Should I do something else with my OP?

getmore4less

Escapar2020 wrote: »

Why doesn't someone teach this stuff, or did I miss that day in school!?

I never expected to be a hr tax payer, so never thought about relief. So, my salary is about £54k gross pa, and about £3050 net per month. Am I reading it rright that of I put an extra £9k pa into my pension, my net would still be £2800 per month? I think I could still cover living costs and op/save on that.

Could I put more into my lgps pension, or would I have to/should I put it in a different pension?

Thanks

Escapar2020

open these in two tabs
https://listentotaxman.com/54000?
https://listentotaxman.com/45000?

Suggests £3,258.34, £2,823.46

check your tax code and pension contributions to see how much you need.

With NI the tax goes up from 32% to 42% if you can do salary sacrifice you can save a bit more.

Scrimps

I would choose paying into the pension also.

Don't think you would have to leave it until 67 though, I thought the rules still currently state you can start accessing it at 55? (Subject to the whims of government)

I would pay it into a sipp to allow me to do this rather than lock it into a LGPS until 67 if that's what your pension scheme states you have to do, but absolutely look at all the rules on this!!!

edinburgher

I would definitely use a SIPP, the benefits and the age at which you can take them may well be more flexible than the LGPS scheme. I'm also in the LGPS scheme, the benefits are fantastic, but there are so many conditions to added benefits etc. that I wouldn't touch them with a barge pole unless I had large amounts invested elsewhere already.

I don't think you need to speak to an IFA if you're willing to do a little research and aren't looking to invest in anything too exotic.

Escapar2020

Thanks museumworker

No kids, I dont have the patience!

I suppose I'm like a lot of other people, I have good days and bad days at work. Seem to be more bad days though and the thought of being tied to it for another 20+ years because of finances is very depressing. I can keep it going for a few years if I know if have a plan and a way out though

Escapar2020

Thanks scrimps and edinburgher.

I'll have a closer look at sipps, dont know anything about them. Do I have to start with a lump investment? Is it something that can be deducted from my salary, or i'd have to pay-in myself? Not sure how you actually get the tax relief on a sipp?

Escapar2020

getmore4less wrote: »

open these in two tabs
https://listentotaxman.com/54000?
https://listentotaxman.com/45000?

Suggests £3,258.34, £2,823.46

check your tax code and pension contributions to see how much you need.

With NI the tax goes up from 32% to 42% if you can do salary sacrifice you can save a bit more.

Thanks getmore4less
Thats a handy calculator. My current take home is £3050 though, my payslip shows £700 in tax £380 in NI and £380 pension. So my take home is £200 less than the calculator. Ill check it with my payroll at work. I could cope with a monthly reduction from £3050 to £2823 I think, but need to see why my real and calculated current take home are so different before deciding anything

crv1963

Hi Escapar2020


We're even later to the party than you, although we do have the benefit of access to my DB pension October 2018 at age 55.


I like my job but not the BS that goes with it, we worked out monthly spend circa 2k pm not counting mortgage as we hope to have it paid off in 3 years when the fixed rate ends. Then we added a sum for big spend items (cars, white goods, house repairs), then we worked out how much money we need to bridge the gap between stopping work and SP kicking in (age 67 for us).


I'm looking at doing the same role but as agency worker from 55-60/62 when I will finally stop work altogether. OH will reduce hours and may look for a complete change of direction from this coming October. I figure that I can tolerate the BS as long as I have the money to pay off the mortgage in the bank and have a date to go for good- October 2023 max October 2025!


If I were you I'd play around with some figures- get a SIPP open to get the higher rate salary gap saved, keep some decent level of mortgage overpayment going, get some cash saved in ISAs (probably S&S to protect against inflation) and aim to go 10 years before my SPA probably 68 for you.


Your 25% TFLS from the SIPP will allow you to either have an emergency fund or utilise it as part of your monthly income before your SP and LGPS starts paying out.


Your SIPP would be tax efficient and doesn't need to last forever as long as your SP and LGPS added together meet your monthly income target after tax. For us we need to save enough to give us 12k pa to top up DB before our SPs kick in so 120k total so as a SIPP gets the tax relief going in they work out better for us, but we will need some in ISAs too.


So if you set a target of 58 it leaves you 14 years to reach your goal and is better than our 5/7 years. I wish we'd started earlier but at least we've started.

Escapar2020

Thanks CRV

I need to learn some more about sips! At the moment, I'm looking at paying more into the LGPS to reduce my tax rate and still maintain healthy savings to become mortgage neutral by 2020.

Even planning for age 58 seems a long way off to me! Planning for 2020 feels achievable. If, by 2020, I'm enjoying my job more, I'd be able to boost my savings for a few more years, otherwise I'd have the choice to find something else at a lower level or part-time. Rather than sticking to a fixed plan, I prefer to have options, which is why the advice on here is so useful

Escapr2020

crv1963

Escapar2020 wrote: »

Thanks CRV

I need to learn some more about sips! At the moment, I'm looking at paying more into the LGPS to reduce my tax rate and still maintain healthy savings to become mortgage neutral by 2020.

Even planning for age 58 seems a long way off to me! Planning for 2020 feels achievable. If, by 2020, I'm enjoying my job more, I'd be able to boost my savings for a few more years, otherwise I'd have the choice to find something else at a lower level or part-time. Rather than sticking to a fixed plan, I prefer to have options, which is why the advice on here is so useful

Escapr2020

That's the way to do it, set an overall target - for us retiring in 5/7 years, then break it down into achievable goals. 14 years is not a long time it seems to fly by. 24 years to retirement is a long time.


I spent the summer researching for our situation and read extensively on this site, HL site and money motivator etc, using links others have posted to get an understanding both of what is available to save in, measuring risks, also knowing if the crash comes near our date we'll have to either use savings, delay retiring or cut our spending or a bit of all three.


There are tools you can use to see what level of risk you can tolerate, we're planning my DB pension underpinning our retirement. Then Sipps to bridge the time from finally stopping work and the SPs starting. If I were you I'd figure the LGPS being your main income plus SP at 68, so work out how much you need per month 58-68 as a target to save for. If you are overpaying into your LGPS is this tied to SP age? Is there any point in this if it doesn't give you flexibility to retire earlier if you get a hugely reduced pension by going before SP age?


For instance I can retire now but at a pension reduced by between 21-25%, but waiting until I reach 55 in October means no reduction! Make sure that your additional contributions are not going to be taken by going early or it will be money lost not tax saved, using another vehicle like Sipp may add some flexibility to your plans, freeing you to change roles/ job without reducing your income by too much.


Our aim to build the Sipps will be started in earnest from November also hoping to use salary sacrifice to keep my combined pension and earnings below the HR tax level. One weakness in our plans is Mrs CRVs poor pension provision and if she reduces hours/ earnings it will limit what can go into her Sipp vs mine. So have to suck it and see for the first year of our plan. It might be that we load as much as we can into her Sipp and S&S ISA.


We do intend to carry on living life to the full as well but not going overboard- on advice from here I looked at all our spending and changed/ haggled with utility/ tv/ phone/ broadband providers, renegotiated a better mortgage deal and on paper we saved lots on our monthly outgoings. Unfortunately vet bills have eaten into those savings.


Learn, juggle and play with figures until you get the balance that feels right for you. For us it was working out the monthly income figure we need then working out how we can achieve it.


Good luck.