Pension Planning

Alexland

ForestBluebells said:

I don’t need 30k, it’s only me for now,  27k is much more than my current spending (I’m assuming same rate of tax is paid in retirement and used a salary calculator to work out what would be left after tax), so 27k would give me 1,833.48 per month after tax?  Given I currently spend £1050 comfortably if I minus my mortgage and money going into savings/investments then this realistically gives me a lot of wiggle room for wanting to spend more when I fancy and not having to worry?

Your tax position in retirement should be better as 25% of the pension can be taken tax free (as a lump sum or regular income) and the money you are investing in the LISA can be drawn without penalty from age 60 and with no income tax to pay. Also the calculator you used seems to assume you would be paying National Insurance which wouldn't apply to pension income.

So to answer "am I saving enough?" it might be worth building a spreadsheet model including a forecast for each of your accounts (contributions, asset allocation, growth and charges), when you want to retire, how you will draw from pensions and ISAs and the associated taxation you expect.

barnstar2077

Alexland said:

ForestBluebells said:

I don’t need 30k, it’s only me for now,  27k is much more than my current spending (I’m assuming same rate of tax is paid in retirement and used a salary calculator to work out what would be left after tax), so 27k would give me 1,833.48 per month after tax?  Given I currently spend £1050 comfortably if I minus my mortgage and money going into savings/investments then this realistically gives me a lot of wiggle room for wanting to spend more when I fancy and not having to worry?

Your tax position in retirement should be better as 25% of the pension can be taken tax free (as a lump sum or regular income) and the money you are investing in the LISA can be drawn without penalty from age 60 and with no income tax to pay. Also the calculator you used seems to assume you would be paying National Insurance which wouldn't apply to pension income.

So to answer "am I saving enough?" it might be worth building a spreadsheet model including a forecast for each of your accounts (contributions, asset allocation, growth and charges), when you want to retire, how you will draw from pensions and ISAs and the associated taxation you expect.

This is how I came to the conclusion I maybe able to retire at 53, I made a spreadsheet to predict pension and ISA growth, then added a section where I stop paying in at different ages and start to spend to see where it is actually feasible. 

ForestBluebells

Ah I see, so I might be over estimating what I need. Also my expenses may even go down more as currently I have 2 dogs and very expensive monthly pet insurance, I will most likely only have 1 dog at a time in the future. 

I’ll try create a spreadsheet, I don’t totally feel I have a good enough understanding though to not get my assumptions wrong. 

Does anyone know the current tax benefits of the different wrappers, SIPP, LISA, ISA. Also I assume the 25% tax free allowance of a pension could be removed in the future potentially?

ForestBluebells

barnstar2077 said:

Alexland said:

ForestBluebells said:

I don’t need 30k, it’s only me for now,  27k is much more than my current spending (I’m assuming same rate of tax is paid in retirement and used a salary calculator to work out what would be left after tax), so 27k would give me 1,833.48 per month after tax?  Given I currently spend £1050 comfortably if I minus my mortgage and money going into savings/investments then this realistically gives me a lot of wiggle room for wanting to spend more when I fancy and not having to worry?

Your tax position in retirement should be better as 25% of the pension can be taken tax free (as a lump sum or regular income) and the money you are investing in the LISA can be drawn without penalty from age 60 and with no income tax to pay. Also the calculator you used seems to assume you would be paying National Insurance which wouldn't apply to pension income.

So to answer "am I saving enough?" it might be worth building a spreadsheet model including a forecast for each of your accounts (contributions, asset allocation, growth and charges), when you want to retire, how you will draw from pensions and ISAs and the associated taxation you expect.

This is how I came to the conclusion I maybe able to retire at 53, I made a spreadsheet to predict pension and ISA growth, then added a section where I stop paying in at different ages and start to spend to see where it is actually feasible. 

I wish there was a template as I feel I’ll mess it up 🙈

Alexland

ForestBluebells said:

I wish there was a template as I feel I’ll mess it up 🙈

Start by modelling the aspects you are most confident in your understanding.