Increasing pension payments vs higher tax/losing child benefit

atush

Gurk said:

atush said:

Keep paying into your pension, reducing tax and keeping the CB in full.

If you are still comfortable with the income at present, consider investing the CB into Junior Isas for the kids 
(investments not cash) for the children.  Do you both have isas?  If not open some.  If you have cahs savings of at least 6 months outgoings, put them in investments.

If you have cash and Isas, have your wife investigate AVCs with her techers pension.

Dazed_and_C0nfused said:

If you can afford it then it's extremely tax efficient to sacrifice the £9k.

But don't forget HICBC is based on adjusted net income not just earnings.

So post sacrifice taxable pay of £50,000 plus interest of say £500 and dividends of £500 would be ANI of £51,000 so still some HICBC to pay.

Thank you for your replies. I have a Fidelity stocks and share ISA and a Wealthify 

What about your OH?

Gurk

atush said:

Gurk said:

atush said:

Keep paying into your pension, reducing tax and keeping the CB in full.

If you are still comfortable with the income at present, consider investing the CB into Junior Isas for the kids 
(investments not cash) for the children.  Do you both have isas?  If not open some.  If you have cahs savings of at least 6 months outgoings, put them in investments.

If you have cash and Isas, have your wife investigate AVCs with her techers pension.

Dazed_and_C0nfused said:

If you can afford it then it's extremely tax efficient to sacrifice the £9k.

But don't forget HICBC is based on adjusted net income not just earnings.

So post sacrifice taxable pay of £50,000 plus interest of say £500 and dividends of £500 would be ANI of £51,000 so still some HICBC to pay.

Thank you for your replies. I have a Fidelity stocks and share ISA and a Wealthify 

What about your OH?

No, she doesn't have anything

QrizB

Gurk said:

I was discussing with a friend the other day and he was saying as he earns £75k there was no way he was sacrificing £25k, even if he lost a large chunk to the taxman.

On the other hand, a friend of mine does exactly this. He reckons living on less than £50k means you never develop the £75k lifestyle habits, with two benefits:

- your pension grows faster, and

- your required income in retirement is lower.

These combine to allow a far earlier retirement than you would otherwise manage.

retiringtoosoon

43 y/o with teacher wife and 2 kids. Similar to you I guess.

I’m on £80k basic and will always Sal sac down to below £50k. Mad not to imo.

Put £76k into pension last year and £56k in this year. 

Pensions are very tax efficient!

german_keeper

retiringtoosoon said:

43 y/o with teacher wife and 2 kids. Similar to you I guess.

I’m on £80k basic and will always Sal sac down to below £50k. Mad not to imo.

Put £76k into pension last year and £56k in this year. 

Pensions are very tax efficient!

Maybe there are lots of people whose financial commitments mean that they can't put such amounts into their pension. The percentages on the figures you have quoted are rather large. Not sure that makes them "mad". 

Pat38493

There is a whole community of FIRE types who advocate putting more than half your money aside from day 1 in order to achieve financial independence in their 30s or 40s

retiringtoosoon

german_keeper said:

retiringtoosoon said:

43 y/o with teacher wife and 2 kids. Similar to you I guess.

I’m on £80k basic and will always Sal sac down to below £50k. Mad not to imo.

Put £76k into pension last year and £56k in this year. 

Pensions are very tax efficient!

Maybe there are lots of people whose financial commitments mean that they can't put such amounts into their pension. The percentages on the figures you have quoted are rather large. Not sure that makes them "mad". 

I’m not sure what you mean. I don’t need to live on £80k. I could easily live on £40k, say.
Happy for the extra £40k odd extra to fund my retirement 

german_keeper

retiringtoosoon said:

german_keeper said:

retiringtoosoon said:

43 y/o with teacher wife and 2 kids. Similar to you I guess.

I’m on £80k basic and will always Sal sac down to below £50k. Mad not to imo.

Put £76k into pension last year and £56k in this year. 

Pensions are very tax efficient!

Maybe there are lots of people whose financial commitments mean that they can't put such amounts into their pension. The percentages on the figures you have quoted are rather large. Not sure that makes them "mad". 

I’m not sure what you mean. I don’t need to live on £80k. I could easily live on £40k, say.
Happy for the extra £40k odd extra to fund my retirement 

I read your "mad not to" comment as being a general one. Most people earning large salaries would probably see their priorities as a nice house, 2 nice cars, nice holidays, maybe private education etc etc. Very likely to make significant pension contributions of course but not right down to BR tax level.

Presumably you meant mad not to in your personal situation.  

Strummer22

QrizB said:

Gurk said:

I was discussing with a friend the other day and he was saying as he earns £75k there was no way he was sacrificing £25k, even if he lost a large chunk to the taxman.

On the other hand, a friend of mine does exactly this. He reckons living on less than £50k means you never develop the £75k lifestyle habits, with two benefits:

- your pension grows faster, and

- your required income in retirement is lower.

These combine to allow a far earlier retirement than you would otherwise manage.

I would agree with this, with one additional point that I'm taking into account with my planning (I'm 37 btw).

I still have 29 years on my mortgage, but in 20 years (under current rules) I could take 25% of my pension tax free. So at 57 I could, if I wanted, pay off my mortgage, do home improvements, give my kids a gift, go on cruises, or whatever. I'm willing to have less take home income now in order to have these options in the future, especially as it means I get more money overall and HMRC get less.

Millions more people will get pulled into the 40% rate because tax bands are frozen until 2028 and with inflation high I imagine pay rises will be high, despite what the BoE has been trying to convince people of. So, I would expect more and more people to take advantage of the tax efficiency of pensions.

This may all change after the next general election, of course. I think a sensible government would review the tax bands and realise that people are avoiding 40% tax anyway and they could get more tax revenue by increasing the thresholds (including HICBC threshold) to get people taking home and subsequently spending that money. That probably won't happen unless inflation is under control and/or we have had a recession by the end of next year though. 

atush

Gurk said:

atush said:

Gurk said:

atush said:

Keep paying into your pension, reducing tax and keeping the CB in full.

If you are still comfortable with the income at present, consider investing the CB into Junior Isas for the kids 
(investments not cash) for the children.  Do you both have isas?  If not open some.  If you have cahs savings of at least 6 months outgoings, put them in investments.

If you have cash and Isas, have your wife investigate AVCs with her techers pension.

Dazed_and_C0nfused said:

If you can afford it then it's extremely tax efficient to sacrifice the £9k.

But don't forget HICBC is based on adjusted net income not just earnings.

So post sacrifice taxable pay of £50,000 plus interest of say £500 and dividends of £500 would be ANI of £51,000 so still some HICBC to pay.

Thank you for your replies. I have a Fidelity stocks and share ISA and a Wealthify 

What about your OH?

No, she doesn't have anything

I think you need to address this.  Perhaps a S&S isa for her, before going to the AVCs.