22 June 2013

Workplace Pensions - how much will you really save in 40 years time?

Right, so this automatic-enrollment for workplace pensions, let's figure out how much would actually go into the pot.

I'm 23, and the default retirement age is 65, but most people retire for their state pension between 61 and 68.
So this gives me a default of 42 years.
Pension is only taken out from one month of payroll, so this means there would be 42 x 12 = 504 contributions.

Now, you wouldn't have the same salary for 42 years, but let's establish a baseline:

The minimum contribution is 1%, with a company contribution of 2%, and you get a small tax relief.
This tool can help you figure out what the contributions from yourself, your company and the government will provide in total:

I've taken my own details for one year from the page linked, and then just calculated what it would be for the rest of my life.

So looking at this, if I did save the minimum contribution into a pension instead of an ISA with 2% interest, I would get double the amount I saved.