When to switch over to saving outside pension

kimwp

I had some really helpful advice when I last posted on this board (link below), so I'm hoping to get some more help.  I currently save roughly £500 a month on an after tax "income" of £1500, so I am aiming for £20k a year in retirement not including state pension (in case it doesn't exist by then). Plan is to retire at 60, so I think I need to have £400-£660k by then (so aiming for £650k and assuming 4% equity growth for how much I need to save)

I think if I continued at my current rate of contribution, I'm likely to have far more in my pension than I will use, so I am pondering when to switch over to to saving outside my pension for access to the money if I decided to retire earlier than 57 or wanted to spend on a large purchase.

Obviously saving outside my pension means that I'll be paying NI and tax at a lower threshold, so I'd like to be fairly conservative and err on putting more into my pension until it's fairly certain that I'll have the money I need for retirement.

https://forums.moneysavingexpert.com/discussion/6252796/when-can-i-stop-contributing-to-pension/p2

El_Torro

A Stocks & Shares ISA is always an option. I’ve been paying more into my ISAs myself, mainly because the way i was going I was going to be a rich 58 year old but poor before then. 

If you are contributing as much as you can into your ISAs I would seriously consider whether it’s a good idea to get a General Investment Account, with the tax liabilities that go with it. 

Also if you retire at 60 I’d be wary of drawing down 4% a year. Assuming your health is OK this could lead to you spending all your pension before you die. 

Albermarle

so I am aiming for £20k a year in retirement not including state pension (in case it doesn't exist by then)

It is not sensible to exclude state pension from your planning. There is no indication it will disappear, if only because any political party that did this in government would be consigned to electoral oblivion. So they would not do it.

Of course there might well be changes. Pushing the age you can get it to later - removing full inflation link- possibly some kind of means testing, although that seems unlikely as probably unworkable.

kimwp

Albermarle said:

so I am aiming for £20k a year in retirement not including state pension (in case it doesn't exist by then)

It is not sensible to exclude state pension from your planning. There is no indication it will disappear, if only because any political party that did this in government would be consigned to electoral oblivion. So they would not do it.

Of course there might well be changes. Pushing the age you can get it to later - removing full inflation link- possibly some kind of means testing, although that seems unlikely as probably unworkable.

Thanks Abermarle. What would you say is sensible planning re the state pension?

NedS

kimwp said:

Albermarle said:

so I am aiming for £20k a year in retirement not including state pension (in case it doesn't exist by then)

It is not sensible to exclude state pension from your planning. There is no indication it will disappear, if only because any political party that did this in government would be consigned to electoral oblivion. So they would not do it.

Of course there might well be changes. Pushing the age you can get it to later - removing full inflation link- possibly some kind of means testing, although that seems unlikely as probably unworkable.

Thanks Abermarle. What would you say is sensible planning re the state pension?

You don't say how old you are, so how long you have to go before state pension age. The further away, the greater the risks.

The largest risks are state pension age being pushed backwards, and the government removing the triple lock, or the link to inflation such that it does not keep up with rising costs of living.

But that aside, I would include the SP in any financial planning, and assume you will get it at state pension age, whatever that may be for you, and that it's value will be maintained in real terms. And be prepared to tweak your planning as the government tinkers which inevitably they will.

Xenon

Albermarle said:

so I am aiming for £20k a year in retirement not including state pension (in case it doesn't exist by then)

It is not sensible to exclude state pension from your planning. There is no indication it will disappear, if only because any political party that did this in government would be consigned to electoral oblivion. So they would not do it.

Of course there might well be changes. Pushing the age you can get it to later - removing full inflation link- possibly some kind of means testing, although that seems unlikely as probably unworkable.

Why are some people fixated on the state pension ending

Always seems to come up sometimes - maybe a 'i told you so...so there' type thing

Only chance the state pension ending/stopping in our/childrens/grand children lifetime is some world ending zombie apocalypse type thingy scenario

Any political party that tried to end the state pension would face protests and riots that would make the poll tax (remember that) look very tame in comparision !!

kimwp

NedS said:

kimwp said:

Albermarle said:

so I am aiming for £20k a year in retirement not including state pension (in case it doesn't exist by then)

It is not sensible to exclude state pension from your planning. There is no indication it will disappear, if only because any political party that did this in government would be consigned to electoral oblivion. So they would not do it.

Of course there might well be changes. Pushing the age you can get it to later - removing full inflation link- possibly some kind of means testing, although that seems unlikely as probably unworkable.

Thanks Abermarle. What would you say is sensible planning re the state pension?

You don't say how old you are, so how long you have to go before state pension age. The further away, the greater the risks.

The largest risks are state pension age being pushed backwards, and the government removing the triple lock, or the link to inflation such that it does not keep up with rising costs of living.

But that aside, I would include the SP in any financial planning, and assume you will get it at state pension age, whatever that may be for you, and that it's value will be maintained in real terms. And be prepared to tweak your planning as the government tinkers which inevitably they will.

Ah sorry, approaching 38. I'm coming to the conclusion of packing money into my pension as a tax efficient way of passing it to my nieces and nephews or their children and do something like release equity and spend my Lisa to keep my estate under the inheritance threshold. I'll figure out the details closer to the time, but basically I'll reduce my pension contributions whenever I want money and keep them high when I don't. 

kimwp

Xenon said:

Albermarle said:

so I am aiming for £20k a year in retirement not including state pension (in case it doesn't exist by then)

It is not sensible to exclude state pension from your planning. There is no indication it will disappear, if only because any political party that did this in government would be consigned to electoral oblivion. So they would not do it.

Of course there might well be changes. Pushing the age you can get it to later - removing full inflation link- possibly some kind of means testing, although that seems unlikely as probably unworkable.

Why are some people fixated on the state pension ending

Always seems to come up sometimes - maybe a 'i told you so...so there' type thing

Only chance the state pension ending/stopping in our/childrens/grand children lifetime is some world ending zombie apocalypse type thingy scenario

Any political party that tried to end the state pension would face protests and riots that would make the poll tax (remember that) look very tame in comparision !!

What's poll tax?

Dazed_and_C0nfused

kimwp said:

Xenon said:

Albermarle said:

so I am aiming for £20k a year in retirement not including state pension (in case it doesn't exist by then)

It is not sensible to exclude state pension from your planning. There is no indication it will disappear, if only because any political party that did this in government would be consigned to electoral oblivion. So they would not do it.

Of course there might well be changes. Pushing the age you can get it to later - removing full inflation link- possibly some kind of means testing, although that seems unlikely as probably unworkable.

Why are some people fixated on the state pension ending

Always seems to come up sometimes - maybe a 'i told you so...so there' type thing

Only chance the state pension ending/stopping in our/childrens/grand children lifetime is some world ending zombie apocalypse type thingy scenario

Any political party that tried to end the state pension would face protests and riots that would make the poll tax (remember that) look very tame in comparision !!

What's poll tax?

The extremely unpopular precursor to Council Tax.

https://en.wikipedia.org/wiki/Poll_tax_(Great_Britain)?wprov=sfla1

https://en.wikipedia.org/wiki/Poll_tax_riots?wprov=sfla1

eastcorkram

On a Nett income of £1500 a month, ending up with a pot of £650k is very impressive!

kimwp

eastcorkram said:

On a Nett income of £1500 a month, ending up with a pot of £650k is very impressive!

Net means after pension contributions and tax.