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any qualms about all your eggs in one basket?
I’m not sure what the investor protection rules are like for pensions so don’t know the answer to that question.
For other investments, the investor protection scheme has a limit of £85k so I’m careful to stay under that on each platform for precisely this reason.
IFAs have a bias to be involved in gathering assets ie persuading people to save, to do it through them, and even better (for them) to promote some sort of product which will promise growth and low volatility. I would steer many looking for advice towards those people labelled "financial planners" because their approach is often to start at the end point - usually retirement - ask what you want out of that, then suggest how you might go about getting there. In my limited experience, you'll likely feel a meeting with the latter rather more satisfactory (although as a retired financial services professional I feel I have less need for IFA input). The line between IFAs and financial planners is bit blurred, and they may occupy the same office but i have always thought financial planners do a better job making you feel they are on your side.
I'm happy with my pension as such but i could use knowledge on the 25% withdrawl at 55.
Things like how it affects contributions in the days after 55. How you go about taking the 25%. How you take say 10% out now and 10% later and the rules on that.... I don't know who's the person for that, either my pension provider or an IFA ?
IANIFA and haven't yet gone through that particular process but for the technicalities I would look at the scheme documents and ask a financial planner if there is uncertainty. From my knowledge, whilst a lot of focus is put on that 25% lump sum, the downside is that any income from that lump sum (interest and dividends) is immediately subject to income tax. You can do a bit, followed by more bits. In fact, one strategy is to take the 25% as part of a regular monthly withdrawal - in that way you can try and ensure you are below a particular tax band. Financial planners might also suggest you fund your retired lifestyle by eating into taxable savings before doing something irreversible to tax advantaged savings. I strongly suspect Rachel Reeves will change the landscape at the end of October.
I have done this with Interactive investor. Its quite a simple process and your platform will talk you through it. They will signpost you to the compulsory and free advice service which will give you a generic explanation of the paths available. Once you have decided which is best for you your platform will have a step by step process to follow.
The process will be unique for you depending on your circumstances. Consider mix of savings between SIPPS, ISA's and other DB and DC pensions as well as your partners circumstances and their pensions, income and tax implications. what you owe on your mortgage, your foreseeable outgoings, plans to downsize if appropriate, health, aspirations in retirement etc. This is all the homework I would suggest you do before making any decisions. Its not as challenging as it sounds as we all carry much of this around with us in our heads.
I have an outgoings spreadsheet for the next 25 years (obviously more crystal ball gazing the further ahead it stretches) which is useful to predict many knowables such as council tax etc then build in inevitable % increases each year. Then match that with your future income stream as pensions come online (include their increases between now and when you take them) then consider how active you will be in earlier years of retirement and try to plan your spend appropriately.
i’m thinking that the 25% will get rid of the mortgage as well as a new vehicle and a year or two of racing.
Once the mortgage is gone i’m in a massively better position financially especially as i’ll still be workin
Well worth doing some research and getting some advice. The James Shack videos are good for this with often quite specific examples. I strongly suspect it would be a bad idea to take money to pay off the mortgage especially if you are still working. Your pension should be making more money than your mortgage is costing and you may limit what you can pay into the pension in the future and miss out on employer contributions and other tax benefits. Certainly don't trust me though, and do some investigation 🙂
Yes as above. I chose not to pay off our mortgage as I was making more money keeping it in savings, plus Mrs Surfer gets a lower interest rate through her employer. Worth creating a spreadsheet to see which works for you. Shouldn't ignore the psychological benefit of paying off your mortgage early, for many that is incredibly liberating.
IANAE but
I strongly suspect it would be a bad idea to take money to pay off the mortgage especially if you are still working.
were my thoughts too.
Very very interesting.. i never really thought of it like that. This is why threads like this are what makes this place useful. There's a lot of good information out there for sure.
I will of course research all of this closer to the time, i've still got 24 months to go yet.
@surferi’m thinking that the 25% will get rid of the mortgage as well as a new vehicle and a year or two of racing.
