how much is in your pension pot and how long have you been putting into it

lisyloo

Putting into ISA's and your primary property and downsizing later

I'm doing all of these as well as the pension, so I think it's important to point out that you don't have to go for one thing only.

not sure about the mattress option though

BeatTheSystem

lisyloo wrote: »

I'm doing all of these as well as the pension, so I think it's important to point out that you don't have to go for one thing only.

not sure about the mattress option though

Sound like you are switched on financially. Well done you!

How many years before retirement? 130K is not a bad start. I quick calc for future value is on your calc do FutureValue = 130 e(years X 7%)

Other options after you have maxed out ISA's is to put into accumation funds outside ISA's I like good quality income paying ones but choose the accumlation version. I believe we can still claim about 10K free CGT 'income'

peterg1965

bristol_pilot wrote: »

I'm afraid you may be wrong. The proposed limit refers to both employer and employee contributions and for those in final salary schemes, because of the way the efffective contribution is calculated, a modest pay rise of 5% for example could easily see you breach the limit. You may end up begging your boss not to give you a promotion! (I'm in the same boat btw).

I have been thinking about this again and have done a little research. This is the statement from the 2010 Budget which refers to Pensions Tax Relief:


1.118

The Government will continue with plans it inherited to raise revenues from restricting pensions tax relief. The Government is committed to protecting the public finances by introducing reforms that raise no less revenue than existing plans. However, it believes that the approach legislated for in Finance Act 2010 could have unwelcome consequences for pension saving, bring significant complexity to the tax system, and damage UK business and competitiveness. An alternative approach involving reform of existing allowances, principally of a significantly reduced annual allowance, might better meet the Governments objectives. Provisional analysis suggests that an annual allowance in the range of £30,000 to £45,000 would raise the necessary yield. The Government wishes to engage employers, pension schemes, experts and other interested parties to determine the best design of a regime.


I have highlighted the significant statements. For people in my position the key factor would be the method of working out the annual monetary value of a non contributory scheme. If the scheme I am in is valued at, say, 20% total employer and employee contribution (that would be generous amount) and add to that my gross contributions to my SIPP it would only just get to the lower limit of that £30K-£45K postulated bracket. Even a promotion or two, or some pay rises over the next 10 years, would not take me far into the bracket.

It will interesting to see what happens and whether it happens before April 2011. If the worse came to the worse I could do one of two things, continue to add to my SIPP (but I wouldn't get tax relief on all the contributions), or limit my SIPP contributions to that which I would get higher rate tax relief and then up my S&S ISA contributions to compensate.

Either way, I suppose it is a nice problem to have!

lisyloo

How many years before retirement?

I'm 42.
My state pension age is 67 I think (I'm in the transition period from 65 to 68).
I think the forecasts look ok for the traditional 2/3rds salary but there isn't huge scope at the moment for early retirement, but that is something we can work on when we don't have mortgage.

Other options after you have maxed out ISA's is to put into accumation funds outside ISA's

At the moment £20.4K ISA allowance plus pensions is enough for us.
When I did have some spare this year I put it into NS&I index linked certs which are paying RPI + 1% which seems to have been a good move.
I think you are right that the next step would be S&S outside ISAs as and when we have any spare.

My short term focus is to have enough assets to cover the mortgage for which I have 23 months to go (it's great to be counting months and not years).
I am not paying off my mortgage as it's 0.99%.
I will of course move assets around should interest rates rise, but that seems a way off at the moment.
Whilst the cash ISA rates beat the mortgage then there is no point paying it off so I'll have a giant stooze pot until the term runs out.

Paul_Herring

£61K over 9 years with a 2 year break

cvd

For people in my position the key factor would be the method of working out the annual monetary value of a non contributory scheme. If the scheme I am in is valued at, say, 20% total employer and employee contribution

What they will do is calculate your annual pension earned from your final salary scheme at the start of the financial year and calculate it at the end of the financial year. Then multiply the difference by a factor, perhaps 20. If you also get a lump sum, then the increase in that earned over the year would also have to be added on. Then add on your gross contributions to the SIPP. If that figure exceeds the limit (possibly £40,000) then you would lose tax concession.

Even people just above the threshold for higher rate tax who are in a final salary scheme and who are either contributing extra to their pension or who get a modest pay rise of say 4-5% will be caught. They are more likely to be caught if they have been in the final salary scheme for a lot of years.

There are some worked examples at the end of this article

http://blogs.telegraph.co.uk/finance/ianmcowie/100007360/how-tax-changes-will-affect-your-pension-q-a/

peterg1965

cvd wrote: »

What they will do is calculate your annual pension earned from your final salary scheme at the start of the financial year and calculate it at the end of the financial year. Then multiply the difference by a factor, perhaps 20. If you also get a lump sum, then the increase in that earned over the year would also have to be added on. Then add on your gross contributions to the SIPP. If that figure exceeds the limit (possibly £40,000) then you would lose tax concession.

Even people just above the threshold for higher rate tax who are in a final salary scheme and who are either contributing extra to their pension or who get a modest pay rise of say 4-5% will be caught. They are more likely to be caught if they have been in the final salary scheme for a lot of years.

