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15% of pension pre-tax or post-tax?

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  • Albermarle
    Albermarle Posts: 28,024 Forumite
    10,000 Posts Seventh Anniversary Name Dropper
    My wife also makes additional monthly contributions directly to her workplace pension (people's pension) via Direct Debit. 15% of her net pay.  
    Looking at the pension fees. I think she may be better off putting it to a Lifetime ISA. But she really values the simplicity of keeping it all together in a single pot. 

    Peoples Pension fees are pretty low.

    If she added to a LISA for retirement purposes, then a Stocks and shares LIsa would be the way to go. The Lisa provider has a fee ,and the investments in the LISA would have fees.

    There are pros and cons between pension and LISA but this is not a relevant one.

  • I'd really focus on keeping your salary below the £50k child benefit threshold (assuming your wife isn't over that threshold), and plan for being able to keep doing that for as long as you can.

    I'd use the linked AVC for the tax free benefit option that's available with the LGPS (you can transfer away from that scheme later if needed e.g. if you wanted to use it to retire early without reducing your annual pension when you take it).

    Anything more than required to get below £50k I'd hold back in an S&S ISA (assuming you have a cash rainy day fund) to use later, potentially to subsidise income while contributing more into the pension to avoid the tax threshold later with each pay rise/promotion.  You can also use this as a buffer to redundancy or any other plans or unforeseen calls on finances.

    Bear in mind if you keep the same salary for the next 20 yrs and get a state pension, you'll have £35k+ p.a. in today's money by then, excluding the AVC's and any contributions already made any your wife's pension.

    It's worth getting the advice and thinking about this as a household - including will you need/want to move or extend your house, are you likely to receive any inheritance and when (don't bank on it), etc., etc.
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