Some people look forward to the cash free lump sum to do something special. I used it to retire a bit early and our hobbies and aspirations can be met through our normal income. I dont want a sports car or a boat or a particularly lavish 6 star holiday or cruise, some people do. We have factored in annual holidays plus we have a camper van which is paid for and gives us all we need. the thing that was missing was the time to use it...
Well my new vehicle was a new Transit Custom, not a Porsche GT3 🙂
On the other hand, I ran my spreadsheets for our circumstances, and *for us* it worked out better to take the lump and pay off the mortgage + anything else we owed.
(I was in the minority position where the DB pension scheme I was in had limited options for how to take + my specific circumstances meant the 'pentalty' for taking it before 60 doubled if I didn't take it immediately but then took it before 60. Taking the £££ out into a £££ pot was also madness in our scheme.
I'm working still elsewhere, and paying into a new DC scheme along with some £££ from the employer (there's some limits to how much I can pay in though).
I'd say the psychological benefit of having paid off the mortgage is significant - knowing that if I chose to I could just throw the towel in tomorrow and we'd not starve or lose the house, is really rather good for my health. The 'spare' cash subsequently has also been nice so we have been able to easily support our daughter through uni and into her 1st job, hundreds of miles from our own home.
I do still remember the words from a good mortgage advisor decades ago - "it's no good being asset-rich but cash-poor".
thankfully @intheborders some above gave a more constructive reply as to why that may be the case instead of just commenting like that.
Kryton - my only issue with Vanguard is that you can only choose their funds - although they do have a massive choice.
HL are VERY expensive compared to either them or other platforms. A bit “reassuringly expensive….
I use T212 for my isa (no charges) and moved my wife’s pension to ii, flat fee which is very cheap for a large pot.
I apologised if I missed something as I haven’t read all the detail, but TOJV; why aren’t you banging it into a Vanguard SIPP, which kind of feels easiest and cheapest in balance
Because I don't necessarily think easy and cheap is best value. Coming from someone that can't make a job choice or car choice without taking advice from all and sundry, to think I'm going to bang best part of a million quid potential value into something because 'it's cheap and easy' makes no sense to me!! I want expert advice and yes, I'm prepared to pay for it!
Also interested I'm being given advice by people who then admit they don't know investor protection rules..... that fills me with confidence you know your onions.
Like i said, i appreciate you all taking the time to contribute but I'll decide what to do with my pension arrangements thanks.
FWIW if it's a pension then you're covered to any amount. If it's a SIPP you're limited to £85k. You SIPPers did know that, yeah? Or are you now scrabbling to limit your exposure?
@theotherjonv you were the one who started with
Might be cheaper in fees but are the returns as good?
And then started recommending IFAs and their above market return with no increased risk funds.
Please don’t get defensive when, in return, your “advice” then gets critiqued.
IFAs charge a lot of money, for what is often, IMV and that of many others, false reassurance.
I get that you find this stressful, but your attitude to finding out whether it really needs to be that stressful seems to be that it’s too important to shoulder yourself, but not important enough for you to spend some time finding out about it.
I’m not in SIPPs, but I am invested in funds that can be included in a SIPP, but mine are wrapped in ISAs. That’s why I don’t know about pension protection, and admitted it. Would you rather I bullshitted about it?
FWIW if it’s a pension then you’re covered to any amount. If it’s a SIPP you’re limited to £85k. You SIPPers did know that, yeah? Or are you now scrabbling to limit your exposure
It doesn't really apply in practice though. SIPP providers don't own your shares so if they go bust the creditors can't be paid with your assets, the shares are safe. Same goes for cash, it should be held by another bank or trust, although if you have over £85k in cash in your SIPP you probably should get some financial advice 🙂
Because I don’t necessarily think easy and cheap is best value.
In that case, you will be well suited by an IFA and probably some actively managed funds. I honestly wish you the best of luck because if you’re doing ok, it’s highly likely that I will be too.
And then started recommending IFAs and their above market return with no increased risk funds.
Have I? I don't think I've given any recommendation to use an IFA per se, just a suggestion of things to look out for. I talked about my situation and why i think it's the right choice for me, I don't think I've recommended that anyone else should use one, if you're confident in what you're doing. Whereas in the other direction I'm being called daft for considering using one.
