Planning - mid thirties

Cornish_mum

Thanks Albermarle, that’s an extremely helpful point CM

noclaf

I am in a similar boat OP albeit 6 years older and am finding this one of the most difficult parts of planning due to a couple of 'unknowns' where we need to make assumptions.

I am a higher rate tax payer, wife is lower and likely to stay in that bracket for at least the next few years, she is also currently on mat leave so we are on a single income at least for another year or so. I have been varying my combined employer+pension contributions between 22-25% of my monthly gross salary and also been utilising a S&SLISA and S&SISA both of which need to be built up in value over the next few years, primarily the S&SISA though il contribute to both in the next tax year and then switch to focussing on just pension and S&SISA thereafter.

Whilst I would absolutely aim to maximise my pension contributions for the next 16-18 years, am less certain how my employment situation will look beyond my 50's and whether it will allow me to keep contributing a relatively high monthly contribution for the whole period.

Here is the jist of my dilemma: if I went all out now putting £25 -£30k per/yr into my pension it might be at the expense of my non-pension investments and as our child is less than 1 years old, expenses will be an ever-increasing one way street for quite a while so could be setting myself and family up for trouble should there be any periods where I lose my job or can't work for any reason....a big pension won't help during those periods unless I am 57 or older!

Alternatively going all out on the pension now even if for only a few years might make all the difference my pension needs as hopefully 'growth' of investments will start to take over as the primary driver to increase overall value...my total pension pot is £120k after taking a small battering due to current state of markets and if the next few years of growth are muted alongside high inflation then significant contributions now might be the only way to stand any chance of having a 'reasonable' pot by retirement.....sorry this isn't much help OP but just to say you aren't alone in trying to work out how best to navigate finances!

hugheskevi

I think in this sort of forward look it is worth recalling when pension contributions are most valuable, which is when as many of the following apply:

• Benefit from an employer contribution (and possibly matched contributions as well)
• Higher/additional rate taxpayer (£50,270 for standard tax code, and £150,000)
• Subject to Child Benefit taper (£50,000)
• Subject to Personal Allowance taper (£100,000)
• Benefit from salary sacrifice, especially if some or all employer contributions refunded
• In receipt of means-tested benefits, eg, Universal Credit

In the past, higher rate relief alone would have been incentive enough for me to pile money into pensions. But with inflation and a frozen LTA, I think I'd need more than that now, at least at a younger age and then once I reached into my mid 40s I'd be reassessing and seeing how things looked once the uncertainty was lower. 

But if I'd benefit both from higher rate relief and Child Benefit taper, that would be enough to incentivise me to contribute. Although if I expected that to be my position, I'd almost certainly hold off contributions until such time as it was.

HCIMbtw

hugheskevi said:

I think in this sort of forward look it is worth recalling when pension contributions are most valuable, which is when as many of the following apply:

• Benefit from an employer contribution (and possibly matched contributions as well)
• Higher/additional rate taxpayer (£50,270 for standard tax code, and £150,000)
• Subject to Child Benefit taper (£50,000)
• Subject to Personal Allowance taper (£100,000)
• Benefit from salary sacrifice, especially if some or all employer contributions refunded
• In receipt of means-tested benefits, eg, Universal Credit

In the past, higher rate relief alone would have been incentive enough for me to pile money into pensions. But with inflation and a frozen LTA, I think I'd need more than that now, at least at a younger age and then once I reached into my mid 40s I'd be reassessing and seeing how things looked once the uncertainty was lower. 

But if I'd benefit both from higher rate relief and Child Benefit taper, that would be enough to incentivise me to contribute. Although if I expected that to be my position, I'd almost certainly hold off contributions until such time as it was.

Good points, but this is essentially my predicament

I can only take advantage of the higher rate relief and CB taper for the next few years by overpaying (due to carry forward), which would be about £46k a year into pension next year.. 

But I just don't think it will make sense (with another year of statutory maternity pay coming up for my wife and another kid in tow) to run our take home finances so tight

I am really thinking I will just settle on £32k contributions.. it isn't optimal, and I need to just make myself comfortable with that.. but gives me a reasonable step up in take home and is pretty substantial contribution.. will then re-evaluate in about 3 years when I am due to reportage and have a kid heading towards school I think 

SpeedSouth

I'm a bit further along at 41, with a pot of £270k. Past 4 years I've been maxing out and carrying forward what I can.  I benefit from 5 of 6 incentives hugheskevi points out so at this time neglecting all other savings vehicles in favour of the pension.

At this point the LTA is not a consideration.  If I do get close/hit it then I'll be in a good place regardless I'd suggest.

Come mid/late forties I'll reassess, but as my carry forward expires this year that will divert more to the ISA naturally.

Sounds like your salary is more than mine of £67k what you say about the CB Taper.  I comfortably get all CB still with my contributions and would do with much smaller annual contributions.  I'm hoping by 55 I'll be in a position to begin considering retirement.