How much savings to be a MSE?

Kim_13

For me, the ability to fill one such account from income (there was a time I would just spend because filling the Regular Saver seemed unachievable.) If this applies to you, open one of the accounts with a lower limit than the standard £250.

Options currently available: 

£50 - Saffron Small Saver (Not the best rate and variable but they have for the last few years offered a market leading fixed account in June to their members of a year, so it’s a foot in the door and a rung on the savings ladder.)

£125 - Principality’s Christmas 2025 Saver (7% fixed)

£150 - NatWest/RBS Digital Regular Saver (The money can stay in these accounts indefinitely and they pay 6% on up to £5,000 in each.)

£200 - Principality’s 6 Month Regular Saver (This is likely to be replaced with a new issue at a lower rate shortly, so move quickly if it’s for you; currently 8% fixed.)

Once you’ve filled one account, especially if it’s one with an end date, you can continue saving the same amount from income each month but also have the maturing funds with which to fund other top accounts, gradually increasing your interest (which I can spend guilt free as it doesn’t erode the capital) and the total you have in savings. 

It’s a mindset so can be difficult start, but once you’re into the habit it’s difficult to break.

Aim for a mixture of accounts allowing access (I have left myself short at times, but it’s a nice problem to have) and fixes without access where the rates on offer make it worthwhile to do this. A number of accounts allow no withdrawals but early closure, so you can get at the funds if you really need to but it may set back your savings journey.

Catplan

[Deleted User] said:

GazzaBloom said:

The thing I wonder, when I see people chasing interest rates up and down the high street, is whether they have maxed out their pension contributions first. We can pay in up to £60K while working and the tax benefits are far greater than a few percentage points of interest on savings from net pay. You can even pay in £2,880 into a pension when not working and get £720 (25%) top up from HMRC straight off the bat and you can repeat that every year. With many pension providers you can choose to keep cash or a cash equivalent fund inside your pension, alongside investment funds.

I have been accumulating cash for retirement this year and chose to do this within my pension using salary sacrifice contributions. The cash earns BOE base rate and does not appear to be subject to the pension annual management charge. Yes, it's potentially subject to income tax on the way out but strategic use of tax free lump sum and annual allowance gives some flexibility. I have accumulated far more cash this way than I would have with net pay.

The only cash we keep outside of my pension is our emergency fund which is held in a cash ISA with the same bank as our current account earning 2.53% and I'm not bothered with moving it around to gain a couple of hundred quid extra a year, growth isn't it's purpose.

I'm probably hopelessy out of the loop here but having started a pension at the age of 25 with an intended retirement age of 50, I was rather miffed to find that had been moved to 55 without me having a say.

I don't know what pension returns are like right now (I once knew someone who invested over 200k through 20 years and got........205k) but for me I decided long ago that my pension could take a running jump and any money I saved would be guaranteed.

I'm fairly confident my pension would not be earning 8% or 10% as some savers do and I'm more than happy putting 20k a year into an ISA - I would not want to put another penny into a pension.

And just as importantly - within my control and NOT at the behest of governments or pension companies who tell you what you are allowed and when.

I can’t access my pension until 57, for me it’s pension, isa, savings…… in that order. If I stick 20k into my pension I can’t access until 57, it does however become 25k straight away and I can claim further tax back. If I put that 20k into a cash isa I’d probably have 21k after a year if earning interest at 5%….. last year my pension grew by a little over 11%, I adjusted my risk down 12 months ago, I do have a smaller pension that grew by 18%, it’s got a higher level of risk but lower overall value, so I’m ok taking more risk with it. 

For balance if I went for a stocks and share isa, my intention would be to tie up for 10 years at least, granted I can access it at anytime but could well get less if over short term. 

friolento

It has been 55 for a LONG time, in fact it is moving to 57. It would be unusual for an individual to have a say in pension legislation to say the least.!

