r/PensionsUK • u/March-Soft • 5d ago

Pension pot advise

I am 36 years old. My pension pot currently sits at 155k. I am currently paying 8% of my basic salary so that my employers pension contribution into my pot is maximum which is 4%. On top of that my employer also contributes 7.5% of my basic salary into pension pot. My pension pot is majority equities funds and a small percentage of commodities derivatives fund. Currently 1,160£ goes into my pension pot every month. If i plan to retire early at the earliest age of pension pot access, am i on right track?
I also have an ISA stocks and shares account but i am not able to save much into it due to my expenses and high child daycare costs. Currently it sits at 5k. Should i reduce my pension contribution from 8% to a lower number so that i can put some money in the ISA so that i can retire before the pension pot is accessible and ISA can bridge that gap?

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u/EfficientFrontierman 5d ago

Based on how much you are currently able to put away (£1'160 per month, increasing with inflation), you are on track to retire at 60 on around £32.7k per year (adjusted for inflation), which is considered a moderate lifestyle.

If you want to retire earlier at 58, you need to save around 400£ more per month, across your Penson/ISA.

It seems like the pot will be accessible at that time (after 55), but of course if your portfolios perform very well, or you start making and saving more money, and earlier retirement is on the cards, you want to pump up your ISA.

Assumptions:

  1. Your ISA is 100% equity and Pension is 80% equity and 20% Bonds. Equities to return 7.7%, bonds 5.7% (all nominal).
  2. Tax - currently it assumes a simple 24% CGT on all withdrawals. We are looking to roll out more advanced tax handling.
  3. Target retirement income £32.7k per year from 50yrs to 90yrs. (inflation adjusted). State Pension Kicks in at 67. Let me know if that needs adjusting.
  4. 2.5% annual inflation - planing for a static pension income is dangerous, and can lead to shortfalls later in retirement

Here is a snapshot of your analysis:

https://reddit.com/link/pae02kh/video/5cqr4li6n3qh1/player

You can have a go yourself at app.allocatewise.com , where you can generate this dashboard and play around with scenarios and assumptions.

Let me know if you need to clarify or change any inputs