Success Stories - Pensions

Freedomforever

savingholmes said:

@Freedomforever

My understanding with AVCs and the LGPS is that the whole amount can be tax free of the AVCs - as long as it's not more than 25% of the value of the entire pension. They calculate the value of the pension as 20 x the annual figure plus the AVC value. I'm unclear however how it's calculated if you take your pension early. His own pension provider should be able to tell him different options and are likely to have a dedicated website explaining things.

Thanks for this insight, much appreciated. It’s definitely worth enquiring. Have a great day 👍🏻

Bilbot

Irish guy here, 45 years old.

Woke up to pensions in 2015 when I realized there was a great tax benefit and started increasing contributions. However because of enormous Ivf linked medical expenses and a property move couldn't max out until about 3 years ago.

However between employer contributing 8% and me 25% I currently contribute circa 2800 euros a month. My wife earns less than half what I do but I have her contributing 25% aswell and we'll split it all when the time comes. She will also have a small final salary pension and we're aiming for 60 years old. My pot is currently worth 250k. All equities.

Ireland is a terrible place to invest with no ISAs and a deemed disposal rule that means that if I invested in a Vanguard Index Tracker after 8 years I would be charged a capital gain even I don't redeem. This all stems from the IMF bailout back in the crash and effectively pensions are the only major tax advantage that Irish people can have where contributions are from gross salary and growth is tax free. An Irish person should always be maxed out on pensions. 

There's is an annual limit of 25% contrbutions up to a salary max of 115k and a standard fund threshold of 2m. I earn around 122k a year but I know there is a public consultation at the moment about increasing the limits so I look forward to getting even more into the pension.

I'm 70% emerging markets and 30% North America type funds and am considering switching it all into Emerging Markets as America seems topped out and EM undervalued, any thoughts?

My optimal case is reaching the SFT of 2m with 10% growth. Does anyone see this as reasonable in their experience? I'll also push for promotion and hopefully the limits get increased. 

barnstar2077

Bilbot said:

Irish guy here, 45 years old.

Woke up to pensions in 2015 when I realized there was a great tax benefit and started increasing contributions. However because of enormous Ivf linked medical expenses and a property move couldn't max out until about 3 years ago.

However between employer contributing 8% and me 25% I currently contribute circa 2800 euros a month. My wife earns less than half what I do but I have her contributing 25% aswell and we'll split it all when the time comes. She will also have a small final salary pension and we're aiming for 60 years old. My pot is currently worth 250k. All equities.

Ireland is a terrible place to invest with no ISAs and a deemed disposal rule that means that if I invested in a Vanguard Index Tracker after 8 years I would be charged a capital gain even I don't redeem. This all stems from the IMF bailout back in the crash and effectively pensions are the only major tax advantage that Irish people can have where contributions are from gross salary and growth is tax free. An Irish person should always be maxed out on pensions. 

There's is an annual limit of 25% contrbutions up to a salary max of 115k and a standard fund threshold of 2m. I earn around 122k a year but I know there is a public consultation at the moment about increasing the limits so I look forward to getting even more into the pension.

I'm 70% emerging markets and 30% North America type funds and am considering switching it all into Emerging Markets as America seems topped out and EM undervalued, any thoughts?

My optimal case is reaching the SFT of 2m with 10% growth. Does anyone see this as reasonable in their experience? I'll also push for promotion and hopefully the limits get increased. 

I think the general consensus is to be the whole of the market, instead of trying to guess what will do well next!

So, a globally diverse fund, with roughly equal ratio to how they actually are in real life.  4% UK, US 60% etc. 

1980ds

MEL1981 said:

Love this thread, some great stories so thanks to everyone 

My story:

Started working early 2000s as a graduate with no real interest in pensions. Coming out of a drunken post student haze in student debt who does? As time had passed and the mortgage has been paid off (maybe one more move in us with younger children),  I've found the thrill of contributing to a pension to be addictive, moreso to try and reduce my tax bill and lower net income.

Currently at the age of 42 with a pot of £565k in standard life and have been maxing out year on year for the last few years. Will continue to contribute max yearly allowance for the next few years then have a think about any potential LTAs etc so perhaps ramp down yearly contributions come 45. In an industry that can be fickle with cyclic tendencies so trying to make hay etc etc

Partner around same age has £250k pension and also starting to contribute closer to the yearly limit to get their pot up in value.

I'm hoping to retire at 58 (kids left uni is that's what they choose) when I can collect the pension. Additional sources of income would be rental property between us (£18k/year with no mortgage on property at present) and currently around £115k in ISAs (mixture of S&S and some cash) combined with around £100k in saving accounts. Partner also has some but don't know the exact details. 

Plan to keep on investing £20k/year in S&S ISA and my partner will do the same for next 10+ years as we approach retirement. We are both in the higher rate income tax band (over £100k each) so trying to keep below this for tax.

Who knows where life takes us but hopefully we will be set up well and financially stable to still have all our limbs and mind to enjoy retirement. Grew up with no money (parents would buy clothes from charity shop or hand me downs etc) as a child as did my partner so we both live quite a frugal life and try to teach our young children the value of money.

I’d say you are well positioned for a very comfortable retirement and better than most even on this forum.

Out of interest, have you considered at what point you taper pension contributions? 

