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Because I've worked two jobs at once this year, and because the 'other' job didn't issue a P45 until recently (I never 'left', just haven't worked for them for ~8 months) I've luckily ended up close to the 40% tax threshold this year.
Being a sensible type financially / closet Tory / self identifying as a multinational coffee company I'd like to avoid that by putting the extra into my pension so I can retire earlier.
I've adjusted my company pension for the next 2 months as far as I can without it going below the minimum wage threshold, but that still leaves me a little over the threshold in April.
I could just write a cheque to the pension company, but that seems boring. Ditto I could just pick A.N.Other private pensions company, but again, boring. Are there apps / tools / platforms that'll let me play monopoly with a small pension? A bit like a stocks and shares ISA, but with an extra 66% from Mr Hunt at the treasury and I can't touch it till my hairs grey.
What you're asking for is a SIPP ( Self invested personal pension)
There's a monthly admin cost for most products, as to whether there's any value in iit for you depends on how much you're putting in.
https://www.money.co.uk/pensions/sipps/v1
Could be worth finding out if one of your existing pensions will accept additional gross contributions from you directly?
Important point here about how to pay SIPP fees most efficiently: SIPP money saving hack - Monevator
What you’re asking for is a SIPP ( Self invested personal pension)
Cheers, I know what to google for now.
Could be worth finding out if one of your existing pensions will accept additional gross contributions from you directly?
They do, although as this is just a relatively small amount in the scheme of things I'm tempted to go for a more "everything on black" strategy with shares in a handful of either undervalued companies that may/may not quadruple in value or ones I want to invest in (renewables etc.) It's a pot of money I don't need for now, and who knows if I get lucky might buy be a yacht in 20 years time! And if I lose, well the pension fund lost more than this last year thanks to Liz so it'll just be noise in the usual 5-8% the main pot manages by the time I retire.
If you want to open a SIPP, Vanguard target retirement date funds are easy to open and require no input from you - other than money! The average return across all of their target date funds was c7% over past 12 months.
Other SIPP providers are available.
You could invest all of it into a global investment fund and hold it in an ISA; have a look at L&G International index fund (accumulation), JP Morgan Global Growth & Income and/or Alliance Trust.
Other international investment funds are available; an international fund spreads the risk/opportunity across multiple markets/sectors - some don't invest in UK businesses.
The global benchmark shows +74% over the past 5 years; the funds above have returned 77%/112%/79% respectively over the same period.
There are reasons for the 112% growth figure.
Hoping to find one or two undervalued shares and betting on/hoping for a turnaround is, IMO, a fool's errand.
You could invest into an S&P 500 tracker and hold it inside an ISA; some market analysts view the S&P 500 as a one way (upwards) bet.
You could subscribe to the Motley Fool or pay for an IFA - or DIY.
Hoping to find one or two undervalued shares and betting on/hoping for a turnaround is, IMO, a fool’s errand.
Yea, I'm aware. But like I said, it's not my main retirement plan, I'm happy enough leaving that in the company plan. So betting on a couple of typically cyclical markets turning round may, or may not turn the price of an entry level FS from the CRC clearance into something nicer.
I’m tempted to go for a more “everything on black” strategy with shares in a handful of either undervalued companies that may/may not quadruple in value or ones I want to invest in
Give the cash to me, I'll buy lottery tickets with it, we'll go halves on the winnings.
Deal?
Because that's effectively what you're suggesting.
Please correct me if I’m wrong but I’m sure self invested pensions (if paid into yourself, after you’ve been paid the money) do not reduce your yearly income pre tax.
Please correct me if I’m wrong but I’m sure self invested pensions
They don't, basic rate relief is added to the contribution by the pension co, but if you are a 40% tax payer you can claim the extra tax relief back via self assessment.
To be honest, if you are only talking about a £100or so in additional tax relief I'm not sure I'd bother getting involved with filling out a tax return.
Yep you’re only going to get additional tax relief by letting yourself earn the higher rate, then claiming it back via higher rate tax relief. Unless your employer can do salary sacrifice pension contributions which is another option.
Please correct me if I’m wrong but I’m sure self invested pensions (if paid into yourself, after you’ve been paid the money) do not reduce your yearly income pre tax.
You can make personal net contributions, where basic rate tax is reclaimed (by pension administrator )This does not reduce your taxable income.
Or, you can make gross personal contributions, no tax is reclaimed, but they can be used to reduce taxable income.
