The plan and the numbers - please critique

Anonymous101

jimi_man wrote: »

I also have this issue. However I am a 40% tax payer and she is a 20% tax payer. In retirement (before her pensions come into force - about 7 years) I will be a 20% tax payer and she won't be a tax payer at all. If I pay into my pension I am saving 25% tax (40% saving on the way in and 15% on the way out) whereas she is only saving 20% (20% on the way in and 0% on the way out) therefore it surely makes more sense to max mine out first?

Yes absolutely. I'm in the same position as you. This year will be the first year I will save the full £40k (almost) into my pension. I've been trying to assess whether its worth then contributing into Mrs. Anon's pension. She's currently in an LGPS scheme with work but we have been considering opening a SIPP for her too.


At the moment I'm siding towards not doing this due to our ages. We're looking to step back from full time work a number of years before she reaches 55 so at the moment any surplus is going into S&S ISA's. I'd like to keep the cash assessable for the time being and there's always the opportunity to backfill the pension as we approach 55.


I think a lot depends on you age. If you're nearing 55 that's not so much of a risk but in the longer term legislation can change so retaining some flexibility is a good idea.

crv1963

jimi_man wrote: »

I also have this issue. However I am a 40% tax payer and she is a 20% tax payer. In retirement (before her pensions come into force - about 7 years) I will be a 20% tax payer and she won't be a tax payer at all. If I pay into my pension I am saving 25% tax (40% saving on the way in and 15% on the way out) whereas she is only saving 20% (20% on the way in and 0% on the way out) therefore it surely makes more sense to max mine out first?

Yes I agree with your view.

Everyone has their own circumstances, our particular situation is that Mrs CRV pension pots are far lower than mine and we started looking at this relatively late in our working lives. For us in our 50s saving into Mrs CRV pension makes sense.

I was pointing out to OP that if he can afford 60k using carry forward into his pension this year it makes sense in his situation to put the maximum possible into his partners pension and LISA next year, his partner could then draw this tax free on retiring.

atush

Re the missus she’s quitting work at the end of mat leave and in the model I’ve assumed she’s not going to work or earn again to be prudent - odds are she will end up doing some form of paid work , particularly when the youngest goes to school (she’s pretty senior in what she does earning 50k+ at moment)

What is her current pension like? I'd top it up before she quits.

jimi_man

crv1963 wrote: »

Yes I agree with your view.

Everyone has their own circumstances, our particular situation is that Mrs CRV pension pots are far lower than mine and we started looking at this relatively late in our working lives. For us in our 50s saving into Mrs CRV pension makes sense.

I was pointing out to OP that if he can afford 60k using carry forward into his pension this year it makes sense in his situation to put the maximum possible into his partners pension and LISA next year, his partner could then draw this tax free on retiring.

Apologies, I wasn't criticising at all, I understand your point fully. I guess I was more looking for agreement that I was doing the right thing. Should have started a new thread really, sorry!

crv1963

jimi_man wrote: »

Apologies, I wasn't criticising at all, I understand your point fully. I guess I was more looking for agreement that I was doing the right thing. Should have started a new thread really, sorry!

No need for apologies, I didn't see it as a criticism. Yes I would do the same as you, in your shoes.

Good luck with it all.

Marine_life

Mistermeaner wrote: »

Working full time earning pre-tax 100K+
My take home, after pension etc. and ignoring bonuses is ~£3K per month.

How does that work then? The take-home looks very low.
Is your bonus is c. £50k?

Norwooder

Marine_life wrote: »

How does that work then? The take-home looks very low.
Is your bonus is c. £50k?

Expect it is the pension conts

Norwooder

If in reality you expect to pay more into your pension (for example do you think you will pay more than £20k in 2020/21) you should stress text the projected nominal value of your pension against the following, to ensure you are not going to breach the lifetime allowance:

- additional contributions (in excess of £20k from 2020/21)
- higher investment return
- lower levels of inflation resulting in less of an increase to the lifetime allowance

As someone else rightly pointed out you should make full use of your annual allowance if you believe there is a risk you will be subject to the tapering. For example you may want to consider making use of any remaining carry forward you have that will be lost next year (i.e. 2016/17).

cfw1994

Mistermeaner wrote: »

It’s frightening how many people don’t have a plan

Or worse still a stupid plan

A wise man one told me to save half of everything you earn

This absolutely is possible, almost regardless of what you earn, providing you cut your cloth accordingly

I do agree that it makes sense to have a plan.....

But I disagree with the ability to save half your earnings!
Saving half my from an early age....would have led to a pretty dull past 20-30 years, I have to say!
Absolutely no way I could have done that & bought the houses, vehicles (not flashy ones, but some quite nice!), raised the kids, enjoyed nice holidays, etc etc.

Herein lies the problem we all face.

Yes, one can scrimp & save & not "do" expensive things (some of which might be quite fun!), in the hope of a relaxed retirement....but I am a firm believer in balance (perhaps due to being a Libra!) - live a little, save a little, it'll all be fine!

(added to which I went to 4 funerals in 2018 - so I don't want to be the richest person in the graveyard, but one of the ones with an interesting write-up on the headstone!!)

DT2001

cfw1994 wrote: »

I do agree that it makes sense to have a plan.....

But I disagree with the ability to save half your earnings!
Saving half my from an early age....would have led to a pretty dull past 20-30 years, I have to say!
Absolutely no way I could have done that & bought the houses, vehicles (not flashy ones, but some quite nice!), raised the kids, enjoyed nice holidays, etc etc.

Herein lies the problem we all face.



Yes, one can scrimp & save & not "do" expensive things (some of which might be quite fun!), in the hope of a relaxed retirement....but I am a firm believer in balance (perhaps due to being a Libra!) - live a little, save a little, it'll all be fine!

(added to which I went to 4 funerals in 2018 - so I don't want to be the richest person in the graveyard, but one of the ones with an interesting write-up on the headstone!!)

Although not being a Libra, I feel that I agree and disagree with you! Both my OH and I saved 50%+ before children but rarely after (we have 4) although we used some of those savings to buy a bigger house.
We were lucky to have the savings bug young which has enabled us to be mortgage free so are able to do as you suggest, enjoy live and save.
Balance is as you say key.

OP, odds are you’ll reach your ‘number’ sooner than 57. So flexible planning is the key. If you can retire earlier will you? Make different assumptions about levels of saving/spending and see how it affects your ‘pots’.

We are both self employed, our income flow can vary quite significantly, so are not sticking to rigid savings targets. Having a plan allows us to know where we are but does not stop us from taking excellent value for money holidays that also, IMO, give our children a better ‘view’ of the real world.

I will reiterate, balance as cfw1994 says is key and reading this pensions forum helps with the diverse opinions.