Retirement Planning for a 30 year old

bootstrapbill

Hi,

I've been a long term lurker on these boards and would love some specific advice from the wealth of experts on here.

I'm 30 years old and recently started taking my retirement planning and wider investing seriously.
I earn 60k a year and currently have the following assets built up:

Company Pension: 35k
S+S ISA: 23k
Cash Savings: 20k

I contribute 15% to my pension (my company contributes an extra 7.5% giving a total of 22.5%)
I drip feed my S+S ISA £1000 a month.

The aim for me would be to retire at 60 if at all possible.
My wife works full time as a teacher, we have no children currently, but would like to start a family in the near future.
We own our house with an outstanding mortgage of £135k.

My question is, would any of you do anything different in the above scenario in regards to contributions? I'm aware my cash holdings are a little on the high side.
Can anyone offer any advice as to if my assets are sufficient at this stage of life for a retirement at 60 years of age?

Thanks in advance.

Bill.

NoMore

First thing I would consider doing is using some of that 1k a month to bring your tax burden down by using your pension (or a seperate new pension). Should be able to bring you self out of the 40 % rate totally, taking good advantage of the tax relief.

232607

NoMore wrote: »

First thing I would consider doing is using some of that 1k a month to bring your tax burden down by using your pension (or a seperate new pension). Should be able to bring you self out of the 40 % rate totally, taking good advantage of the tax relief.

I'd 2nd this advise. The OP doesn't state if salary sac is available but if it is then the case for more in to the pension is more compelling.
I'd probably look at dropping the ISA contributions down to say £500 & divert this to the pension.

Dazed_and_confused

we have no children currently

In view of the above and your current earnings of £60k you may find it useful to read up on the High Income Child Benefit Charge and "adjusted net income"

bootstrapbill

NoMore wrote: »

First thing I would consider doing is using some of that 1k a month to bring your tax burden down by using your pension (or a seperate new pension). Should be able to bring you self out of the 40 % rate totally, taking good advantage of the tax relief.

Thanks. Stupid question, but if I was to contribute enough to a pension to bring myself out of 40% tax, do HMRC just work out the additional tax relief up to that point themselves? i.e. I don't need to explicitly tell them that I won't get higher rate relief on the contributions that bring me under the 40% limit?

232607 wrote: »

I'd 2nd this advise. The OP doesn't state if salary sac is available but if it is then the case for more in to the pension is more compelling.
I'd probably look at dropping the ISA contributions down to say £500 & divert this to the pension.

Not salary sacrifice unfortunately, but thanks for your advice regarding diverting additional funds towards the pension.

Dazed_and_confused wrote: »

we have no children currently

In view of the above and your current earnings of £60k you may find it useful to read up on the High Income Child Benefit Charge and "adjusted net income"

Yes, I've looked at that in the past. I guess its another incentive to shift contributions to the pension as well!

I've always been a bit worried about putting too much into a pension at a young age in case I need the money in the future. However, I suppose you could argue its not really retirement provision if I'm not prepared to lock it away until 57/58.

LeadFarmer

Im not sure you would be allowed to pay more into your pension, isn't 15% the maximum anyone is allowed to contribute?

Dazed_and_confused

Thanks. Stupid question, but if I was to contribute enough to a pension to bring myself out of 40% tax, do HMRC just work out the additional tax relief up to that point themselves? i.e. I don't need to explicitly tell them that I won't get higher rate relief on the contributions that bring me under the 40% limit?

If it is out of pre tax wages like salary sacrifice then your employer does it all, it simply reduces your taxable salary (P60 value).

If it's a personal pension/SIPP then the pension company adds the basic rate relief i.e. £80 contribution is topped up to £100, but you need to claim any additional relief due via HMRC. This will always come back to you, either as a refund, reduced PAYE tax or reduced tax owed at year end, and is never added to your pension fund

NoMore

LeadFarmer wrote: »

Im not sure you would be allowed to pay more into your pension, isn't 15% the maximum anyone is allowed to contribute?

No, limit is 100% of earned income or £40000. Whichever is lower. 40 k limit is gradually reduced for really high earners (>110k I think).

kidmugsy

bootstrapbill wrote: »

30 years old ...I earn 60k a year and currently have the following assets built up:

Company Pension: 35k
S+S ISA: 23k
Cash Savings: 20k

I contribute 15% to my pension (my company contributes an extra 7.5% giving a total of 22.5%)
I drip feed my S+S ISA £1000 a month.

The aim for me would be to retire at 60 if at all possible.

... I'm aware my cash holdings are a little on the high side.

Once you've avoided 40% tax by increasing your monthly pension contribution then you could consider a LISA, which would go well with your proposed retirement age of 60. You could do that using monthly money or simply withdraw some money from the ISA and bung it into the LISA.

If you still have surplus monthly money consider a Regular Saver that pays 5% AER. Not least because you don't have too much in cash: a bit of insurance against the slings and arrows is wise, and that's what cash is. You should, though, try to ensure that the cash is earning as much interest as possible. For instance the two of you could between you open three FlexDirect current accounts at Nationwide: live by the T&Cs and they pay 5% AER for the first year on 3 x £2,500. Look at the TSB current accounts too.

crv1963

As your wife is a teacher I'd also look at the post 60 tax situation as in when you take your pensions- will her pension be taxable? Or will she have a lower pension because of possible part time work after you have children? If she will it may be a good idea to put a bit away in her name, even if she doesn't get the 40% tax relief you would if it is all in your name.


Maybe divert some of the ISA money into LISA as said in an earlier post?


Have 4 months salary saved as cash- what are your sick pay entitlements? It might be worth putting this up to 6 months with a high proportion into relatively easy access funds such as the 5% accounts with a bit of juggling or premium bonds- I expect you could use credit cards in an emergency and cash in the former to clear the cc by the time the bill came in?


Just a few quick thoughts.

bootstrapbill

kidmugsy wrote: »

Once you've avoided 40% tax by increasing your monthly pension contribution then you could consider a LISA, which would go well with your proposed retirement age of 60. You could do that using monthly money or simply withdraw some money from the ISA and bung it into the LISA.

If you still have surplus monthly money consider a Regular Saver that pays 5% AER. Not least because you don't have too much in cash: a bit of insurance against the slings and arrows is wise, and that's what cash is. You should, though, try to ensure that the cash is earning as much interest as possible. For instance the two of you could between you open three FlexDirect current accounts at Nationwide: live by the T&Cs and they pay 5% AER for the first year on 3 x £2,500. Look at the TSB current accounts too.

Yes, sorry I should have said before, part of that Cash ISA savings is a LISA from last year. I've hesitated putting more into it as I keep wrestling with the validity of that over increasing pension contributions. You can probably sense I'm a little torn at the moment!

I've got a couple of regular savings accounts, I didn't realise we could have three with Nationwide so I'll look into that as well. Thank you.