I am of similar age and a DC pot of 400k, Isa 50k.  My plan is another 2 years of maxing pension to hopefully get it to around 550k at age 45.  Then pull it back to around 15k-20k per year contributions, which with a fair wind of gains would hopefully get to around £1m at pension age of 58. 

Need to focus on my wife’s pension as this is small and the idea of being mortgage free in 4/5 years does feel appealing too. 

Part of me thinks put as much into pension whilst I can, I.e next 5 years plus but then I think what point is enough?!!

SpeedSouth

1980ds said:

I am of similar age and a DC pot of 400k, Isa 50k.  My plan is another 2 years of maxing pension to hopefully get it to around 550k at age 45.  Then pull it back to around 15k-20k per year contributions, which with a fair wind of gains would hopefully get to around £1m at pension age of 58. 

Need to focus on my wife’s pension as this is small and the idea of being mortgage free in 4/5 years does feel appealing too. 

Part of me thinks put as much into pension whilst I can, I.e next 5 years plus but then I think what point is enough?!!

Similar again to both you and MEL1981.  42, with £475k in pension.  Missus has £110k.  I've been maxing out for last 4 years or so.  I want to go earlier than 58 and hoping for 55 or earlier.  I think I've decided now to taper down my contributions to only get 40% relief and start building up the much smaller ISAs (currently 50K combined) to provide the bridge until I can withdraw the pension.

So will likely shake out very similar in that I'll have around £550K by 45, with my £20K per year from now to get me there.

How much is enough for sure is the question!  We've never had big holidays, never buy cars newer than 5 years old. 
Last couple of years I have started to think we are approaching a decent amount for our age.  So we have had a couple of big holidays with the kids.

I read in envy others planning to retire with £500K at 50, but would be far to scared to push go at those figures!

Florafauna

I have nowhere near that amount but have no debt, no mortgage, no more dependent kids and am married. We are moving to a cheaper area. I am a low maintenance person. I love swimming, walking, nature,  hanging out with friends and family, bbq on the beach etc.  I've never earned a fortune but have saved as much as much as I've been able.
My retirement will be comfortable enough but not luxurious.  But the time and the lack of stress will be more than adequate recompense 

finbaar

I started working in 1985 and at a couple of years later was enrolled in the companies DB scheme - a non-contributary DB scheme at that! I left there in the mid 90s and paid into a very terrible Equitable Life pension for a short period. I cashed that in a couple years ago. My current employer had a very good DB scheme which stopped in April and we moved to a CARE scheme. Still that will be only a small effect on me as I will retire at 60 in a couple of years. My current prediction at retirement is the pensions will be £31k a year with £90k lump sum. My wife will retire maybe a year later with roughly £20k from CARE/DB schemes and a decent lump sum. We are lucky to have been mortgage free for a bit now and by the time I retire we should have about £70k in various savings pots.
I will say I have been very fortunate to be in this position given that I am allergic to hard work.and have never put a lot of effort into my career. I've always concentrated on outside activities and would never put myself out for a job.

OuterNet

What a great thread. I’ve never had a DB pension, and worked for small companies that didn’t have any kind of pension for 10 years. I’m now self-employed - so definitely doing things the hard way. I had 1 year in a well paying job with an employer contributing to pension, when I managed to accumulate £25,000, but until age 42 that was it. When I received the annual statements they said i’d receive £500 per year, so I felt it was hopeless and even pointless to invest more, especially as I was only earning £25,000 at that point working part time with 2 little kids. 

The big revelation for me was understanding that I would never have the big DB pension, but that there was still a path to retirement for me. Learning about the 4% rule, moving into 100% equities in a tracker fund, understanding the difference between risk and volatility, and also realising that I could part retire with a patchwork of some paid work, some SIPP, some savings, renting to a lodger etc has helped motivate me to do my best to get what I can into the SIPP and accept that everyone’s path is different and ANY amount invested will be great to have when i’m older. 

I now have over £100,000 invested as i ploughed all my spare money into pensions after I went back to work full time. My parents were public sector workers with the full DB pensions, so they had no idea about any of this and thought investing was reckless gambling. I won’t retire with a huge pension, but I’ll have something to help me and I’m grateful to have had the resources to educate myself. 

mark55man

Well done OuterNet - that's a story that rings so true. The majority of people have journeys and balance like yours - for me its a blend of looking after you now and looking after your future the best you can

pterri

finbaar said:

I started working in 1985 and at a couple of years later was enrolled in the companies DB scheme - a non-contributary DB scheme at that! I left there in the mid 90s and paid into a very terrible Equitable Life pension for a short period. I cashed that in a couple years ago. My current employer had a very good DB scheme which stopped in April and we moved to a CARE scheme. Still that will be only a small effect on me as I will retire at 60 in a couple of years. My current prediction at retirement is the pensions will be £31k a year with £90k lump sum. My wife will retire maybe a year later with roughly £20k from CARE/DB schemes and a decent lump sum. We are lucky to have been mortgage free for a bit now and by the time I retire we should have about £70k in various savings pots.
I will say I have been very fortunate to be in this position given that I am allergic to hard work.and have never put a lot of effort into my career. I've always concentrated on outside activities and would never put myself out for a job.

Love the honesty! “Allergic to hard work”. Some people really do enjoy there work and it’s part of who they are, I’m honestly glad for them. For me it’s a means to an end, I take my job seriously but clock off on time regardless. I will leave without a backward glance, hopefully next July at 57.