FIREside Chats

killerpeaty

I like the idea of this thread. Although it's interesting about the legal avoidance of tax, this is a moving beast so like there used to be a scheme that you would take your remuneration by way of a loan that you never intend to pay back, however HMRC wasn't happy and acted promptly after 20 odd years and demanded the taxes they were owed. More info if interested. (No association with the firm in the link but it was the first option when I googled).

Why Because at 21 years old I was told that I would not be able to work full time and have a short working life (by a nurse when I asked her about the future). So I decided to work full time at a stressful job so I can have a better life than I feared. I have no idea if I made the right choice however it's been 10 years so it's not a wrong choice! I hope to go part time by 40 and do enjoy my job mostly.
The amount and plan I made a rough calculation back when I was 22 for a fund of £600k plus an owned home, I'm nowhere near to it so I'm not recalculating! The plan is to invest in index funds in both ISAs and pensions. I do need to improve my pension provision as it's pathetic.
How long err not sure? Hopefully will work part time from 40 to 60+

Thanks for starting the thread Ed! Very jealous of all the DB pensions.

South_coast

Great thread Ed 😀 I'm one of those that's been musing on the business of ER on my diary, so it only feels right to throw my workings into the mix too 🤣!

* Why?
Well, really I just don't like working! I know that sounds like a lame reason, but there we are. I feel pretty out of step with a lot of aspects of the modern world, and committing 1/3 of my life 5 days a week just feels wrong. I want to spend my life doing what I want to do, not what society feels like I should be doing

* How much?
I'm working towards an income of £18k per year. That sounds really low, but it's £1500/month and that's more than I leave myself to live on at the moment (which includes saving, paying a mortgage and driving 20k miles a year) - so it really does seem feasible, especially when all those things are taken away. Although I think I'll always save 🤣!

* How am I doing it?
*Deep breath* £75k pensions, £150k FIRE pot, state pension, £99k cash - different sources for different phases

* How long?
I'm aiming for 57, but my secret target is 52 once I've collected enough years of NI. That would mean more in the various pots, but hey anything's possible, right? I've also just turned 38 (always thought Ed was older than me, I feel rubbish at adulting compared to him 😮!) Current position is just shy of £50k in pensions, £9k in cash and, er, £730 in the FIRE pot, so there's a way to go!

I don't have any kids, so have no qualms about leaving nothing behind. If I need to pay for care then the FIRE pot and my home will both be fair game. My mortgage will be paid off later this year, then I should be on to commencing with the plan. However the slight fly in the ointment is that my flat needs a full refurb (and that really is need not want 🤣), so that is going to take precedence for about 18 months or so - then it's on with the plan 😀

I love being part of the underground counter-cultural revolution!

Sholly

South_coast said:

I'm aiming for 57, but my secret target is 52 once I've collected enough years of NI. 

I thought I should check how many years NI I have as I remember thinking I needed 30ish years to get the state pension, but on the website, it says "You’ll usually need to have 10 qualifying years on your National Insurance record to get any new State Pension" 🙌🏻 that's so much less than l thought. It is "35 qualifying years to get the new full State Pension if you do not have a National Insurance record before 6 April 2016"

South_coast

I'm sure when I checked it said I needed 30 🤔 Although I was contributing well before 2016, so it must be the younger folk who are having to put in more years as the Govt thinks they'll live longer. I got a forecast the other week and it said I needed 14 more years, so I'm working with those dates

Staffordia

This is a great thread Ed. 
I retired last year at 52, I had been working towards 55, but decided that I had enough of the work BS, looked at my finances and decided to go for it.  I was a Civil Servant, so will be able to access my pension at 55, I have a vague idea of what it will be, but I was affected by the Macleod judgement, so I should get more than the projections I did before I left.

My OH retired in 2017, and I knew that if I could match her monthly pension then we would be fine, and we are.  Neither of us are "shoppers", and we have the equipment for our hobbies, so no immediate expense there.  We are intending to travel the UK more extensively and had made plans for this pre pandemic, hopefully we will be able to pick this up in a few weeks/months.

Our house is mortgage free and we have recently had it valued as we are contemplating a move north, which will free up equity.

