Paying the most I can into a pension - daft idea?

Cobbler_tone

poseidon1 said:

However,  my objective over the years has been to grow taxable investment income sources, back to the levels of 40% earnings on the basis one can never have too much disposable income.  

I think that is a fair objective. There is no doubt that regardless of 20% or 40% tax it will leave you with more in your pocket. I'm sure it is all relative and that it still stings if you are earning £50k a week.

Hoenir

Cobbler_tone said:

vacheron said:

Cobbler_tone said:

disgruntled1234 said:

vacheron said:

So after years of steady accelleration, you now have to lift off and begin to apply the brakes, knowing that if you plan has worked perfectly, when you approach zero (or your target figure to leave for your beneficiaries) death should be imminent. In order to do this, you have to objectively and realistically decide how long you expect to live in order for your careful calculations to work optimally.  

Part of me does feel like I'd be letting my work colleagues down as I've worked for the same company for over 20 years, but I have to think about myself and family.

Despite thinking of my large corporate as a local business for over 30 years, that is one thing I WON’T be worrying about!!!!
You’d be gone in a heartbeat if they have to cut their cloth accordingly.
I think we all like to think we are more important than we are, it’s what keeps us going.

I've seen so many people leave our company (voluntarily and involuntarily) over the last 30 years. In most cases both they, and their teams / colleagues felt that the company were "stupid for letting them go" and that a hole would be left that could never be filled, causing irreparable damage the company.

The reality however was that this never happened (and I consider myself equally expendible in this regard).

When you have to make a choice between your interests and that of your company, you look after yourself and your loved ones first and foremost.  

Note: The only exception is when the company is laying off because it is already on a deathmarch to oblivion, in which case none of that matters to anybody in that desparate quest to keep the doors open for a few extra weeks!

Our annual turnover is over £20b, so despite saving us the odd million here and there I reckon they’ll be OK without me. 

Turnover is vanity, profit is sanity, but cash will always remain King. 

leosayer

poseidon1 said:

Not sure if I am a little unusual in holding a certain attitude to retirement income.

At retirement 10 years ago, moved down from being a solid 40% employed tax payer  broaching the point of begining to lose personal allowances, down to a comfortable 20% tax payer from various sources of retirement investment income.

However,  my objective over the years has been to grow taxable investment income sources, back to the levels of 40% earnings on the basis one can never have too much disposable income.  State pension has now firmly  tipped income  back into higher rate tax territory, with a reasonable size Sipp still to be accessed at which point will be generating  overall the same as  pre retirement employment earnings. 

Seemed to me, that since I expected  and received decent annual  pay rises whilst employed , could see no reason why the same should not occur in retirement,  but with far less effort than my previous 50/60 hour working week demanded.

It's not clear from your post whether you will spend that excess income or not. I assume so.

If the lifestyle you want requires paying some tax at 40% then so be it. At least we don't have the LTA tax any more.

Cobbler_tone

Hoenir said:

Cobbler_tone said:

vacheron said:

Cobbler_tone said:

disgruntled1234 said:

vacheron said:

So after years of steady accelleration, you now have to lift off and begin to apply the brakes, knowing that if you plan has worked perfectly, when you approach zero (or your target figure to leave for your beneficiaries) death should be imminent. In order to do this, you have to objectively and realistically decide how long you expect to live in order for your careful calculations to work optimally.  

Part of me does feel like I'd be letting my work colleagues down as I've worked for the same company for over 20 years, but I have to think about myself and family.

Despite thinking of my large corporate as a local business for over 30 years, that is one thing I WON’T be worrying about!!!!
You’d be gone in a heartbeat if they have to cut their cloth accordingly.
I think we all like to think we are more important than we are, it’s what keeps us going.

I've seen so many people leave our company (voluntarily and involuntarily) over the last 30 years. In most cases both they, and their teams / colleagues felt that the company were "stupid for letting them go" and that a hole would be left that could never be filled, causing irreparable damage the company.

The reality however was that this never happened (and I consider myself equally expendible in this regard).

When you have to make a choice between your interests and that of your company, you look after yourself and your loved ones first and foremost.  

Note: The only exception is when the company is laying off because it is already on a deathmarch to oblivion, in which case none of that matters to anybody in that desparate quest to keep the doors open for a few extra weeks!

Our annual turnover is over £20b, so despite saving us the odd million here and there I reckon they’ll be OK without me. 

Turnover is vanity, profit is sanity, but cash will always remain King. 

We have plenty of each….along with debt. One of the most solid bets in the world….i.e. it’s not Tesla

poseidon1

leosayer said:

poseidon1 said:

Not sure if I am a little unusual in holding a certain attitude to retirement income.