Quite. The 5 year increase from 50 to 55 was announced in 2006 and became effective in 2010. 18 and 13 years respectively. Going without employer contributions and income tax / NI benefits associated with pensions for all those years as a protest against this increase could well be an act of self-harm.

masonic

I'm budgeting for private pension access at 60 and state pension in my early 70s. I use a private pension for about half my retirement savings. My S&S ISA will do the heavy lifting in the early years. Having some flexibility in your retirement accounts is valuable, but you don't need to go to the extremes of completely excluding an account with an uncertain access date.

VNX

Albermarle said:

[Deleted User] said:

GazzaBloom said:

The thing I wonder, when I see people chasing interest rates up and down the high street, is whether they have maxed out their pension contributions first. We can pay in up to £60K while working and the tax benefits are far greater than a few percentage points of interest on savings from net pay. You can even pay in £2,880 into a pension when not working and get £720 (25%) top up from HMRC straight off the bat and you can repeat that every year. With many pension providers you can choose to keep cash or a cash equivalent fund inside your pension, alongside investment funds.

I have been accumulating cash for retirement this year and chose to do this within my pension using salary sacrifice contributions. The cash earns BOE base rate and does not appear to be subject to the pension annual management charge. Yes, it's potentially subject to income tax on the way out but strategic use of tax free lump sum and annual allowance gives some flexibility. I have accumulated far more cash this way than I would have with net pay.

The only cash we keep outside of my pension is our emergency fund which is held in a cash ISA with the same bank as our current account earning 2.53% and I'm not bothered with moving it around to gain a couple of hundred quid extra a year, growth isn't it's purpose.

I'm probably hopelessy out of the loop here but having started a pension at the age of 25 with an intended retirement age of 50, I was rather miffed to find that had been moved to 55 without me having a say.
It has been 55 for a LONG time, in fact it is moving to 57. It would be unusual for an individual to have a say in pension legislation to say the least.!

I don't know what pension returns are like right now (I once knew someone who invested over 200k through 20 years and got........205k) but for me I decided long ago that my pension could take a running jump and any money I saved would be guaranteed. Pension returns depend a lot on how the pension is invested but typically would in the region 6% on average each year. So over 20 years you would expect £200K to become something over £400K.

I'm fairly confident my pension would not be earning 8% or 10% as some savers do and I'm more than happy putting 20k a year into an ISA - I would not want to put another penny into a pension.
Good luck on getting 8 to 10 % in a normal savings account !

And just as importantly - within my control and NOT at the behest of governments or pension companies who tell you what you are allowed and when.

If you are employed then the employer has to contribute to your pension, and you get tax relief on your contributions. So a lot of what goes into the pension is free money, so you would have to be crazy to turn it down.

Also people getting 8-10% on their savings are on regular savers and can’t contribute much per month nor are they getting tax relief like you do on a work placed pension. 

Middle_of_the_Road

VNX said:

Albermarle said:

[Deleted User] said:

GazzaBloom said:

The thing I wonder, when I see people chasing interest rates up and down the high street, is whether they have maxed out their pension contributions first. We can pay in up to £60K while working and the tax benefits are far greater than a few percentage points of interest on savings from net pay. You can even pay in £2,880 into a pension when not working and get £720 (25%) top up from HMRC straight off the bat and you can repeat that every year. With many pension providers you can choose to keep cash or a cash equivalent fund inside your pension, alongside investment funds.

I have been accumulating cash for retirement this year and chose to do this within my pension using salary sacrifice contributions. The cash earns BOE base rate and does not appear to be subject to the pension annual management charge. Yes, it's potentially subject to income tax on the way out but strategic use of tax free lump sum and annual allowance gives some flexibility. I have accumulated far more cash this way than I would have with net pay.

The only cash we keep outside of my pension is our emergency fund which is held in a cash ISA with the same bank as our current account earning 2.53% and I'm not bothered with moving it around to gain a couple of hundred quid extra a year, growth isn't it's purpose.

I'm probably hopelessy out of the loop here but having started a pension at the age of 25 with an intended retirement age of 50, I was rather miffed to find that had been moved to 55 without me having a say.
It has been 55 for a LONG time, in fact it is moving to 57. It would be unusual for an individual to have a say in pension legislation to say the least.!

