Early-retirement wannabe

fraserkerr

I have just turned 30 years old and have already considered early retirement. I have a defined contribution pension at my workplace where my employer matches my 5% contribution which is capped.

I have also been additionally adding 15% via salary sacrafice into AVCs into the same fund L&G Global (60:40 Index) each month. I hope to continue to paying into AVCs and possibly increase the 15%. Just now my total monthly contribution including employer contribution is £600. Since Dec 2006 to date I have contributed £23,537 and the fund value is now £31,241. Does this seem like a good return and should I consider starting a personal pension plan outside of work?

Fraser

kidmugsy

fraserkerr wrote: »

I have also been additionally adding 15% via salary sacrifice ... I hope to continue to paying into AVCs and possibly increase the 15%. Does this seem like a good return and should I consider starting a personal pension plan outside of work?

Sal Sac is such good value that you should use it in preference to a Personal Pension. (Use it before a government comes along and stops it.)

If I were to reach a limit for contributing to an AVC, then I'd prefer ISAs to PPs unless the PP let me avoid higher rate income tax.

madeinireland_2

Thanks for all the encouraging comments. I think I have decided to plough on for another year but its strangely comforting to hear your comments which suggest I am financially secure. I was particularly stressed the other day but this seemed to lift and I think I now understand the feeling that someone had earlier in the thread.

James - thanks for the very useful suggestions. It took me a while to completely understand but I think I've got most of what you were saying. I could not understand the years to get the rest out bit and I think somehow a column was missing from you table.

A couple of points on your post...

1. I am able to take my pension at any time now after 50 as I am in a scheme that was protected from the change to 55.

2. My scheme does not start out at full rate on voluntary redundancy but it does on compulsory which in this case is not on offer

3. It's a mixed scheme with final salary / CARE and a new normal retirement age at 65 (it was 60) and I think it's most efficient to take it from 60 as far as I can tell as the final salary bit freezes at that point - I have planned to defer for 3 years and I could go longer perhaps but I don't want my pension to get anywhere near the next tax bracket as I can give capital to my wife to use her personal tax allowance instead.

4. Is there a danger in your arrangement of putting capital into a personal pension that I would exceed the annual allowance which I thought was soon to be £40k ? I think you were referring to putting in £60k - I also want to try and avoid any lifetime allowance of course

5. Finally is there any limit to the number of times your can recycle pension ? Is that what you meant with the years to get the rest out bit ?

Thanks

madeinireland_2

James - I've just thought of one further question if you don't mind....

When you refer to a personal pension - I presume you don't mean a SIPP - have you any examples that you might recommend where a lump sum can be put in ?

Thanks

kidmugsy

madeinireland wrote: »

5. Finally is there any limit to the number of times your can recycle pension ? Is that what you meant with the years to get the rest out bit ?

You can recycle income as much as you like, subject to the annual cap. There are some limits on recycling capital: my own feeling is that the existence of the caps means that those limits are obsolete: it might be worth watching in hopes that they are scrapped.

jamesd

Yes, there's a danger of exceeding the annual allowance. You can carry forward unused allowance from the previous three years if you were in a pension scheme during the year you're carrying forward. HMRC has a calculator to help with this. You may need to know the pension input periods. This is usually the tax year for personal pensions but for work defined benefit pensions it can be anything so you'll need to ask your scheme for what it is.

The years to get rest out part uses the final net cost column, which is £3500 for higher rate tax. It divides that by the after tax income amount to work out how long it will take that income to get out the rest of your net cost.

There is no limit to how often you can recycle pension income money. Not related to years to get the rest out. There are limits on recycling pension lump sums, ask about them if you want to recycle lump sum money.

I just meant a personal pension (PP), any of them. The self-invested personal pension (SIPP) type can hold things other than the funds that the more general personal pensions tend to be limited to, like individual shares, ETFs, investment trusts and more, depending on the particular SIPP product. The best product for you depends on what you'll want to invest in. For funds it's likely that you can find a PP that's cheaper than a SIPP, though not necessarily. First decide what sort of thing you'll want to be invested in, how much in total you expect to have in the pension pot and how often you may buy and sell thing. The rest follows from that.

jamesd

If you mean the limits, there are two different limits that apply each year and the lowest of them is the one that applies:

1. Total earned income, usually PAYE income.
2. The annual allowance and any unused allowance that can be carried forward from past years.

gfplux

Hello everyone, the person who started this thread should be congratulated for creating a splendid and interesting thread.
However we now seem at over 1100 posts to have a mature thread that should in some way to be split up. (Forgive me)
We have posters on the thread who are just beginning their journey who can/could benefit from almost every post and those of us (yes, self interest) who have completed the journey and are now enjoying the fruits of all that planning.
Is it possible that those thinkers who are posting could come up with "sub titles" of this great thread that could focus more closely on the needs of different groups.
I am probably in the wrong sub heading of thread as I am already retired and looking for like minded members to share that part of the journey with. However I might have some knowledge or experience that would assist those that are close to retirement.
However I know I have nothing to contribute to a discussion with someone in their 30's or 40's who whatever the planning life will get in the way of any plan or advise.
Sooooooo there it is, I have thought so long about making a post of this nature and am well prepared for those who will say I should have ignored the elephant in the room but I could not help myself.
Forgive me and thank you those that will think before making an angry reply.

mark55man

retirement is about change - and change is good


this thread is about retirement - and I don't think it needs to be hacked about - the pensions forum is plenty big enough for people to test their ideas out or to as ask specific questions.


Like capitalism if they are good they will succeed. I enjoy the serendipity of this thread sometimes earnest, sometimes factual, sometimes gently chiding


my vote - lets not try and reinvent it (and if I might beg lets not spend too much time on this particular oxbow lake within the thread)

madeinireland_2

Hi,

I'd just like to say a big thank you to Jamesd (and others) who have given me incredibly useful advice over the last couple of days on this thread and others.

Jamesd - I've been ploughing through numbers over the last day or so and I think I have worked out an optimum way forward which does adopt your suggestion of putting a significant sum into a PP - not worked out which one yet. You might like to know that both my kids are very happy and grateful too as they will also benefit by being able to increase their NHS bursary from about £1k per annum to nearly £4k - an interesting and useful by product of this as my net income from the pension contribution will now be significantly less.

Thanks for everything!