What i specifically said was that just moving to the cheapest fees doesn't mean the best overall outcome, you need to look at returns as well. I don't think that is disputable? I have noted the incoming comments that managed pensions do worse longer term than passive ones, and the scepticism about anyone claiming to outperform the market - I'm looking at that.
And secondly, to be aware that not all schemes offer all withdrawal methods, so moving something only to have to move it again later when it comes to getting access to your money might be a consideration. Also pretty much a fact.
it’s too important to shoulder yourself, but not important enough for you to spend some time finding out about it.
No - what i specifically said was " don’t have the confidence to do it and are worried about bollocksing it up". It might be my personality flaw but for me to get to a confidence level on what's going to be best part of a million quid, would take -> ME <- an awful lot more than watching a few Youtube videos on the bog. Now, YMMV and that's fine. I'm not calling anyone daft because they're for having a semi-skilled amateur's punt at it so don't do the opposite.
What i specifically said was that just moving to the cheapest fees doesn’t mean the best overall outcome, you need to look at returns as well. I don’t think that is disputable?
Yes, I’m afraid that it very much is.
Fees are predictable, returns are not.
This is exactly how actively managed funds fleece people repeatedly. But there’s no point in trying to warn people who don’t want to be warned, so point taken and I wish you the very best.
It doesn’t really apply in practice though. SIPP providers don’t own your shares so if they go bust the creditors can’t be paid with your assets, the shares are safe.
Sorry, I don't really understand that, I tried to google and just found this. If you can explain further, maybe there's a few with >£85k SIPPs that will benefit. I asked the (potential IFA) if having a variety of pensions was a benefit because of the £85k and that's where he told me pensions are protected to full value, SIPP's to £85k, which broadly (I don't remember exactly, once he'd said not relevant) ties in to that FCSA info.
So taking that to its conclusion, pension investments are easy, just put them into the one with the cheapest fees because that's predictable?
I don't mind being warned, gives me a good list of questions when I meet the IFA to discuss options. Thanks for the advice and all the best to you too.
Ref a SIPP - if you spread your investments then there’s no worry about the £85,000 limit as like someone has been said before, they don’t own your shares so in the unlikely event your SIPP provider went under you’d still have your investments- they’d just need to be managed via a different platform.
I disagree that cheapest fees are automatically best though! But there are good cheap all-in platforms (eg Vanguard) and very cheap SIPP platforms where you can choose your own investments if you want. My Interactive Investor platform charges £12.99 per month, which at my current level of investment is 0.04% per year, getting lower the more I have. This is of course separate to fund management fees which vary from 0.05% to just under 1% depending on the fund.
pension investments are easy, just put them into the one with the cheapest fees because that’s predictable?
As long as you are diversified and there’s some form of rebalancing going on then choose your risk level and AFAIK yes.
And it’s not just a few YouTubers and grumpy middle aged men off the internet who are saying it, its starting to become standard industry advice.
Get a book on personal finance and read it, see whether it tells you something different?
Look, it’s your money to invest as you please, so do what you’re happy with.
@theotherjonv you may wish to take a look at a robo investing platform such as nutmeg which essentially does the same job as an IFA for investors who aren't confident in investing AND they keep the fees low.
One question to ask your IFA is what are the OCF charges for the funds they invest in?
HL don’t need to be as VERY EXPENSIVE as many presume. If you have unit trust type vehicles, including the Vanguard range, then yes, they will be relatively expensive. But if you own shares, including investment trusts - many of which perform as well as, often better, than the equivalent unit trusts - the fees are capped in absolute terms, and at a relatively low level in % terms. And for those after a tracker, ETFs are trackers but because they have an exchange listing are treated as shares - and therefore subject to the same fee cap.
