When to switch over to saving outside pension

mark_cycling00

My viewpoint on you question is that you need to know quite how clever and successful you'll likely be over your career.

I mean will you regret having so much cash in a pension you can't touch?

This may prevent you starting a business, buying shares in a company that you know will do well, or buying additional property.

You get taxed on pensions when you take them, but you have £1million entrepreneurs tax relief when you dispose of new companies that you create. (As an example).
The price increase of a holiday home in Devon will have crushed the performance of any pension+tax relief over the last 3 years.

When I started out in work, a high flyer told me: you'll never get rich through salary.

Speak to people like you who are 20years older and see what they think.

retiringtoosoon

kimwp said:

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.

Hah, yes - I'm the same, my net income is about £1.8k and currently have a pension pot of £450k at 43.
SS down to NMW is a great way to save!

kimwp

mark_cycling00 said:

My viewpoint on you question is that you need to know quite how clever and successful you'll likely be over your career.

I mean will you regret having so much cash in a pension you can't touch?

This may prevent you starting a business, buying shares in a company that you know will do well, or buying additional property.

You get taxed on pensions when you take them, but you have £1million entrepreneurs tax relief when you dispose of new companies that you create. (As an example).
The price increase of a holiday home in Devon will have crushed the performance of any pension+tax relief over the last 3 years.

When I started out in work, a high flyer told me: you'll never get rich through salary.

Speak to people like you who are 20years older and see what they think.

These are great points Mark, thank you. 

Just thinking them through- 

I'm not bothered about being rich (er - my salary affords me a very comfortable life - I'm warm, well fed, buy whatever I want and go wherever I want to- it helps that my wants are frugal) financially. A rich life for me means adding to this better health and fitness, maintaining and improving relationships, continuing to have a job where I work with great people, am mentally challenged and have the flexibility and support to do my volunteering work. I'm basically pretty happy with my life and the financial planning is just to try to maintain my financial situation to continue enabling these things and any spare will go to my niblings.

I probably won't start a business, but if I did, it would be one with low capital expenditure. I wouldn't invest in an individual company and I've pondered additional property and decided I don't want the faff or the guilt of being the reason someone can't buy their own home.

Albermarle

kimwp said:

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. 

Although state pension ending seems a remote possibility, the ending of IHT exemption for pension pots is not.
The recent budget announcements for pensions, have probably brought that change closer. Although some kind of part exemption/fudge might be the end result.
Really you should look first at a pension as a source of retirement income for you, and its use as a way of avoiding IHT as a secondary issue, which may or may not survive in future.
Although tax efficiency is important, just trying to pay less tax should not be the priority for a savings/investment/retirement plan. 

kimwp

Albermarle said:

kimwp said:

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. 

Although state pension ending seems a remote possibility, the ending of IHT exemption for pension pots is not.
The recent budget announcements for pensions, have probably brought that change closer. Although some kind of part exemption/fudge might be the end result.
Really you should look first at a pension as a source of retirement income for you, and its use as a way of avoiding IHT as a secondary issue, which may or may not survive in future.
Although tax efficiency is important, just trying to pay less tax should not be the priority for a savings/investment/retirement plan. 

Thanks Albermarle. How do you think that would change my plan?