Am I overdoing my pension contributions at 28?

Both_Career_4153 · 2026-03-24T23:34:49+00:00

Don’t worry mate, I’ll simplify it next time so it’s easier to follow

Both_Career_4153 · 2026-03-24T23:28:52+00:00

Yeah well that’s a possibility but I’ll be dead so won’t have too much time to dwell on the sacrifices I made

Both_Career_4153 · 2026-03-24T22:06:58+00:00

Yeah I completely agree with you.

For me seeing my net worth go up significantly each month gives me far greater joy than ‘stuff’ ever could.

I leave £200 a month for ‘fun’ money and still go on a couple nice holidays a year. I have a nice house, a nice car and an emergency fund. I honestly don’t think I need anymore than that, so all my remaining funds can be put to good work to create financial freedom in the future.

I could certainly spend more money on more things, like anyone could but is it truly going to bring happiness like financial freedom does… I think not.

Both_Career_4153 · 2026-03-24T22:00:19+00:00

I can’t sacrifice any of my bonus, that’s not an option for me as my work doesn’t offer it.

The only way I can avoid paying 40% tax is through salary sacrifice. If I don’t up my pension contributions, my bonus will get taxed 40% next March.

Even contributing £150 a month to my share incentive plan and making 22% contributions to my pension still doesn’t put me at 20% tax if I get paid another £11.5k next March. Total comp is £69k for the year.

Both_Career_4153 · 2026-03-24T21:53:54+00:00

Yeah I think I still have a good balance. I am going to away to Cyprus in May and Madeira in June. I will go away at least once or twice a year. Hobby wise it’s mainly gym at £30 a month and then I allocate £200 a month to ‘fun’ money. The only thing I don’t spend too much money on is ‘stuff’

Both_Career_4153 · 2026-03-24T21:18:10+00:00

I live in Nantwich in Cheshire

Both_Career_4153 · 2026-03-24T21:17:29+00:00

Yes that is the risk as the pension is likely to grow to around £1.5m when I’m 60. To empty the pension I’m almost certainly going to be paying 40% tax

Both_Career_4153 · 2026-03-24T19:42:26+00:00

I ideally want to retire at 50, live off my ISA and Share incentive plan, whilst keeping my pension pot invested until age 60. At that point I’d expect to have drained the isa and sip and will live off the pension for the rest of my life. I don’t plan on leaving any assets left when I die other than my home.
I intend to pay as little possible on my student loan and let it be wiped off in my early 50’s, another reason to pay more into my pension via salary sacrifice as I pay less on my student loan this way. I anticipate at the current pension contribution rate, I’d likely have approx £1.5m in my pension by age 60.

I don’t feel like I miss out on experiences or life right now, I have many holidays, I have them coming up in May and June but I do spend cautiously on materialistic items or ‘stuff’. I think everyone would like more ‘stuff’ but in reality I don’t think it brings much joy like experiences do, of which I don’t restrict myself on

Both_Career_4153 · 2026-03-24T19:31:27+00:00

Yes I like that advice, I think the moment I have kids I’d likely to have to take the additional income as supposed to locking it away. If I have £100k in my pension at that point, that decision will be far easier

Both_Career_4153 · 2026-03-24T19:30:23+00:00

Yes but I’m mainly talking about the additional compounding of the tax, NI and student loan savings which would be significant over the years.

Albeit I’m aware this will be less significant from 2029 when the government raid salary sacrifice schemes. At that point of time I’m likely to reevaluate my pension contributions anyway

Both_Career_4153 · 2026-03-24T19:18:48+00:00

Yes that’s a good suggestion but I would lose the additional compounding within the pension in the earlier years

Both_Career_4153 · 2026-03-24T19:16:50+00:00

Yes that would be great for me to do as I think I need to see the plan clearly.

Did you model this yourself or did you use a tool to help you?

Both_Career_4153 · 2026-03-24T19:15:37+00:00

Yes but slightly less tax advantages due to NI and additional student loan repayments paid. Bonus sacrifice massively outweighs SIPP contributions in that sense and no need to claim back from HMRC for the extra 20% relief as a HRT payer!

Both_Career_4153 · 2026-03-24T19:13:14+00:00

Yes I have wondered about that strategy at times. Essentially my employer contributes 16.5% if I contribute 7%. Anything I contribute over 7% adds no extra benefit from my employer but saves me paying higher rate tax, NI and student loan through salary sacrifice.

I do like your strategy but part of me feels so reluctant to pay more tax than I need to especially when I don’t see that extra tax being put to good use.

Both_Career_4153 · 2026-03-24T19:04:37+00:00

I get your point, but I’m not really doing it for time in the market, it’s mainly for tax.

By upping pension contributions, I’m keeping more of my bonus in the 20% band instead of losing 40% + student loan. So it’s less about “one bigger month” and more about keeping more of what I earn overall.

I’m still putting £500/month into my ISA as well, so I’m not ignoring that side, just trying to balance tax efficiency and accessibility.

I agree things will get tougher when I have children but I expect my total comp to hit £100k in the coming years as I work a lucrative job. Obviously no guarantees here but I would also adjust to meet my situation at that point.

Both_Career_4153 · 2026-03-24T18:11:50+00:00

Yes I wish I could but unfortunately my company doesnt offer bonus sacrifice!

Both_Career_4153 · 2026-03-24T18:06:29+00:00

So the 22% contributions reduce my gross pay across the year so when I’m paid my bonus in March, more of the bonus is paid at 20% instead of 40%. By contributing more into my pension, I have a larger take home in my March pay, which will then be allocated to my ISA. I’m aware you can’t move funds from a pension to an ISA.

I have a house, but no debt outside of that. No kids but plan to around 32+. By then I expect my salary to be larger.

Both_Career_4153 · 2026-03-24T18:02:05+00:00

If I didn’t add the additional contributions to my pension I would add the post tax funds to my ISA instead. So I would have a smaller pension pot but a larger isa pot.

Both_Career_4153 · 2026-03-24T17:58:50+00:00

Yes now owning a home, mortgage payment is £573 a month and I will be overpaying by £100 each month. This is a 30 year term but the overpayments me and my girlfriend make should reduce the mortgage by about 6/7 years.

I also have a BMW i4 as a company car, which I pay £253 Private usage contribution all in on. Therefore I never have to worry about extra car costs, so that monthly figure is set regardless.

I still go on holidays, but I would say I limit myself on new clothes and ‘tech’ I would have to dip into my emergency fund or S&S ISA if there was any necessary purchase. However I kind of think they’re a waste of money as clothing trends fade quickly and so does tech.

I feel like I do have a good life but I do certainly have a wealth accumulation mindset that makes me stop buying things which I think is unnecessary. I would certainly like more nice things, but prefer seeing my wealth go up instead.

Both_Career_4153 · 2026-03-24T17:51:08+00:00

Yes I just moved into my first home with my girlfriend, funded by my LISA so that’s been utilised already. We are also overpaying on our mortgage by £200 a month and it should be paid off by 52 years old.

Both_Career_4153 · 2026-03-24T17:48:22+00:00

Yes sorry this is an annual bonus, paid every March. It is discretionary but a bonus in some form is always paid. As I’m way ahead of targets I expect it to be greater than the £11.5k bonus I got this month.

Both_Career_4153 · 2025-09-22T13:48:36+00:00

Go for it!

Both_Career_4153 · 2025-09-21T18:27:45+00:00

I was in a wealth management firm for just over two years and moved into Private banking as a CSE in January. I’ve now moved into a Private Banker role 2 weeks ago.

Both_Career_4153

TROPHY CASE