Anyone know about Scottish widows ? It’s my default work pension with 0.4% annual charge, and I’m wondering whether to consolidate the last 3 years of my old work pension into it or Vanguard. The latter is 40% obviously cheaper, jus wondering if SW might outperform the difference in their “middle risk” option.
you may wish to take a look at a robo investing platform such as nutmeg which essentially does the same job as an IFA for investors who aren’t confident in investing AND they keep the fees low
Or you may think differently https://www.wired.com/story/beware-roboadvisors-wealthfront-betterment/
Scottish Widows workplace pensions rate very highly in terms of performance. In terms of actual
growth, my SW workplace pension has had 35% in 5 years. Looking at fund details for Vanguard target retirement 2040, this has grown a very similar amount in that time.
Although it’s easy enough to get better returns than this just by using global and US tracker funds in a SIPP.
Anyway…here’s an article about workplace Pension providers, with SW coming out very well:
https://www.yodelar.com/insights/how-default-pension-funds-can-impact-your-retirement
Mmm. That Yodelar content has a nugget of truth: default pension fund choices may not suit you in saving for a pension because your risk profile and goals may be better served by a different mix of funds.
But most of it reads like chatbot auto content.
My wife has a SW pension, it is has been very poor value IMO. Far too much moved to cash and bonds as she got older which left her overexposed to the bond crash. And very high fees to further suck the life out of it - charging 1% management fee on the lot, including the cash element!
Ok thanks for the feedback, I think I’ll stick it in my Vanguards SIPP Lifestrategy 100 leaving it until about 5yrs from retirement when I’ll maybe move it to one of two others in my SIPP, Target retirement 35 & 30 respectively.
The SW can stay for the Sal Sac & company contribution until it’s no longer needed at medium risk. I’ll set the retirement date to 67 rather than my target of 62 to avoid them moving it to Bonds to early should I have it that long.
I think most all-in pension policies - Vanguard included - had too much reliance on Bonds and therefore suffered pretty badly from the bond crash. I’m confused by bonds to be honest - even without the crash the returns are very modest and Index trackers do better even when taking into account market crashes. Most of us have ben in retirement would be more suited to leaving funds invested, other than those looking to take a maximal lump sum.
SW workplace pensions have pretty low charges. Having said that if going ‘all-in’ I’d probably stick with Vanguard.
thankfully @intheborders some above gave a more constructive reply as to why that may be the case instead of just commenting like that.
Did you really need a "constructive reply" to the idea of spending your pension lump sum on a vehicle and a bit of racing?
But then I've seen others spend it on the 'holiday of a lifetime'...
Did you really need a “constructive reply” to the idea of spending your pension lump sum on a vehicle and a bit of racing?
I felt either you or I have read something completely wrongly.
My contstructive reply was in relation to someone commenting that paying off your mortgage was pissing money away, due to the lower rate of interest between saving and mortgage meaning you actually get more by keeping it in savings/pensions that you're spending on the interest in the mortgage.
I have no issues at all pissing it away going racing and buying a van for it, i'm 100% fine with that and don't see that as pissing it away in the slightest. That may be completely weird to some (or even all) on here, but i'm completely fine with whatever it costs.
I get the comments about mortgages but I must admit I am trying to do both - being mortgage free is something that will make my job decisions much easier to I’m throwing money at pension, ISA and mortgage overpayment in that order of priority.
I should add that the Scottish Widows pension was a private pension sold to teachers as an add on to their workplace pensions. They had an IFA come in during a staff meeting to do a sales pitch and loads of them signed up. I was not really in the pension mindset at the time so thought nothing of it. In hindsight she could have done much better without the IFA flogging a high fees product. One of the many reasons I will never touch an IFA with a barge pole now.
Or you may think differently https://www.wired.com/story/beware-roboadvisors-wealthfront-betterment//a >
American article relating to an American investment company. Are nutmeg planning to pivot away from low fees?
My thinking is the movement to bonds as you approach retirement only applies if you are thinking of buying an annuity. I’m in drawdown and still have a significant proportion of my pot in equities but keep around 5 years drawdown in bonds and cash to cover any significant market correction. Your attitude to risk may vary.
to I’m throwing money at pension, ISA and mortgage overpayment in that order of priority.
