How big should my pension pot be at 40

Do you know how much money you should have in your pension pot by the age of 40? Read our blog post below to find out!

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How big should my pension pot be at 40?

Knowing how big your pension should be at a certain age is completely dependent on the lifestyle you wish to have in your retirement. The more lavish you want to be and the more holidays you want to go on – the more you need to start saving now.

Payments made into your pension are very tax-efficient and if you are employed, your employer will make payments on your behalf using auto-enrolment. Auto-enrolment has meant that all employers now have to offer pensions to their employees and although you can opt-out of this – we would advise you not to. For the self-employed, there is no such option. It is up to the individual to set up and make payments into their pension scheme.

We can give you guidance on your existing pension plan(s), no matter how many different companies these may be with. We can analyse these and report back to you in a simple and easy to understanding manner. If you do not currently have a plan in place, we are more than happy to set one up for you and we will explain how it works and provide guidance on the most suitable amount to start paying each month. Paying in something (even if it is only small to start with) is better than not paying in anything at all.

Try out a retirement calculator to give you an idea of what pension savings pot you might be able to reach in your retirement. Once you have this figure, you will be able to see how much interest you have made over that period.

To work out how much this may then provide you as an income in retirement, times the figure by approximately 4% (estimated and dependant on the economy) and this will give you the pre-tax annual income available.

Financial Advisor Poole, Pension Adviser Bournemouth, How big should my pension pot be at 40

How much do I need in my Pension?

Are you getting to that age where you are starting to panic about your pension? Well, there really is no need.

At the age of 40, you still have at least 15 years, if not more to be putting money away for your future.

On average, it is said that £260,000 is enough for a comfortable pension; If you have calculated yours to be below this, then again, don’t panic. The figures you read about pensions are based on averages and not on individual circumstances.

You may not even need this much, or maybe you may need more. However, time is still on your side and you have enough of it to be realistic about your finances.

Even though this is another approximation, it is suggested that at the age of 45, if you save approximately £750 a month, you will be able to live comfortably for 20 years of your retirement. This isn’t even including any previous savings, so this figure can definitely be lower if you can’t afford to do so.

Fortunately, as of 2012, an auto-enrolment pension scheme came into play, which means that your employer has to put a pension in place to secure future financial security.

This will mean that you should have a pension in place already if you haven’t set one up yourself. These schemes can be along the lines of yourself putting 5% including tax relief of your salary into your pot, whilst your employer puts 3% in.

You can opt-out of auto-enrolment, but you’re unable to contribute less than 5%. It is suggested that at the age of 40, you should realistically be putting 20% of your wages into your pension pot. This is a 5% increase up from the suggested amount in your thirties.

Although it should be individually tailored, the figures suggest that by the age of 40, you should have double your yearly salary as your current pension pot total, to ensure you can go on living your life comfortably and not too dissimilarly from now, into your later years.

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For further advice, please get in contact and we will be more than happy to help you understand your current financial position. The more you are able to put away now means A load off your mind for later.

To speak with a pension advisor today simple book an appointment online or give us a call on 03300 562 218 or send an email to [email protected]

The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested. HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.

Mortgages & Pension Team Working in Head Office, Financial Advisor in Poole, Financial Adviser Southampton

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