To all of you working towards your version of FIRE, keep on going, it is possible to retire early on a decent but not massive salary, while enjoying your life in the here and now.

ElmoR

@Sholly, @South_coast it's 35 years to qualify for full state pension for us older ones too. I think it all changed recently. A friendly person on the 'other' boards explained to me that you can still earn more if for example you babysit your grand children or you can buy them too.

@rara32 Thanks for those reading tips - I looked up and do like theescapeartist blog. Sent for the book too. Part of this trip is psychological and anything that gets that firmly in it's box is welcome.

@edinburgher Now I know this is the right place for a chat! The USS pension scheme is now a hybrid (dare I say frankenstein) one. It was a complete, real, shiny unicorn of a final salary scheme when I joined many moons ago. In 2016 it was changed. I could rant a lot about this but won't. It's now a "hybrid" with part benefits (DB) and part contributions (DC)(much like rest of private sector). While workers in universities are considered public employees (with salaries that match), the majority have a private pension scheme, this USS. It's big and it's the only one we can receive the employers contributions into. The DB part is capped and I make maximum use of it. Beyond that salary cap, you pay into a DC pot. I also had some AVCs for extra years that started in 2002 and I have hung onto those, still paying for them. They were old pension and worth their weight in gold. So my additional, additional payments were going into the DC pot. The FIL felt that the 13 funds run by the USS were not great, too little equities exposure. You can find them on the tinternet - USS Growth Fund and USS Moderate Growth Fund are the ones I'm in (80:20). I have to factor in some anger too, having lost the final salary pension hurts. Moving the goalposts also feeds the worry. Fast forward a few more years and their is another consultation going on because the scheme is not seen as sustainable. It is likely that the DB will be either scrapped or eroded again. So when I say I have a predicted benefit income of £22K, that could be reduced to £15K if they make such changes. That would require perhaps double-ish what I am initially aiming for - £140K v £70K in the next 8 years. So much less feasible. My updates here will likely obsess about the current status for the next 8 years! Young people are getting the raw deal - huge inter-generational inequities happening. I'm midway in all this, hence half unicorn and half not.

Is Strathclyde Pension within the USS?

Why the H&L SIPP? That was partly my FIL input. He uses it and loves it. I have found the website really easy to use. There are explanations for everything in easy to find, logical places and a complete lack of jargon. You can also build a portfolio (or choose one if you want) on a much wider range of stuff. The fees are slightly higher than Vanguard at 0.45%. I'm also trying to work out if I just paid a fee for buying some stocks?! I have a regular monthly purchase set up but it hasn't swung into action yet, so am waiting to see what happens...Plus I had some bonus money to invest, so I did a one off buy, and that's where I think I got stung with fees? I'll email them and ask, they respond very quickly to emails, also good. This is where I feel a bit embarrassed in case maybe I have made a mistake - I like Investment Trusts because they spread across a sector. I realise that in choosing some, it's not as passive as the Vanguard S&S ISA 80:20 product. I already separately have the (Foreign and Colonial) BMO Smaller Global Companies one doing us proud the past 17 years. To add to that I signed up for a drip feed into Mercantile, Brunner, Finsbury Growth and Income and Vanguard ETF All World UCITS (no idea what all that means) VWRP accumulation fund. Plus I read that Fidelity Multi Asset Allocator Fund was a good alternative for the Vanguard passive range and have a small drip into there too. The Trusts are a spread of UK equities and world ones in different sectors? Note all the question marks In doing this, I believe (?) that I'm adding that larger equities exposure that the USS isn't covering. In theory (?) this means that the USS is taking a medium ish risk pathway, the Vanguard S&S ISA is a lower risk pathway, and the H&L SIPP (about a third of the money contributed in total) is higher risk?!

As @floraandfauna points out (thank you!!), the plan is there, not quite fully swung into operation, but it can change as I read more. Or get helpful feedback too hopefully. The H&L fees is something I need to get my head around first. And the relative risk between the USS and the spread of Trusts. Salary sacrifice was super convenient, but I have lost my trust in the USS scheme (to manage effectively/efficiently) - they have limped from one crisis to another since the 2010s. Beware those with DB schemes, they do occasionally get eroded/taken away mid way.

