How much savings to be a MSE?

masonic

Sarahspangles said:

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.

This is the prize for many of us. There are potentially 10 years up for grabs if you wish to retire long before the state pension kicks in, and of course the state pension can be deferred for quite a generous boost if you believe you will have the longevity to benefit from it. With salary sacrifice arrangements, the contribution can be even lower, although the benefit is less now that employee NI has reduced by a third from its 'normal' level.

GazzaBloom

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.

Some employers also pass on to your pension payment the 13.8% Employers NI they save through salary sacrifice.

As a 40% rate tax payer I calculate that through my employers salary sacrifice pension scheme, withe the employers contribution and employers NI pass back, I save just under £2 in my pension of every £1 of take home pay I sacrifice.

Sarahspangles

Middle_of_the_Road said:

Sarahspangles said:

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.

…17 weeks for me.

Using a SIPP to bring forward my retirement by a couple of years was a recent decision, after I turned 55. So I haven’t had to tie up contributions for too long. Last year I paid my entire relevant UK earnings into pensions and it’s an option this year. Of course in reality you ‘keep’ c. 20% of your earnings for living expenses because on the SIPP side that’s made up by HMRC.

Sarahspangles

Bob2000 said:

I've been on here now for a few months and noticed there are a core of forum members who seem to be opening  saving account  every other day, or ones maturing.

So how much wonga do you really need to make this work?
I've learnt  a few things on here that have helped me to save and am grateful  for what I've got so far.
I'm just curious.

Chasing interest with regular savers, or having a string of current accounts in order to qualify for opening incentives is a bit like a ‘side hustle’. Stoozing credit cards used to be more in fashion, in pre-internet days I knew people who would go to the bank every lunchtime to deposit even small change to increase their overnight mortgage offset. Couponing, comping…. There is a cost in time and some people wouldn't feel this stuff is worth their while.

There’s strategy and there’s tactics. I like the Reddit UK Personal Finance flowchart for strategy. Others subscribe to FIRE approaches which may for some be a decision about a particular lifestyle.

How, and how fast, we achieve our objectives is partly determined by the tactics we choose. If you’re looking for incremental improvements to your financial position then you just work with what you have.

We’re at the life stage where we have savings plus (sadly) inheritance to manage so it makes sense (tactically) to take advantage of regular savers and monitor interest rates for ISAs and savings bonds. But we’re aware of the time drain. Another person’s time might be better spent working overtime or getting a certification that leads to a pay rise. For someone else it might be learning to cook.

I don’t think there’s a right answer, other than being mindful about how we spend our time and whether the decisions about that are taking us where we want to go. 

UKX69

Sarahspangles said:

Bob2000 said:

I've been on here now for a few months and noticed there are a core of forum members who seem to be opening  saving account  every other day, or ones maturing.

So how much wonga do you really need to make this work?
I've learnt  a few things on here that have helped me to save and am grateful  for what I've got so far.
I'm just curious.

Chasing interest with regular savers, or having a string of current accounts in order to qualify for opening incentives is a bit like a ‘side hustle’. Stoozing credit cards used to be more in fashion, in pre-internet days I knew people who would go to the bank every lunchtime to deposit even small change to increase their overnight mortgage offset. Couponing, comping…. There is a cost in time and some people wouldn't feel this stuff is worth their while.

There’s strategy and there’s tactics. I like the Reddit UK Personal Finance flowchart for strategy. Others subscribe to FIRE approaches which may for some be a decision about a particular lifestyle.

How, and how fast, we achieve our objectives is partly determined by the tactics we choose. If you’re looking for incremental improvements to your financial position then you just work with what you have.

We’re at the life stage where we have savings plus (sadly) inheritance to manage so it makes sense (tactically) to take advantage of regular savers and monitor interest rates for ISAs and savings bonds. But we’re aware of the time drain. Another person’s time might be better spent working overtime or getting a certification that leads to a pay rise. For someone else it might be learning to cook.

I don’t think there’s a right answer, other than being mindful about how we spend our time and whether the decisions about that are taking us where we want to go. 

Excellent point - can’t disagree. 

Bob2000

Sarahspangles said:

Bob2000 said:

I've been on here now for a few months and noticed there are a core of forum members who seem to be opening  saving account  every other day, or ones maturing.

So how much wonga do you really need to make this work?
I've learnt  a few things on here that have helped me to save and am grateful  for what I've got so far.
I'm just curious.

Chasing interest with regular savers, or having a string of current accounts in order to qualify for opening incentives is a bit like a ‘side hustle’. Stoozing credit cards used to be more in fashion, in pre-internet days I knew people who would go to the bank every lunchtime to deposit even small change to increase their overnight mortgage offset. Couponing, comping…. There is a cost in time and some people wouldn't feel this stuff is worth their while.

There’s strategy and there’s tactics. I like the Reddit UK Personal Finance flowchart for strategy. Others subscribe to FIRE approaches which may for some be a decision about a particular lifestyle.

How, and how fast, we achieve our objectives is partly determined by the tactics we choose. If you’re looking for incremental improvements to your financial position then you just work with what you have.

We’re at the life stage where we have savings plus (sadly) inheritance to manage so it makes sense (tactically) to take advantage of regular savers and monitor interest rates for ISAs and savings bonds. But we’re aware of the time drain. Another person’s time might be better spent working overtime or getting a certification that leads to a pay rise. For someone else it might be learning to cook.

I don’t think there’s a right answer, other than being mindful about how we spend our time and whether the decisions about that are taking us where we want to go. 

Thank you for i your input .

TomJ

Bob2000 said:

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 🙏 

If you like things nice and simple, the flowchart at https://ukpersonal.finance/flowchart/ is not a bad place to start for the big picture...

Bob2000

TomJ said:

Bob2000 said:

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 🙏 

If you like things nice and simple, the flowchart at https://ukpersonal.finance/flowchart/ is not a bad place to start for the big picture...

Appreciate  the link.