I did mine the other way around - mortgage, ISA and pension albeit I’m lucky enough to have 2 company contributing SIPP for the last 32 years.
my mortgage ends in November, 50% of what was the monthly payment will get added to my salary sacrifice contribution, the balance to ISAs.
Edit - I should add that this was more luck than judgement on my part, I wasn't financially educated enough to understand that my pension might outperform my mortgage interest until I got into it during 2020 lockdown, from which point it wasn't anyway. I just thought it was a good idea to sink sales commission into the mortgage and live off the basic salary. Therefore then I'm very lucky to have paid off a mortgage and have a decent if not huge pension sum as well at the age of 52.
Index trackers do better even when taking into account market crashes.
Do you have a source for that, I'm genuinely interested?
My understanding was the volatility of index trackers impacted their returns, hence the need for a diversified portfolio and rebalancing.
I did mine the other way around – mortgage, ISA and pension albeit I’m lucky enough to have 2 company contributing SIPP for the last 32 years.
my mortgage ends in November, 50% of what was the monthly payment will get added to my salary sacrifice contribution, the balance to ISAs.
Edit – I should add that this was more luck than judgement on my part, I wasn’t financially educated enough to understand that my pension might outperform my mortgage interest until I got into it during 2020 lockdown, from which point it wasn’t anyway. I just thought it was a good idea to sink sales commission into the mortgage and live off the basic salary. Therefore then I’m very lucky to have paid off a mortgage and have a decent if not huge pension sum as well at the age of 52.
You don't have to justifty it to randoms... be happy and enjoy...
I'm currently allocating about 60% to pension, 10% to S&S ISA and 30% to the mortgage.
This is calculated so as to have the mortgage paid off by 50 (unless we move to a more expensive house which I'm currently mulling over) and then maximise pension tax efficiency while still adding a little to the S&S ISA as an insurance policy against possible changes to private pension access age and or tax treatment.
As for bonds, personally I think they have a place to reduce volatility. We haven't had a proper sustained equity crash for about 15 years which I think might be making people a little complacent. If you can't handle seeing your portfolio drop by 40%+, history suggests you probably shouldn't be in 100% equities.
As for bonds, personally I think they have a place to reduce volatility. We haven’t had a proper sustained equity crash for about 15 years which I think might be making people a little complacent. If you can’t handle seeing your portfolio drop by 40%+, history suggests you probably shouldn’t be in 100% equities.
This is my understanding too.
@intheborders that's of the amount left over after all other costs. If my total income including pension contributions is 100% then the current split is approx 40% costs, 60% pension/ISA/mortgage equity
You don’t have to justifty it to randoms… be happy and enjoy…
It wasnt a justification, merely an explanation to clarify IANAE and my “portfolio management” isn’t some expert insight or advice.
Be wary of bond funds though, as opposed to holding actual bonds. They are far more volatile than just holding actual bonds to maturity, although that is far harder in the uk than the us, for some reason.
The Americans are far more advanced than the uk at buying bonds and gilts, I think it's because they have been doing it longer. My investment platform doesn't let me buy short dated gilts online, has to be submitted as a trade, if it were like trading shares I would do it.
You only have to look at long term stock market returns - with crashes included - compared to bonds to see the difference. Bonds are supposedly safe but market conditions can still make them volatile, as we found out recently.
Don’t disagree about possible market crash in near future though. Given worldwide markets will be affected the only sensible option in my opinion is to get the returns while you can and then just ride the crash when it comes…
Ok, thanks for the answers.
The old fashioned method, before the new pension freedoms, was based on buying an annuity on the day you retired. Because this was a fixed date, you couldn’t risk a crash just before you retired, so you were gradually moved into bonds and cash in the 10 years prior.
Now, if you plan to use drawdown, you need to build 3 years supply of fixed income/cash, which will allow you to ride out the maximum expected length of stock market crashes without having to sell equities/funds whilst they are down.
The potential growth of an equity portfolio whilst retired is massive compared to bonds. So even low risk investments are a risk in themselves…..
Definitely not as nice as Adrian Newey's.
My plan is to have 70% in low cost global tracked funds, 20% in government bonds and 10% in money market funds.
