SIPP, LISA, S&S... Death by acronym!

cfw1994

atush wrote: »

Second, boost your pension. Open a PP or a Sipp, and invest. For your age, i would suggest a higher risk global 100% equity tracker or Vanguard 100. If that is too much for you, then look at Vanguard 80 (80% equities). Put in at least enough to take you out of HRTax at the end of the tax year. but more hopefully, esp if you want to retire early.

On the bold point above: wouldn't that remove the extra boost the HMRC effectively add for HR taxpayers? Wouldn't you just want to remain inside the HRT threshold really?

SonOf wrote: »

Just being pedantic but the "half your age" crude guide has been around for 30 odd years. long before MSE. It is only to get people thinking about the actual ballpark to what they should be paying. It is not at all accurate to rely on with proper financial planning.

Yup, don't disagree with this.....but what would you suggest as an alternative "rule of thumb"? I've not seen anything suggesting that is a "bad" RoT!!

Or are you simply saying "there is more to finances than just pension, see an IFA"?

As more broad advice, I like this flowchart!!

Albermarle

A simple summary of the various pension posts for the OP :
Increase contributions to the current NEST pension, to at the very least a point where no HRT is payable .
Make sure within the NEST pension the funds are not in the default fund but in either the higher risk fund ( due to your age ) or one of the retirement funds but set with a retirement date a long time in the future ( not necessarily your dreamed about date.

SonOf

SonOf didn't suggest a standard personal pension at all either. He just singled out a SIPP, which is why I mentioned it.

I mentioned using the existing master trust scheme.

edit: the OP said he was maxing out his existing pension, so I take it using that is not an option.

Its unlikely he is maxing pension contributions. I read it that he was maxing out the matched employer benefit. If so, he can still pay more than that. It just wont be matched by the employer. There may be salary sacrifice available though.

Yup, don't disagree with this.....but what would you suggest as an alternative "rule of thumb"? I've not seen anything suggesting that is a "bad" RoT!!

I would suggest a bit more accuracy is used in the shortfall analysis. The old "half your age" crude guide was based on an annually increasing monthly contribution (to cover inflation) to buy an annuity at age 65 if you had no existing retirement provision. Its primary purpose was not to be used to tell you how much to pay in. It was there because too many people were paying in £20pm and ticking the "pension done" box. This ballpark guide was an easy way for people to be told they were not paying enough.

CarbonImage

Thanks everyone for your advice so far. A few clarifications based on posts above:

- My NEST is already in higher risk funds, I switched a few months ago due to this forums advice
- When I say I want access to money 'when I need it' I am talking about should I be able to retire in my 50s, not just whenever I want.
- I am not looking for advice on specific funds right now, just the best 'wrapper' to choose in my situation
- I cant afford to diversify into Nest, SIPP, and ISAs right now. I just want to pick one of SIPP, LISA, or ISA to add to my NEST.

SonOf

I cant afford to diversify into Nest, SIPP, and ISAs right now. I just want to pick one of SIPP, LISA, or ISA to add to my NEST.

Forget SIPP. That is not necessary. There is absolutely no point based on what you have said. (and forget PPP and SHP as well. I know you didnt mention them but they should be in the mix for consideration. Even if to eliminate).
LISA beats ISA for retirement planning.
NEST beats LISA when you are a higher rate taxpayer.
NEST is best for your higher rate tax contributions. LISA is best for when you are not using the higher rate band.

So, you may need two options if you want to get the most tax efficient way.

CarbonImage

Thanks for your response.

I guess my main worry with the LISA is if the age at which you can take it gets increased. 60 is already later than I'd like to retire, (ideal world scenario) and who's to say they won't push it to 65 or later before I get there?

SonOf

I guess my main worry with the LISA is if the age at which you can take it gets increased. 60 is already later than I'd like to retire, (ideal world scenario) and who's to say they won't push it to 65 or later before I get there?

You will then use the pension to fund the gap or the medium-term investments you will build up in later life (if you are efficient).

My gut feeling is that LISA wont exist by then it and it will be reclassified as ISA or whatever tax wrapper comes out in later life.