Savings rate- before or after pensions?

[UK Accountant]

Hi all, new to this forum.

Just wondering how you guys calculate your savings rate:
1. (Net after pensions- expenses)/net after pensions.
Problem: this doesn't calculate pension as savings
2. (Savings+pension)/Gross
Problem: this treats tax as an expense, Which it is but uncontrollable.
3. A 3rd way which I haven't thought og

[Playing with Fire UK]

I track both. Tax is an expense but optimising it is as real a saving as anything else. One opinion on a few methods here.

Tracking something consistently is more important than exactly what you track. There isn't one true method for competitive saving rate comparison that I'm aware of.

[SpreadsheetMan]

3. (Net before pensions - expenses)/Net before pensions

The only anomaly is that my employer provides a NEST pension, but this is small relative to my own saving so I don't include it in my rate. It's actually about 3% with my+employer+hmrc contributions and will be more from this april.

I don't include tax+ni as I have no control over it, my pension contributions already keep me in the standard rate band.

(I forgot to make it clear that my expenses includes my pension, isa and general savings & not just "expenses")

[PhilB]

The two numbers I was always most interested in tracking were net savings - which included pensions and mortgage capital- and net expenditure (ie money out the door from my post tax income).  If I ever wanted to calculate a saving rate therefore I just used savings / (savings plus expenses) which seemed the most logical to me.  YMMV.

[UK Accountant]

@PhilB  I like this method, will try and recalculate mine based on this.

[vand]

We'd rather hope the OP could answer this more definitively, given he's an accountant!

IMO the number to keep track of is

total investments / (total spending + total investments)

to give you your true savings rate %.

[never give up]

Yep I use the same as PhilB and vand here I.e. ignoring income tax but including pension contributions from both myself and my employer.

[PhilB]

We'd rather hope the OP could answer this more definitively, given he's an accountant!

As a lapsed chartered accountant myself, I canclearly tell you're not an accountant.  If I may quote the old joke, an engineer, a statistician and an accountant all apply for a job and are asked the same question -"What's two plus two?"
The engineer gets out his slide rule (I did say it was an old joke) and after fiddling with it for some time says "I make it 3.95";
The statistician studies his tables and announces that he's 95% confident that it's somewhere between three and a half and four and a half;
The accountant says "Well what do you want it to be?"

[Playing with Fire UK]

We'd rather hope the OP could answer this more definitively, given he's an accountant!

What a peculiarly unhelpful comment.

[londonstache]

UK Accountant, I'm starting to calculate as savings from net income only (removing pensions from the equation).

We're slogging a good amount into pensions and contributing the max to ISAs as well and we're well on track for FIRE, if that is what we want to do (at the moment, RE doesn't grab me as much as FI).

I'm interested in the non-pension figure as that is essentially the FIRE fund if I pull the trigger this side of pension access, which is looking increasingly likely.

Essentially there are 3 pots:

- private pension(s), which can only be accessed at 60 (assumed, based on my current age)
- LISA(s), which can only be accessed at 60
- other ISAs and savings, with no restriction on access

If I want to FIRE, I'll be fully living from pot 3 until I can access pot 1 & 2, and ideally I'd like to avoid going to far into drawdown from pot 3. Therefore a) savings rate on pot 3 and b) growth towards target figure is the bit that most interests me at the moment.