Im 50, and planning to retire at 60. Whilst the funds are growing, I will sell them down to pay myself an income supplementing my RAF pension from 60, plus state pension from 67. In a market downturn, I will draw on the money market funds and maturing bonds, rather than reinvesting them.
Gosh it’s such a minefield. My tiny pension from being self employed kicks in soon. The IFA advised taking the 25% tax free per month , not in a lump sum. When the state pension goes up and kicks in, I’ll be paying more tax than I expected. Although I don’t mind paying tax , it seems that once again the small average hardworking person gets hardest hit
someone mentioned that Rachel Reeves could be changing the way pensions are paid. I really hope as chancellor she doesn’t take away the 25% tax free sum. It makes me wonder was it all worth while not having some sort of wage just to make sure I had a private pension.
someone mentioned that Rachel Reeves could be changing the way pensions are paid. I really hope as chancellor she doesn’t take away the 25% tax
I searched for ‘labour government pension reforms Rachel reeves’. Lots of right wing newspaper hits in the results. Some referring to ‘raid on public pensions’, some on the 25% tax free piece. With the, expected, skewing of results I noticed one like ‘Hunt says Reeves…’. On to a fact checker as there was a bit of a smell about the hits.
This is stamped July 2024 https://fullfact.org/online/rachel-reeves-pension-quote-false/
WHAT WAS CLAIMED
Chancellor Rachel Reeves announces new pension rules by saying “the State Pension is a benefit, it can no longer be an entitlement for all”.
OUR VERDICTThere’s no evidence Ms Reeves has said this or that she has announced any changes to the pension system since becoming chancellor.
Edit. The ‘what was claimed’ refers to the state pension. Though vague, the ‘our verdict’ refers to ‘the pension system’. I’d be interested in more facts on this.
Buffering an invested draw down against a fall is what I was doing by sticking money in ISA’s, I’m not clued up on Bonds/money market funds if there is such a thing, can someone provide a short explanation?
They’re basically investments based on Government / Treasury debts with reasonably guaranteed returns over a period of time. As someone said earlier mostly in SIPPs there are bond funds rather than the ability to buy actual bonds. I’m not sure about money market funds or what the actual difference is.
Given many SIPPs give interest on cash I wonder if it’s simpler to just set aside part of your portfolio as cash if you want the security of not having to sell during a fall during a drawdown.
I highly recommend two books:
- Overall investing, especially the accumulation phase: Tim Hale, "Smarter Investing: Simpler Decisions for Better Results"
Goes into plenty of details around why low-cost tracker ETFs are best for building wealth, bonds are best for stabilising the portfolio, and what sort of mix makes sense for you individually. - Optimising your money in retirement: Michael H McClung, "Living off your money"
Goes into even more detail about how to use your money in drawdown, with tons of research & data evidence (US, UK, Japan & others, going back 100 years or more). Very data-driven: your basically looking to reduce the probability of dying before you run out of money to <1%. Basic strategy is to spend from bonds, periodically sell equities to buy more bonds, and vary each year's income according to how well the portfolio does (within upper & lower limits).
Given the above strategy, it then makes sense to be mostly in equities until about 10 years from retirement and then gradually shift the portfolio balance to 30-40% bonds at retirement age - a so-called "bond tent".
Gulp, I knew there was something I forgot to do when I was younger. We need a work until drop thread.
you're basically looking to reduce the probability of dying before you run out of money to <1%.
EH? I really don't think you are
Apologies, I mis-typed. First of all, thanks for adding the apostrophe in "you're" 🙂
Of course, it's the other way around: you want to reduce the probability of running out of money before you die to <1%, i.e. *increase* the probability of dying without running out of money to >99%.
For example, there may be a 10% chance of being alive at 97. There may also be a 10% chance of running out of money aged 97 based on your portfolio, spending plans and past market behaviour. Naively, you might think "there's at least 1 in 10 chance (10%) that I run out of money before I die, that's too high". However, probabilities multiply: the chance of being alive at 97 and running out of money are 0.1 * 0.1 = 0.01, or 1%. This means that there is a 99% chance that you die without running out of money.
