# am i contributing enough to my pension?



## fogfurn (9 Mar 2016)

hi there just looking for opions and advice please, i am 46 and just started a pension, my monthly contribution is 106 and my employer pays 200 towards that monthly, my question is do you you think that will build to a reasonable pension in 20 years or should i increase my contribution, i know alot depends on how pensions will do in the future, but if any one could give me their opinon or advice please.


----------



## Sarenco (9 Mar 2016)

At that contribution rate, you would be doing well to build a pension pot of much more than €100k by 65 in 2016 terms (assuming a real rate of return, after costs, of 3% per annum). 

That would only give you an income of a few grand per annum in retirement so you might want to consider saving more aggressively.

Your employer's contributions look pretty generous - would any increase in your contributions be matched by your employer?


----------



## fogfurn (9 Mar 2016)

Sarenco said:


> At that contribution rate, you would be doing well to build a pension pot of much more than €100k by 65 in 2016 terms (assuming a real rate of return, after costs, of 3% per annum).
> 
> That would only give you an income of a few grand per annum in retirement so you might want to consider saving more aggressively.
> 
> Your employer's contributions look pretty generous - would any increase in your contributions be matched by your employer?


thank you, but no my employer only pays a percentage of my salary which is across the board in the industry i work in. how much would you recommend me to increase my contribution to


----------



## Sarenco (9 Mar 2016)

fogfurn said:


> thank you, but no my employer only pays a percentage of my salary which is across the board in the industry i work in. how much would you recommend me to increase my contribution to



It's really not possible to give meaningful advice in that regard without having a much better picture of your overall financial position and goals.  Would you consider completing the details set out in the "Money Makeover" forum?


----------



## PGF2016 (9 Mar 2016)

fogfurn said:


> hi there just looking for opions and advice please, i am 46 and just started a pension, my monthly contribution is 106 and my employer pays 200 towards that monthly, my question is do you you think that will build to a reasonable pension in 20 years or should i increase my contribution, i know alot depends on how pensions will do in the future, but if any one could give me their opinon or advice please.



What in your opinion is a 'reasonable pension'?


----------



## fogfurn (9 Mar 2016)

PGF2016 said:


> What in your opinion is a 'reasonable pension'?


to be honest i have not a clue,taking into account that all debths will be clear (which is very little right now) and going by todays times and minus my mortgage, travel to work and after all those i have 1600 a momth to live on which does well to be honest out of that i spend 200 a month on hobbies so i suppose approx 1200 to 1400 a month


----------



## Boyd (9 Mar 2016)

Your contribution seems very low, considering you have missed out on about 20 years of contributions already. At 46, you can contribute up to 25% of your income into your pension (source: http://www.citizensinformation.ie/en/money_and_tax/personal_finance/pensions/personal_pensions.html). If you are a high rate tax payer, I would suggest upping your contributions to whatever you can afford within this limit. As a comparison, I am 33 and can contribute up to 20% of salary (while getting tax relief), which I am currently doing.


----------



## Jim2007 (9 Mar 2016)

PGF2016 said:


> What in your opinion is a 'reasonable pension'?



It is very difficult to say what is reasonable.  Here in Switzerland the most common calculation is: Assume you will need 65% of current salary in retirement so for arguments sake let's say 65% of 25k => 16,250, then take off the expected state pension say 11K => means you need to cover the short fall of 5,250. Next assume a annuity of say 2% and that points to a savings at retirement of about 260K.  After that it is a case of projecting your savings into the future...


----------



## Cervelo (9 Mar 2016)

Jim2007 said:


> It is very difficult to say what is reasonable.  Here in Switzerland the most common calculation is: Assume you will need 65% of current salary in retirement so for arguments sake let's say 65% of 25k => 16,250, then take off the expected state pension say 11K => means you need to cover the short fall of 5,250. Next assume a annuity of say 2% and that points to a savings at retirement of about 260K.  After that it is a case of projecting your savings into the future...



I always thought the rule of thumb was 2/3 of your final salary not your current salary


----------



## Steven Barrett (9 Mar 2016)

Cervelo said:


> I always thought the rule of thumb was 2/3 of your final salary not your current salary



That's the maximum pension that can be provided under a company paid scheme. 

In reality, people who are really enjoying their retirement spend more in retirement than they did when they were working. You have an additional 240 days annual leave once you retire and you go out doing all the things you couldn't do before. 