There are some worked examples at the end of this article

http://blogs.telegraph.co.uk/finance/ianmcowie/100007360/how-tax-changes-will-affect-your-pension-q-a/

Wow! Thank you for posting that link, that is an absolute eye opener for me, and to be honest if that comes to pass it is absolutely shocking. I, and many others in the same pension scheme as me (and other similar ones) , could be facing significant tax bills that would be totally unexpected. I had no idea that was the sort of pension regulations which are being contemplated. It sounds as if a fair few people could be caught out, and I can't believe it is coming from the Tories.

This would force some serious restructuring of my finances and, in the absolute extreme, I would even contemplate retiring early to take immediate pension benefits which I can do now in my scheme even though I am only 45.

C_Mababejive

sandsy wrote: »

The simple response to this comment is that final salary schemes were usually set up to target a pension of 2/3rds of final salary.

However, it's not quite that simple anymore. Final salary schemes were established at a time when people often joined a company for life and frequently worked 40 years for one employer (40/60ths giving you 2/3rds).

However, your average working person today doesn't do this. A few years with one employer, a few years with another etc etc etc. Final salary schemes have always penalised this person. If they transferred benefits to a new scheme, the transfer value always purchased less years than they had with the previous employer. And even if the pension was left as a deferred benefit, it became based o nthe salary at leaving.

In essence, at its extreme, if you had someone who moved employers each year, always in final salary schemes and leaving deferred benefits with the scheme each time they moved, they would effectively have had a career average pension scheme rather than a final salary one. This is effectively the same as someone who has money purchase benefits and contributes a fixed % of salary throughout their working lifetime. Of course, it all comes down to the actual %!

Thanks for the explanation. I have about 30 years in the same FSPS and the FSPS is not in deficit and backed by a major international Blue chip so i guess I'm lucky.

pineapple

Wow you are all so lucky!!
I'm afraid I swapped financial security for travelling overseas. Result was a very bitty contribution to various schemes - most of which have been aggregated. So here I am at the age of 60. I only got £40,000 (and that was through commuting some income to lump sum). I had £30,000 mortgage remaining and paid off £20,000 of it. I've put the maximum amount in a 1 year ISA. That and another (fixed at 6% and due to mature) will pay off the balance in a years time.
I get the state pension next March - if they don't move the date on again.
Plus I collect a second, small retirement grant at 65.
Currently I only work 3 days but I would still like to retire. I should be able to manage once the state pension kicks in but would only have about £10,000 capital - due to current home maintenance expenses.
That said, I am quite prepared to move and downsize or release equity. No kids so not bothered about leaving any money!

Rainmaker_uk

Batchy wrote: »

im 33 ive only got 14k in a pension (small hey), but for last 12 months and going forward employer is paying in 6k, I will probably go for 3k per annum from April next year (once ive sorted out the ISA's and payrise (hopefully).

But have just spent 35k of my cash buying a house, I consider my house a pension that Ive just capitalised at a fixed value, as who knows what renting will cost in the future, and how do you make sure you provide yourself an income for that purpose. So I took, the housing element out of the pension income and brought, even though it could go down in value. Its the right thing to do. (got a cracking deal too)

So I have four long term plans:-
one is to save into ISA's max out each year
second is all about saving a pension pot, for some council tax food, energy and holidays and luxuries.
Third plan is also to have maxed out premium bonds on retirement. thats going along nicely, 'Won 3 times this year'.
Forth was obviously to buy the house which is now already done (I think its a priority when the going is good, but not in a bubble, personal opinion)

Its not a sprint its a marathon, just pace yourself, once you have a nice fund built up, it will be amazing to see it grow, faster than the contributions you make into it, even on a daily basis.

The plan is to retire early, but as I only do a 9-5 desk job, ill happily go into my late 60s if necessary.

Sometimes life just doesnt work out the way you plan things, so you have to adapt. Fingers crossed I will win a million on premium bonds lol.

PS gf has final salary with government (10 years banked and bound to max out the 40 years as necessary) so its a lot less for me to worry about on that front.

IMO this is a nice plan. It worries me to see so many people trusting additional money over and above matching the employer contributions to a pension provider.

Saving for your future is vital however a pension is not always the best or most effective way to do it.

Yes the are tax breaks but you get taxed on the way out... You cannot access your money if you need it or if there is a golden investment opportunity. There are also fees to pay to so called 'experts' to invest your money. The performance of these experts is often very poor and can be easily outperformed by other specialists or indeed by yourself... You are also at the mercy of when the government decides what age you can start drawing a pension from... The 25% tax frre lump sum is great but there are no guarentees this will remain - unlikely to go but it could!

I would second Batchys approach to ISAs - utilising your ISA allowance is a great move - it gives you flexibility for emergencies as well as retirement age. It also provides you with a money generating asset.

I would tend to disagree with the view that your house is an asset - I would tend to put that in to the liability section. If it does not generate income then in my opinion it is not an asset. Not saying you should not buy your house - just be clear whether it is a liability or an asset.

Just to reiterate I would think carefully putting non matched contributions in to your company pension.