At retirement 10 years ago, moved down from being a solid 40% employed tax payer  broaching the point of begining to lose personal allowances, down to a comfortable 20% tax payer from various sources of retirement investment income.

However,  my objective over the years has been to grow taxable investment income sources, back to the levels of 40% earnings on the basis one can never have too much disposable income.  State pension has now firmly  tipped income  back into higher rate tax territory, with a reasonable size Sipp still to be accessed at which point will be generating  overall the same as  pre retirement employment earnings. 

Seemed to me, that since I expected  and received decent annual  pay rises whilst employed , could see no reason why the same should not occur in retirement,  but with far less effort than my previous 50/60 hour working week demanded.

It's not clear from your post whether you will spend that excess income or not. I assume so.

If the lifestyle you want requires paying some tax at 40% then so be it. At least we don't have the LTA tax any more.

LTA tax maybe history, but with IHT on pension pots looming on the horizon, draining the SIPP will be a new priority going forward even if it means broaching 45% tax territory at some point. 

Spending the excess not an issue, have a healthy ( or perhaps unhealthy)  interest in art and antiques.

ali_bear

This is why I say you can pay too much into a pension. It is only right that pensions are a means of funding a persons retirement, and not a vehicle for wholesale income or inheritance tax avoidance. The tax rules are set up to encourage us to save for our retirements, but no more.

Wealthy individuals and those with large incomes should aim to build a solid pension, but also do other things with their money. They could start by gifting some of it to me (only joking - I have enough already). 

MiserlyMartin

One thing that I was thinking about was if the government started to means test the state pension. How likely would it be that they would say if you had a private pension of 'X' or more, you will not get the state pension. ?There has been speculation in the media that they are poised to do this. This is putting me off making any extra contributions this tax year, especially if it will leave me short of money to buy a better house etc... Yes I could drawdown the money in 3 years time but there may be means tests about that too!

artyboy

MiserlyMartin said:

One thing that I was thinking about was if the government started to means test the state pension. How likely would it be that they would say if you had a private pension of 'X' or more, you will not get the state pension. ?There has been speculation in the media that they are poised to do this. This is putting me off making any extra contributions this tax year, especially if it will leave me short of money to buy a better house etc... Yes I could drawdown the money in 3 years time but there may be means tests about that too!

If I did my financial planning based on the fevered speculation of the mostly right wing press (helllloooo Torygraph!) then I'd have all my money in krugerrands buried in a bunker somewhere.

It would take an astonishingly brave/foolish/suicidal government to introduce means testing on SP without a multi-decade transitional period so that those who have already paid their 'stamp' for years don't feel they have been robbed blind.

Also there's the small point that governments want people making their own provision rather than being solely reliant on SP - so where's the incentive to do so if paying into a workplace pension could reduce/eliminate your SP entitlement?

Much easier just to let fiscal drag do its thing with the higher rate tax thresholds...

Cobbler_tone

artyboy said:

MiserlyMartin said:

One thing that I was thinking about was if the government started to means test the state pension. How likely would it be that they would say if you had a private pension of 'X' or more, you will not get the state pension. ?There has been speculation in the media that they are poised to do this. This is putting me off making any extra contributions this tax year, especially if it will leave me short of money to buy a better house etc... Yes I could drawdown the money in 3 years time but there may be means tests about that too!

It would take an astonishingly brave/foolish/suicidal government to introduce means testing on SP without a multi-decade transitional period so that those who have already paid their 'stamp' for years don't feel they have been robbed blind.

That is the key point. For that to happen can you imagine someone paying tax and NI for 20-40 years, only to have their state pension removed because they had made other provisions? An extreme socialist would be onboard. Governments have to make unpopular decisions but they aren't usually suicidal! 
Before something like that they'd be raising tax bands for the wealthy, or you would set the bar to remove it very high.
It could work but would have to be in conjunction with a style of contracting out to make your own provisions as opposed to the existing tax obligations.

I'm sure something will (continue to) happen over the years and depends how far they can push the age out to. My guess would be 70 but I doubt I'll be around to see that.

It's certainly not something in my thinking when contributing to my private pension.

More likely changes: ISA limits, TFLS reduction (at some point in the future).....and almost certain taxation increases after the budget. IMO.

You're right though, a hint of anything and the press go into overdrive.

QrizB

MiserlyMartin said:

One thing that I was thinking about was if the government started to means test the state pension. How likely would it be that they would say if you had a private pension of 'X' or more, you will not get the state pension?

IMO the most likely (of a number of rather unlikely scenarios) would be a "pensioner tax" similar to the "graduate tax" aka student loan repayments.

For example 5% of extra income tax for those over SPA, starting at eg. £35k (like the WFP clawback).