Smiley
@intheborders that’s of the amount left over after all other costs. If my total income including pension contributions is 100% then the current split is approx 40% costs, 60% pension/ISA/mortgage equity
Go 50/50, spend more while you're younger - you're a long time dead.
Currently age 55, will likely not be able to retire until state age 67. This makes me sad, I would chuck it now if I could afford to.
Kind of regret not putting more into pensions when I was younger, I thought what I was doing was enough, clearly not. When I started working for my current employer 13 years ago, I transferred all the little pots in to their Scheme. Im currently paying 10% of salary, they pay in 12.5%, pot stands at £130k. Seems pretty small after 38 years of working.
We're in the decent position of having no debt, fair amount of savings and only £44k on the mortgage.
The house has a decent amount of equity in it, so I suppose we're in a fortunate position. Just look back on those early years of work with a wee bit of regret.
Im currently paying 10% of salary, they pay in 12.5%, pot stands at £130k. Seems pretty small after 38 years of working.
We’re in the decent position of having no debt, fair amount of savings
I wonder, in this situation, whether it would be beneficial to increase your pension contributions significantly to gain the tax relief on the contributions and supplement your reduced take home monthly salary by drawing down on your savings ? IANAFA !
wonder, in this situation, whether it would be beneficial to increase your pension contributions significantly to gain the tax relief on the contributions and supplement your reduced take home monthly salary by drawing down on your savings ? IANAFA !
Good point. I've been considering this too on and off. Basically if I took a grand out of my savings to live on next month, and reduced my take home by a commensurate amount I'd pretty much double my money....
BUT. The reason I don't is:
Eggs all in 1 basket
The fact that the government may raid my pension in some form, or change the rules/timings on access.
The £grands are currently sitting in an ISA, so any retirement income on them will be tax free, whereas if I put them in my pension pot then they become taxable ( admittedly at a tiny rate)
The fact that the government may raid my pension in some form, or change the rules/timings on access.
The £grands are currently sitting in an ISA, so any retirement income on them will be tax free, whereas if I put them in my pension pot then they become taxable ( admittedly at a tiny rate)
But on the plus side everything you put into your pension is increased by your highest tax rate - which for me as a +30 year higher rate payer, is a 'no brainer'. Unless someone tells me otherwise?
But on the plus side everything you put into your pension is increased by your highest tax rate – which for me as a +30 year higher rate payer, is a ‘no brainer’. Unless someone tells me otherwise?
this is my logic also. I am fortunate to get a large annual bonus, which I get in December, put into Premium Bonds, and then draw down every month or so to make up shortfall in take home pay, whilst at same time maximising my pension contributions into Scottish Widows workplace pension, which I transfer annually into an Investec SIPP.
Ultimately the biggest retirement saving for me is i am able to move to Iberia with its lower cost of living.
^ I err with you intheborders. I am putting far more into pension for that reason at present.
I save a little, but if I need cash suddenly I have access to significant credit if needed and am earning well currently, so savings are not too much of an issue.
Unless someone tells me otherwise?
Does it not depend on the tax rate you'll pay on the way out? If you are fortunate enough to retire as a higher rate tax payer, then it is tax deferred. Of course 25% of the pot may be taken tax free, so there is the bonus over an ISA. But in general for most people, it will be higher rate relief in and standard rate when taken out. So that is a better deal Than an ISA.
Overall investing, especially the accumulation phase: Tim Hale, “Smarter Investing: Simpler Decisions for Better Results”. Goes into plenty of details around why low-cost tracker ETFs are best for building wealth, bonds are best for stabilising the portfolio, and what sort of mix makes sense for you individually.
I’m just reading this one now and would back up that strong recommendation.
Ultimately the biggest retirement saving for me is i am able to move to Iberia with its lower cost of living.
A villa in the Balearics is an option in my future, I'd love to know if you investigated the process and how you find it. The advice I get varies from "easy" to "ex pat nightmare, don't bother just have holidays instead".
Lots of my cousins have done it. The more wealthy spend summer in Ireland and winters in Portugal.