FIREside Chats

Suffolk_lass

I was wondering if anyone has actively planned to take a public sector role, relatively late in their working life and use the pension scheme facility to transfer in a DC pension, rather than buy an annuity? I believe Teachers scheme permits this within first 6 months and the civil service used to be 12 months - if I had a moderately small DC pot I would consider it.

edinburgher

@Suffolk_lass - it's possibly a clever strategic move for the right person, but they might end up sacrificing their freedom to take a DC pot sooner - there's also a clear divide between recruiting in the private sector and the competencies based or die approach in the public sector. It might be challenging for someone with a lifetime of private sector experience to walk into a public sector job.

remote_control

I have read the entire thread over the past week and it has been really interesting and confusing (mainly because I change my mind over what is the best option). I also don't understand quite a lot of the pension/tax stuff.

I will open a s&s ISA next year and plan to split between that, savings and mortgage over payments I think. I have no inclination to retire early (but appreciate that may change as I am in my 30s now). I want to have a comfortable 50s and 60s with lots of fun, travel and helping out the kids a bit. But I also want to have a fun 30s and 40s as I do think 'life's too short' a bit. 

Anyway a couple of stupid questions for you:

With the s&s ISA do I open a new one each year or is it the same one that I pay into each year? Just wondering, it doesn't really matter. 

How does the s&s ISA work with the FSCS protection of £85,000 per institution? I presume as you are investing in a company then if Vanguard (for example) went bust you would still have your investment with that company.

Thanks! I've really enjoyed reading everything and look forward to pulling up a chair now and then. 

ilselm

remote_control said:

I have read the entire thread over the past week and it has been really interesting and confusing (mainly because I change my mind over what is the best option). I also don't understand quite a lot of the pension/tax stuff.

I will open a s&s ISA next year and plan to split between that, savings and mortgage over payments I think. I have no inclination to retire early (but appreciate that may change as I am in my 30s now). I want to have a comfortable 50s and 60s with lots of fun, travel and helping out the kids a bit. But I also want to have a fun 30s and 40s as I do think 'life's too short' a bit. 

Anyway a couple of stupid questions for you:

With the s&s ISA do I open a new one each year or is it the same one that I pay into each year? Just wondering, it doesn't really matter. 

How does the s&s ISA work with the FSCS protection of £85,000 per institution? I presume as you are investing in a company then if Vanguard (for example) went bust you would still have your investment with that company.

Thanks! I've really enjoyed reading everything and look forward to pulling up a chair now and then. 

Hi. There’s no such thing as stupid questions, only stupid answers! Hopefully these aren’t them.

1. You don’t need to specifically open a new ISA each year (at least with HL). If you make a payment in the new tax year to your same ISA account then it will be included in your overall portfolio.

2. Investment companies, like VG, will hold your investments in a separate nominee account and are not included as part of the company’s balance sheet. Your cash will be held in client trust accounts with another bank. This is a rule set out by the UK regulator, FCA. So if VG goes bust (unlikely), you will get your funds and cash back or it will be transferred to another investment company. It may however be worthwhile to consider more than one investment company if, in the more likely event, one suffers an IT meltdown which could impact the time taken to make any withdrawals. 

Grogged

Technically each year you do open a new ISA on your first contribution in that tax year.
In practice, if you invest with the same provider, it will be all be treated as one account.
The current £20,000 annual limit is for your contributions.
Any gains or income from your investments does not count towards the annual £20,000 limit.

You can invest in both a cash ISA and a stocks and shares one at the same time, the £20,000 limit is shared between them both in whatever way works for you - 50/50, 20/80, etc.

remote_control

Thanks so much for your replies. I know it wasn't that important a question, I just wondered if I was going to end up with 20 odd s&s ISAs, the way you say it works sounds much more neat and tidy!

Suffolk_lass

@remote_control if you do not have a S&S ISA yet it is worth looking at the different options and their charging structures in the context of what you plan to buy in that account. For example there will be a monthly platform fee and an admin fee (called different things with different providers). Inside that bucket you can choose to go as simple or confident as you feel with greater or less risk, depending on your choice.

I have stopped buy individual company shares with my DS (late 20s) because the trading costs vs the amount he is buying makes it all rather expensive (and while he has some good performing shares, he has as few as 3 in one company) - so we are looking more at a spread of funds (global, UK, passive and active) so that he is not in just one thing, and he is in many of the same companies, but as part of the fund, not as an individual.

I know you did not ask this part but hopefully it stops someone making our rookie errors.