Give the cash to me, I’ll buy lottery tickets with it, we’ll go halves on the winnings.
Deal?
Because that’s effectively what you’re suggesting.
🤷♂️
Best case they bounce back to where they were, it's a cyclical industry that seems to do it every time.
Alternative case, they move nowhere, I'm 66% better off than I would be in an ISA.
Worst case, they drop in value by more than 40% and I wish I'd just put them in an ISA with a FTSE/S&P tracker.
You can make personal net contributions, where basic rate tax is reclaimed (by pension administrator )This does not reduce your taxable income.
This. We're on a salary sacrifice scheme, but there's not enough paydays between now and April 6th to keep the total "salary" <£50k, but also my monthly salary >minimum wage.
Mostly this is because I begrudge the idea that I spent a lot of weekends away working, and I'm not giving 80% of Sundays pay to Mat Hancock's pub landlord to procure dodgy PPE when I could have gone for a ride. So if I don't do something the money's lost anyway.
If you want to open a SIPP, Vanguard target retirement date funds are easy to open and require no input from you
there's lots of people with these that are cursing them as they had a simplistic view of bonds and it's cost them a lot as long term bond prices crashed so much recently, particularly as they had been switched to a higher bond allocation now they were near retirement.
It was well known that bond prices suffer in high inflation environments and also that the negative correlation between bonds and equities is not a constant relationship (far from it) and doesn't hold in high inflation environments (lots of history to look at), but these 'clever' funds, and companies, take no account of that, even when you could see the inflation coming.
Basically you need a global equity fund as a core - PensionCraft has some decent videos on this:
there are other options but notice that this video maker studies these funds a lot but admits that he just uses a global equity fund for his core.
https://www.youtube.com/@Pensioncraft/videos
Meb Faber has some great books on investing which are free and quite short, so an easy read. Worth reading.
He has some others that are cheaply available as well.
He did note that using momentum and looking at the 10 month simple moving average price of the S&P 500 as a trigger as wehn to buy and sell actually gave better results than just holding the S&P, but them again the sell in may and buy back after Halloween strategy also beats just holding.
Is that a comment ^^^ with the benefit of hindsight? I don't recall you commenting about the 'glidepath' strategy in other investing/pensions threads.
Did you also forsee the threat to company pensions resulting from market loss of confidence following the truss/kwarteng debacle - and say nothing about that either?
Using Vanguard SIPP as an example, the target retirement date is not the year in which the pension must be taken; it can be deferred for upto five years.
What insight can you offer into how SIPP providers should change their investment strategy? This could include suggestions on how to avoid the problems caused by the high inflation impact on bond prices.
Did you also forsee the threat to company pensions resulting from market loss of confidence following the truss/kwarteng debacle – and say nothing about that either?
After reading various books and articles on investing, and the Meb books, I haven't touched long term bonds, including the 60/40 portfolio. Several things make me uneasy about them, including the amount of US debt held by other countries such as China.
And just considering how yield curves work and that inflation looked a certainty after the fiscal manipulation of QE, particularly during COVID, plus the energy crisis of the Ukraine war (the Truss debacle was just an extra event on top of that) made long term bond investing look precarious. I'd read two Bolgleheads books on it as well.
I have made comment on lots of YT videos from creators, including PensionCraft, banging on about the negative correlation between bonds and equities and how it doesn't always hold up. I was a bit shocked when one of the top Vanguard pension professionals said that this correlation being broken was an outlier and would return soon, as if you look at history it certainly isn't an outlier.
The correlation between stock and bond prices has changed over time, with a positive correlation (where their prices move in the same direction) being more persistent in the 20th century. However, beginning in about 1998 and lasting through 2019, the correlation was negative. When bonds performed well, stocks underperformed, and when bonds performed poorly, stocks did well.
https://www.investopedia.com/articles/fundamental-analysis/09/intermarket-relations.asp
The target retirement date funds change your equity bond balance as you get older, in order to 'derisk' your portfolio, so anybody close to retirement is going to have a high percentage of bonds.
However there are arguments that a higher percentage of equities in your portfolio is going to be more successful for retirement, search PensionCrafts YT videos for arguments about that, or read "Living Off Your Money" by Michael McClung.
Decent article, also discusses life styling/target date pensions:
Theres a massive difference between buying individual bonds at issue & holding to maturity for the coupon payments, vs bond funds, which go up and down dependent on the larger economic situation. Sadly its very hard to hold individual bonds and most cheaper pension wrappers dont offer them.