ElmoR

South_coast

ElmoR said:

....you can still earn more if for example you babysit your grand children or you can buy them too.

Interesting idea, but buying grandchildren seems a bit extreme 🤣!

ElmoR

Ha! They are less than a £1000 too!

FloraandFauna

As a public sector "worrier" I do find these goals interesting. Things I know need to be dealt with, and so don't worry so much about:

- I don't want to worry about debt (ie mortgage) so would like that gone before I retire (currently not possible, but things change)
- I want enough guaranteed so that I can cover the basics (the 2 DBs, then SP will ensure there is always food and heat etc)
- I want enough on top of that to deal with broken cars, collapsed roofs, new boilers (the DB1 lump sum of about £25k will be kept safe and unspent to cover this)

But things I don't know are:

- money has always been a bit tight, for a wide variety of reasons, so I have absolutely no idea how much on top of this I would want for 'fun'. I have a suspicion 'fun' could get really expensive if I truly embraced it. 
- again, due to various commitments, I haven't had a holiday in over 10 years. I did a LOT of international travel with a previous job, so do not in any way feel I've missed out on the Russias, Koreas, Japans, Australias, Hawaiis... but I strongly suspect I'm going to develop a bit of wanderlust when I retire and I have no idea how much this sort of thing costs.

Currently, I get by on about £800 a month bills and necessities (not counting mortgage or savings or other costs that will vanish), so I only 'need' £9,600 to survive. I'm actively saving for everything on top of that, but really, with no benchmark for costing fun and holidays, my particular worry is that I find I've vastly underestimated it and have no chance of ever earning more...

edinburgher

@killerpeaty - welcome! I have read about those schemes and in retrospect (perhaps without any retrospect required) - they were quite obviously dodgy   DB pensions are a fab perk, agreed, I'd struggle to match the total reward they provide in the private sector for similar work. Then again, I work in social care information work, so the private sector wouldn't offer this as it doesn't make any money!

@South_coast - adulting - how very dare you?! I know our cunning plans all seem very logical and well thought out on MFW, but it's like social media posts, you see the curated version. In real life I suffer from terrible imposter syndrome and assume all my friends and associates are better at life than me I live in an area where the "fancy" houses are £500k, several friends living in these due to very high salaries and rich families etc. I struggle with comparisons.

@Staffordia - I am not a "shopper" either, but I think my tastes are high falutin'. For example, food, whisky or beer tend to be the posher varieties or the limited edition. I think I tend to justify this to myself as "my vice", but actually it's several vices (wasting money, eating and drinking too much).

@ElmoR - the SPF is not part of the USS. It is the second largest local government scheme, assets of £20BN, pretty well funded. Have you explored whether you can make a partial transfer of the DC benefits from your scheme to a SIPP? This is one way to keep the cost of a DC pension down and it makes me feel a bit more in control of investment choices. It might be a way to use salary sacrifice, but periodically "check out" of the DC part of the scheme, reducing overall risk? We'll part transfer Mrs E's current Scottish Widows pension to Vanguard when it hits £10k, this will probably be another couple of years.

I suppose I am a little bit surprised that you have a Vanguard ISA (passive investment, funds, low fees) and a HL SIPP (active investment, investment trusts, higher fees). I appreciate that FIL sounds like they are a valued counsellor for you, but I think it's important that we all come up with our own investing philosophy. I've chosen to maximise the things that are within my control (the cost of investing, how much I invest and the diversity of the geographical regions/sectors that I invest in) because I firmly believe that passive investing is a "winner", in that there is clearly evidence to show that it is likely to produce positive outcomes for most people who stick to it. I would recommend the Monevator blog or Tim Hale's "Smarter Investing" if you'd like to do any further research. This is not to say that investment trusts won't work out for you - I have a family member who did very well with them over a decade or more - but again this was largely because they'd been advised to use them by a trusted family member.

One way to explore where you are investing geographically/by sector might be to make use of one of the "portfolio x-ray" type tools that can be found free online.

@FloraandFauna - I also plan on developing a case of wanderlust - would love to start my retirement by walking the Pacific Crest Trail