Our accounts are with Charles Stanley Direct, very easy and on a par with HL. HL have been hammered in The Times and ST money pages for the last two years because of their recommendations (the Woodford Fund that was suspended was still being recommended right to the last, despite many warning signs).

ElmoR

ilselm said:

Simples. What could possibly go wrong? Death, divorce, unemployment, equity crash, unfavourable market timing, hyperinflation, change to pension and investment rules, underestimating cost of raising children, tax changes, accidentally deleting the FIRE spreadsheet...

I had a chuckle at this part!

I can personally tick off at least four of these 'calamities' which came pretty much out of the blue!!

Still standing though I reckon that planners are more likely to land on their feet at the end of the day

[Deleted User]

Hi all,

I hope you are all well Thank you @edinburgher for this discussion! Hoping to join the discussion and make some virtual friends here. Here goes…

Why am I investing? 

I am hoping for an early and fruitful retirement. I don’t like or agree with the notion we should be working until our twilight years or that our careers define us. Maybe I’m just not ambitious, but I see a huge difference between my colleagues who seem to live to work, and my outlook which is ‘it’s a means to an end’. Although I enjoy my job, the sense of obligation isn’t really for me and it’s not something I’d choose to do if I didn’t need to pay the bills. I like the idea of working part time or spending time volunteering, maybe fostering animals. I am drawn to a simple life, not one of accumulating expensive things, which I hope will serve me well in my quest for early retirement! I would also like to know I have the funds to support others if necessary.

How much do I think I'll need? 

An income of £20k would be more than enough for me. However, at the moment I rent so this figure might be different if I buy a property in the future. Not aiming to be a millionaire or have fancy cars, just enough for a comfortable and peaceful existence!

How am I going to get there?

I have an ISA, a LISA and a recently-opened SIPP. My outgoings include rent, petrol (and other car maintenance), food, phone/ internet, Netflix. My intention is to buy necessities as opposed to spending loads of money on clothes every month (as I used to) so my aim during my working life is to save at least half of my monthly income and to contribute more whenever possible (i.e. if I receive a bonus).

How long do I have?

I am currently 36 and fairly financially savvy (note: I wasn’t always!) Also, living in Scotland is beneficial in the sense that cost of living is lower and it is possible to retire early. I have 14 years of full NI contributions, which suggests I should continue working for the next 20-21 years. This suits me as I’d like to retire before 60, so age 57 is realistic for me. I would also like to buy a small property in the next year or so.

Thanks all and have a great Sunday x

[Deleted User]

Busy_Mee said:

Morning all. I have been busy claiming the tax relief on my contributions into my SiPP this morning, so I thought I would share the calculation here.

By way of background I am a Civil Servant with a good DB pension and tax free lump sum when I retire. I am very cautious and have been wary of investing in any additional pensions because  (a) I already have good pension provision and (b) I grew up with lots of horror stories about people losing their life savings in pension funds that went wrong.

However I was persuaded by some good people on here that a SIPP would be a tax efficient vehicle for savings, as I am a HR tax payer.

I invested in Vanguard Target Retirement 2025 accumulation fund in 2019 and 2020 and here is what has happened to my investments:

19/20.                 £12000+ 20% immediate tax relief from pension provider.                   =£14400
20/21.                 £15000+ 20% immediate tax relief from pension provider.                   =£18000
                                                                                                           Total.                      = £32400
                                                                                                    

                                                                                                     Fund is now worth.       =£37197.39

Tax relief claimed from HMRC on 40% £12k                                                                            555.00
                                                               £15k.                                                                           862.80
                                                                                                                      Total.          =.  38,615.19

The initial investment of £27k is now worth £38,615.19

However pension contributions attract tax relief on the way in, but you have to pay tax on 75% of it on the way out. Which should look like this :

Current fund.               £37,197.39
25% tax free.                 £9,299.35
Taxable.                        £27,898.04
Tax.                                   5,579.61
=.                                   £22,318.43
+ Tax free.                          9,299.35
+ Tax relief.                            555.00
+ Tax relief.                            862.80

Total.                               £33,035.58

Therefore the initial investment of £27k is now worth £33,035.58 after all the tax implications.

I hope that all makes sense and people find it useful to see some real figures on how this works.

Hi @Busy_Mee

Thank you for this - really informative and helpful! You mentioned 'you have to pay tax on 75% of it on the way out'. I wondered if this is still applicable if the amount withdrawn in any tax year is less than the threshold for tax? For example, if one were to withdraw £8k in a tax year, would they still be liable for tax on this amount? If this is the case, I'm just wondering what the benefits of a SIPP would be over, for example, an ISA. Thank you again for your help!