I don't know what pension returns are like right now (I once knew someone who invested over 200k through 20 years and got........205k) but for me I decided long ago that my pension could take a running jump and any money I saved would be guaranteed. Pension returns depend a lot on how the pension is invested but typically would in the region 6% on average each year. So over 20 years you would expect £200K to become something over £400K.

I'm fairly confident my pension would not be earning 8% or 10% as some savers do and I'm more than happy putting 20k a year into an ISA - I would not want to put another penny into a pension.
Good luck on getting 8 to 10 % in a normal savings account !

And just as importantly - within my control and NOT at the behest of governments or pension companies who tell you what you are allowed and when.

If you are employed then the employer has to contribute to your pension, and you get tax relief on your contributions. So a lot of what goes into the pension is free money, so you would have to be crazy to turn it down.

Also people getting 8-10% on their savings are on regular savers and can’t contribute much per month nor are they getting tax relief like you do on a work placed pension. 

Might it be that pensions are often misunderstood with regard to tax relief?
I certainly was unaware for many years, that this is in fact the government adding a substantial cash contribution to our pensions.

Bob2000

Kim_13 said:

For me, the ability to fill one such account from income (there was a time I would just spend because filling the Regular Saver seemed unachievable.) If this applies to you, open one of the accounts with a lower limit than the standard £250.

Options currently available: 

£50 - Saffron Small Saver (Not the best rate and variable but they have for the last few years offered a market leading fixed account in June to their members of a year, so it’s a foot in the door and a rung on the savings ladder.)

£125 - Principality’s Christmas 2025 Saver (7% fixed)

£150 - NatWest/RBS Digital Regular Saver (The money can stay in these accounts indefinitely and they pay 6% on up to £5,000 in each.)

£200 - Principality’s 6 Month Regular Saver (This is likely to be replaced with a new issue at a lower rate shortly, so move quickly if it’s for you; currently 8% fixed.)

Once you’ve filled one account, especially if it’s one with an end date, you can continue saving the same amount from income each month but also have the maturing funds with which to fund other top accounts, gradually increasing your interest (which I can spend guilt free as it doesn’t erode the capital) and the total you have in savings. 

It’s a mindset so can be difficult start, but once you’re into the habit it’s difficult to break.

Aim for a mixture of accounts allowing access (I have left myself short at times, but it’s a nice problem to have) and fixes without access where the rates on offer make it worthwhile to do this. A number of accounts allow no withdrawals but early closure, so you can get at the funds if you really need to but it may set back your savings journey.

What a nice simple plan for someone  like me to follow. Thank you for your time to reply. I appreciate it 🙏 

Eco_Miser

Middle_of_the_Road said:

VNX said:

Albermarle said:

[Deleted User] said:

GazzaBloom said:

The thing I wonder, when I see people chasing interest rates up and down the high street, is whether they have maxed out their pension contributions first. We can pay in up to £60K while working and the tax benefits are far greater than a few percentage points of interest on savings from net pay. You can even pay in £2,880 into a pension when not working and get £720 (25%) top up from HMRC straight off the bat and you can repeat that every year. With many pension providers you can choose to keep cash or a cash equivalent fund inside your pension, alongside investment funds.

I have been accumulating cash for retirement this year and chose to do this within my pension using salary sacrifice contributions. The cash earns BOE base rate and does not appear to be subject to the pension annual management charge. Yes, it's potentially subject to income tax on the way out but strategic use of tax free lump sum and annual allowance gives some flexibility. I have accumulated far more cash this way than I would have with net pay.

The only cash we keep outside of my pension is our emergency fund which is held in a cash ISA with the same bank as our current account earning 2.53% and I'm not bothered with moving it around to gain a couple of hundred quid extra a year, growth isn't it's purpose.

I'm probably hopelessy out of the loop here but having started a pension at the age of 25 with an intended retirement age of 50, I was rather miffed to find that had been moved to 55 without me having a say.
It has been 55 for a LONG time, in fact it is moving to 57. It would be unusual for an individual to have a say in pension legislation to say the least.!

