Saving too much in a pension

Fatbritabroad

Thanks Linton yes I'm slowly building it back up and intend to save at least 10k of the bonus I get next year as I'll need that for house upgrades.

The saye and sipp both mature in 5 years and will be take as cash so they will be about another 15 to 20k even without the shares doing well. Whixh. Hopefilly they will! If I need the cash I'll csn then in or transfer and hold them in my isa

Very good point about the flexibility of isas. I just thought starting now I could probably building up at least 100k in a reasonably short space of time so if by some. Miracle I could afford to retire early I could love off that until my pension matures

RuleTheWorld

A lot of this is assuming there are no changes regarding pension regulations and tax rates over the next 30 years.

My view is enjoy the 42% tax efficiency of the current system to a sensible level but it might not always be there which might be the time to shift tact having took advantage of it for many years

Fatbritabroad

Yes that was my reasoning like when they mooted taking away the higher rate tax benefits last year

Pincher

http://www.telegraph.co.uk/finance/personalfinance/special-reports/11533409/Lifetime-allowance-How-to-avoid-55pc-tax-bills-on-your-pension.html

"Are you a dedicated saver putting regular sums into a pension? If so, keep a very close eye on your pot to make sure you don't go over the new £1m lifetime limit.
Last month George Osborne, the chancellor, announced that the maximum amount savers can put into their pension pots over their lifetime - known as the "lifetime allowance" - will be cut from £1.25m to £1m next April.
It's another huge blow for people who have carefully and responsibly saved for their retirement. Any savings above the limit will lose valuable tax relief and suffer a crippling 55pc tax rate when it is eventually withdrawn."


Tax rebate at 20% suddenly seems such a waste of £1million.
If you can, you should only pay in pension contributions to soak up 40% tax rebate, or MORE.




When Alexander saw the breadth of his domain he wept for there were no more worlds to conquer. Damn, I used up my lifetime allowance by age 32, he cried; and died of anger because he can't save any more.

Thrugelmir

Fatbritabroad wrote: »

Putting jn 12k a year for another 35 years ( as my pension age is technically 69) would give me 500k without any growth at all!

Long term forecasting is nigh impossible. So many potential unexpected events in that period of time. I'd worry more once your pot is of more substantial proportions.

RuleTheWorld

Pincher wrote: »

http://www.telegraph.co.uk/finance/personalfinance/special-reports/11533409/Lifetime-allowance-How-to-avoid-55pc-tax-bills-on-your-pension.html

"Are you a dedicated saver putting regular sums into a pension? If so, keep a very close eye on your pot to make sure you don't go over the new £1m lifetime limit.
Last month George Osborne, the chancellor, announced that the maximum amount savers can put into their pension pots over their lifetime - known as the "lifetime allowance" - will be cut from £1.25m to £1m next April.
It's another huge blow for people who have carefully and responsibly saved for their retirement. Any savings above the limit will lose valuable tax relief and suffer a crippling 55pc tax rate when it is eventually withdrawn."


Tax rebate at 20% suddenly seems such a waste of £1million.
If you can, you should only pay in pension contributions to soak up 40% tax rebate, or MORE.




When Alexander saw the breadth of his domain he wept for there were no more worlds to conquer. Damn, I used up my lifetime allowance by age 32, he cried; and died of anger because he can't save any more.

Absolutely agree. Should only make AVC's if access to spare 40% and above marginal tax rate

OR very close to retirement.

Youngsters with only 20% tax should focus on ISA

armchaireconomist

Personally i'd continue to invest in pension and S&S ISA but at a lower rate than currently, and pump the rest into overpaying mortgage.

Worst come to worst, your massive pension pot isn't going to pay your mortgage.

RuleTheWorld

mortgage overpayment question really depends on current plans of how it will be paid off and whether you might want to borrow more in the future for any reason.

if for instance, the mortgage would be paid off in your 40s anyway then there is not a strong arguement to accelerate at the moment

Fatbritabroad

Thanks guys probably more like 55 for the mortgage ( down from 70,2 years ago after the divorce. And actually the pension could be used to clear any o/s mortgage couldn't it using the tax free lump sum. I should inherit at some point too ( not for a long time hopefully) though I've always assumed that's Not going to happen in case mum leaves it all to the cats home ��

Fatbritabroad

Jimmy Jones you're probably about right there my mid range pot is 656000 which would be about 24k . But that assumes a growth rate of 1.45%which seems ultra conservative. That does include inflation so I guess itd really 4%