Of those with a personal pension, the Office for National Statistics reckons the median value’s £57,500. This drops to £19,700 if those who haven’t saved for retirement are included.

Whatever the correct figure, it’s probably too small.

Do as I say, not as I do!

Personally, I hate reading those articles that make you feel guilty for not saving enough. Sorry!  After all, everybody’s circumstances are different and being old seems so far away when, for example, you’re 18.

But it’s undoubtedly true that saving regularly from a young age is the secret to retirement success, especially with the State Pension age continuing to rise. Plans are afoot to increase this to 68. Currently (12 July), the full pension is £11,973 a year.

But given that it’s impossible to rewrite history, let’s see how much someone aged 45, who has yet to start a pension, would need to save to generate £1,000 a month by the time they turn 68.

I’ve chosen this figure because, when added to the State Pension, it’s roughly equal to two-thirds of the average UK salary. This benchmark’s often used as a guide for a ‘comfortable’ retirement.

Getting into the detail

In 1994, William Bengen devised the ‘4% Rule’. This is intended to make a pension pot last at least 30 years. The basic concept is that you withdraw 4% in year one and then take a similar amount, adjusted for inflation, thereafter.

Following this approach, our hypothetical pensioner would need a SIPP worth £300,000.

This could be achieved by investing a lump sum of £5,860 each year for 23 years, assuming an annual growth rate of 6.2%. According to JP Morgan, this is the average annual return of the FTSE All-Share index since 2015, with dividends reinvested.

Suddenly, the idea of waiting to 45 before starting a pension doesn’t seem as disastrous as initially feared. But there’s no guarantee that such a return can be achieved. However, even a small growth rate’s likely to beat doing nothing.

Something to consider

One company that has a vested interest in seeing people save more for their retirement is PensionBee. Seeing itself as a disruptor, the online personal pension provider encourages savers to consolidate their existing pensions with them. Using third parties, it also offers seven retirement plans.

The group now has 275,000 customers and £5.8bn of assets under management.

In 2024, it reported revenue of £33.2m. By 2030, it hopes to have annual sales of £100m. The industry’s highly competitive so it will be interesting to see how it fares against this target.

But in October 2024, to fund its US market entry, it surprised investors by announcing a £20m rights issue. Small private investors were diluted as only institutional investors were allowed to participate.

And the company remains loss-making, although it should record a small post-tax profit in 2025. However, based on revenue, Canaccord Genuity claims PensionBee’s the world’s fastest growing listed digital platform.

After balancing the pros and cons, I think the stock’s one that a 45-year-old investor (and others) could consider adding to their SIPP.

The post How much should a 45-year-old put in a SIPP to earn monthly passive income of £1,000? appeared first on The Twelfth Magpie.

FTSE 250 laggard

Price comparison site owner Moneysupermarket.com (LSE: MONY) has stubbornly refused to get involved in the recovery in the UK stock market until today. Bar one or two flushes of positive momentum, its share price has been drifting lower for some time now. Today’s interim results provide some context for this. 

Revenue sank 11% to a little over £162m in the first half of 2021. Pre-tax profit fared even worse, tumbling 31% to £28m. I pretty much expected this. Like many in the market, Moneysupermarket continues to be impacted by the pandemic and the ongoing impact on consumer behaviour.

However, I think there are reasons to be optimistic. Moneysupermarket is still clearly generating a healthy amount of cash. Margins were up, as was the amount of net cash held by the company on its balance sheet.

Holding the interim dividend at 3.1p per share was another encouraging move. Sure, I’d prefer payouts to be increasing. Even so, the fact that it wasn’t reduced is indicative of confidence on the part of management.

Patience required

Naturally, the recovery won’t happen overnight. The spike in Covid-19 infections, while expected, means the rest of 2021 could still be tricky for the FTSE 250 member. The markets in which MONY operates — insurance, money (that is, cards and loans), home services (like energy), and travel — are also “recovering at different rates“, according to the company.

Even so, CEO Peter Duffy did say that he expected “more normal trading conditions” for the company’s markets next year. This may explain why the shares are up strongly today. I personally think we’ll see a dramatic improvement in revenue at MONY’s travel insurance arm as restrictions lift overseas. 

At 19 times earnings before markets opened, MONY still looks like a bargain to me. I’d feel comfortable buying more today. 

Another bargain?

Another company that’s seen buying pressure this morning has been online pension provider PensionBee (LSE: PBEE). Like Moneysupermarket, this new-stock-on-the-block also released half-year numbers to the market today. 

Helped by increased marketing, PensionBee has been attracting more people to its services. Invested customers rose 81% to 92,000 over the reporting period. Perhaps we shouldn’t be surprised by this. Make of it what you will, but PBEE was named as a ‘Best Buy’ in five categories at this year’s Boring Money Awards.

Most importantly, it seems to be hanging on to its customers. Retention rates remained at more than 95%. At £2bn, assets under administration (AUA) were also more than double that seen at this point in 2020. 

Based on today’s numbers and the potential demand for online pension consolidation going forward, I wonder if the shares may turn out to be another bargain in time. Right now, however, I think it’s wise to keep my feet on the ground. PBEE remains loss-making (and won’t be profitable until the end of 2023, according to the company). That’s a long time to keep my money tied up in an illiquid stock. 

Despite today’s encouraging share price rise, I’ll only be adding this promising small-cap to my watchlist for now.

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