Back to the OP, you want approx €14,400 net at retirement. The OAP pays just shy of €12,000 and that is worth about €300,000. In 19 years time, that is €526,000 (inflation of 3%). You need to contribute €1,242 per month to match that. 

Don't be concerned that you are a long way off that amount. Put in what you can and increase the premium by 5% every year. The compounding effect of the contribution increase and the growth of the existing fund will help. Always have it ticking away in the background and throw in a few quid extra if you can. 

Steven
www.bluewaterfp.ie


----------



## fogfurn (9 Mar 2016)

Cervelo said:


> I always thought the rule of thumb was 2/3 of your final salary not your current salary


How will I know my final salary


----------



## Steven Barrett (9 Mar 2016)

fogfurn said:


> How will I know my final salary



It's not a rule of thumb, it's a revenue maximum. Not many people get to that maximum!

Steven
www.bluewaterfp.ie


----------



## fogfurn (9 Mar 2016)

SBarrett said:


> It's not a rule of thumb, it's a revenue maximum. Not many people get to that maximum!
> 
> Steven
> www.bluewaterfp.ie


Hi steven. As well as my pension is there any other way I can save for retirement separate from my pension


----------



## Cervelo (9 Mar 2016)

SBarrett said:


> That's the maximum pension that can be provided under a company paid scheme.





SBarrett said:


> It's not a rule of thumb, it's a revenue maximum. Not many people get to that maximum!



Is it a company scheme the OP didn't say whether it is a private pension or company
The rule of thumb reference is a rough guide line that was use by a lot of pension providers maybe they don't use it today but it was used when I was taking out my PRSA


----------



## fogfurn (9 Mar 2016)

Cervelo said:


> Is it a company scheme the OP didn't say whether it is a private pension or company
> The rule of thumb reference is a rough guide line that was use by a lot of pension providers maybe they don't use it today but it was used when I was taking out my PRSA


Company prsa pension scheme private sector


----------



## Steven Barrett (10 Mar 2016)

fogfurn said:


> Hi steven. As well as my pension is there any other way I can save for retirement separate from my pension



You can start a regular savings plan too, whether that is by putting it on deposit or investing in shares etc. You can obviously access this money if needs be (we don't know what life is going to throw at us and when we might need access to cash!).



Cervelo said:


> Is it a company scheme the OP didn't say whether it is a private pension or company
> The rule of thumb reference is a rough guide line that was use by a lot of pension providers maybe they don't use it today but it was used when I was taking out my PRSA



Fogfurn's employer was contributing to it. I see he has since clarified it's an employer PRSA, where the maximum he can have is €2m and the 2/3 of final salary doesn't apply. Although, under PRSA rules, the maximum contribution is restricted to a percentage of salary so there isn't a hope of ever hitting the €2m limit. 

It's not surprising that the 2/3 rule of thumb was given to you by a pension provider, it's to encourage you to put more money into the pension without actually asking you what do you want to do when you stop working and have all this time free. Some people might want to potter around the garden and going for long walks. Others might want to travel the globe. Very different costs and different funding levels required. 

But then, it's a rule of thumb, so generalisations will apply 

Steven
www.bluewaterfp.ie


----------



## Cervelo (10 Mar 2016)

Steven, the "2/3 rule of thumb" is a guideline not a recommendation or a figure you have to meet, you are reading to much into my original statement.


----------



## Gerry Canning (10 Mar 2016)

Fogfurn,

In spite of all the gloom over future State Pensions , I think we can reasonably assume it will cover necessities.
So you have the grub sorted!

By the time you retire you should have mortgage repaid.
So you have the house sorted!

So what you probably want to have Private pension for;  is for an above minimum life..

If as per Stevens advice, you can increase it by 5% per annum, then @ least  you will have a pot that will  cover a lot of things. would be a generous aim. 

Today it takes a pension pot of circa 24,000 to give 1,000 of a pension.
So your pot will grow to circa 100,000 even as is..

Your pot should give therefore 5,000 per annum , if you add Contributory Old Age Pension of 12,000 = 17000 = circa 1400 per month.
So using todays figures ,you are grand.


----------



## Jim2007 (10 Mar 2016)

Cervelo said:


> I always thought the rule of thumb was 2/3 of your final salary not your current salary



The whole idea is to give you some kind of a ball park figure to aim at, since you don't know your final salary, your current one will do just as well.  Of course it is not a once off exercise, you should do it every few years to see how you are progressing and make adjustments to your savings plans accordingly.  The main thing is that people always under estimate how much they need to save and this exercise will point out that flaw in their thinking.


----------