I don't know what pension returns are like right now (I once knew someone who invested over 200k through 20 years and got........205k) but for me I decided long ago that my pension could take a running jump and any money I saved would be guaranteed. Pension returns depend a lot on how the pension is invested but typically would in the region 6% on average each year. So over 20 years you would expect £200K to become something over £400K.

I'm fairly confident my pension would not be earning 8% or 10% as some savers do and I'm more than happy putting 20k a year into an ISA - I would not want to put another penny into a pension.
Good luck on getting 8 to 10 % in a normal savings account !

And just as importantly - within my control and NOT at the behest of governments or pension companies who tell you what you are allowed and when.

If you are employed then the employer has to contribute to your pension, and you get tax relief on your contributions. So a lot of what goes into the pension is free money, so you would have to be crazy to turn it down.

Also people getting 8-10% on their savings are on regular savers and can’t contribute much per month nor are they getting tax relief like you do on a work placed pension. 

Might it be that pensions are often misunderstood with regard to tax relief?
I certainly was unaware for many years, that this is in fact the government adding a substantial cash contribution to our pensions.

Most of which they take back when the pension goes into payment.

If you are paying the same rate of tax on the way out as on the way in, the net result is the same and you may as well have used a S&S ISA giving unrestricted access.

 Of course you may actually be paying lower tax rate, and so getting a real benefit from from the tax relief, or basic rate tax may be higher in the future, meaning you actually lose out.

While I was saving for retirement, employers were not required to contribute to employees pensions, and none of mine since 1980 did, so most of my savings were in ISAs, which is working out very nicely considering the fiscal drag increasing the tax on my pension.  

Sarahspangles

Eco_Miser said:

Middle_of_the_Road said:

Might it be that pensions are often misunderstood with regard to tax relief?
I certainly was unaware for many years, that this is in fact the government adding a substantial cash contribution to our pensions.

Most of which they take back when the pension goes into payment.

If you are paying the same rate of tax on the way out as on the way in, the net result is the same and you may as well have used a S&S ISA giving unrestricted access.

 Of course you may actually be paying lower tax rate, and so getting a real benefit from from the tax relief, or basic rate tax may be higher in the future, meaning you actually lose out.

While I was saving for retirement, employers were not required to contribute to employees pensions, and none of mine since 1980 did, so most of my savings were in ISAs, which is working out very nicely considering the fiscal drag increasing the tax on my pension.  

The net gain for someone on basic rate tax during their working life, and on retirement is 6.25%. £800 paid in is made up to £1,000 with tax relief. On withdrawal, 25% = £250 is tax free and the remaining £750 is taxed at 20% = £600. So for £800 you take out £850.

If you’re not earning for a year pre State Pension you can take £12,570 within your personal allowance plus 25% tax free = £16,760. For a £13,408 contribution.

Middle_of_the_Road

Sarahspangles said:

Eco_Miser said:

Middle_of_the_Road said:

Might it be that pensions are often misunderstood with regard to tax relief?
I certainly was unaware for many years, that this is in fact the government adding a substantial cash contribution to our pensions.

Most of which they take back when the pension goes into payment.

If you are paying the same rate of tax on the way out as on the way in, the net result is the same and you may as well have used a S&S ISA giving unrestricted access.

 Of course you may actually be paying lower tax rate, and so getting a real benefit from from the tax relief, or basic rate tax may be higher in the future, meaning you actually lose out.

While I was saving for retirement, employers were not required to contribute to employees pensions, and none of mine since 1980 did, so most of my savings were in ISAs, which is working out very nicely considering the fiscal drag increasing the tax on my pension.  

The net gain for someone on basic rate tax during their working life, and on retirement is 6.25%. £800 paid in is made up to £1,000 with tax relief. On withdrawal, 25% = £250 is tax free and the remaining £750 is taxed at 20% = £600. So for £800 you take out £850.

If you’re not earning for a year pre State Pension you can take £12,570 within your personal allowance plus 25% tax free = £16,760. For a £13,408 contribution.

Exactly what I plan to do in the next couple of years.