48 & No Pension Plans

dunstonh

@dunstonh, may I ask what the calculation is to get 6-7 years of £20k from £72k? (Always interested in calculations related to "the number".)

No calculations, it was ballpark (too many unknown variables to put a proper calculation on it).

You need to be putting money aside either into a Stocks & Shares ISA or your pension. 

The OP has a limited company.  ISA is not the choice here.   Pension beats it significantly.   To put money in the ISA, the company would have to pay corporation tax and the OP suffer dividend tax first.     With the pension, both of those are avoided.

penners324

Nest is a pension plan.

It's not great but it's not the worst either.

Not sure why a previous commenter said directors don't use Nest. Yes they do.

Just up your contributions to it and make it a salary sacrifice arrangement.

Then look at what investment you've chosen within Nest. Moving to higher risk or Sharia fund would be sensible 

MallyGirl

mark_cycling00 said:

Pension is part of retirement planning.
If you're unable to wack significant amountsj into pensions over next 15 years then you still have 15 years to do the following:

1. Make your retirement life less costly. Eg. Plan to live somewhere with facilities within walking distance, or good bus transport. Insulate home etc..live close to children or good friends who can help out. Gradually give up smoking, caffeine, chocolate etc. cultivate cheap hobbies 

2. Develop a skill that allows you to work part-time after 68. When you discover that a pedigree kitten costs £1,000 or more, that second garage suddenly becomes much more of an asset. Loads of opportunities out there. Be ruthless, don't follow the crowd 

Are you proposing become a back yard breeder as a retirement income stream?

p00hsticks

dunstonh said:

p00hsticks said:

dunstonh said:

I still have about 20 years of working life left (touch wood).

For example, if you both qualify for maximum new state pension then that's £20k a year.    If your current household income is around £20k a year then you are used to that standard of living.

Although even in that scenario, given that state pensions are not inherited and many household expenses are the same for one person as for two, you'll need some sort of plan or savings in place if you wish to ensure that  the other can carry on at that standard of living when the first  person dies. 

Some people can live frugally and have a good life.   Going out walking costs very little but you can experience fantastic views and enjoy lunch/dinner outside.   
Others have a consumer lifestyle where with heavy expenditure and couldn't cope with £20k.

Area matters too. £20k in Wales, much of the North or East would not be as hard as a city location or most of the South East.

I agree absolutely.
The point I was making though is that even those couples who are happy living off £20k a year (two state pensions) need to try to bear in mind that when one dies that amount will halve, and that is a big reduction to come to terms with as most bills won't also halve. 

dunstonh

Not sure why a previous commenter said directors don't use Nest. Yes they do.

They can do but not if they know what they are doing.

Just up your contributions to it and make it a salary sacrifice arrangement.

No.  That would be the wrong way to do it.

Info_Hunter1976

Thanks everyone.

If I was to up employer contributions to our pensions from 3% to higher, is there implications for this?

Also I see people saying they are putting £2880, is this because of tax?
What is the optimum amount to put in, in an ideal world to get the most return or does it not matter?

MallyGirl

£2880 is the max amount for non earners - this is not relevant to your situation.
Do you mean employer or employee?
There is a rough rule of thumb about contributing half your age as a percentage when starting to contribute to pensions. So 20% at age 40, 25% at age 50 etc. This includes employer and employee. Although it seems like you are not totally starting from scratch you would need to contribute significantly to make a difference to your retirement comfort levels.

dunstonh

Also I see people saying they are putting £2880, is this because of tax?

Because they are non-earners and that is the maximum they can do.

What is the optimum amount to put in, in an ideal world to get the most return or does it not matter?

As a company director you can put in £200,000 minus what you have paid in over the last 3 years and current year.
Typically, you would look to not exceed your profit as you get corporation tax relief.

Info_Hunter1976

Thanks for the info.

We put a basic wage of £12500 through for both me and my wife.
The employer (my company) pays 3% and I pay 4%

If I increase the employer contribution, would that have implications for tax etc as I am reducing the potential profit for the year

Info_Hunter1976

dunstonh said:

Not sure why a previous commenter said directors don't use Nest. Yes they do.

They can do but not if they know what they are doing.

Just up your contributions to it and make it a salary sacrifice arrangement.

No.  That would be the wrong way to do it.

That's why I am on here. Trying to find put what you would do if you were me.
I will then look in to everyone's suggestions and see what is best for us