Pension and retirement planning

Smudgeismydog

Redscope77 said:

jimjames said:

Redscope77 said:

Hi everyone,

About two years ago I posted my situation and got some incredibly helpful and insightful advice that really helped me focus and improve my financial position – so a big thank you to those who contributed!

I thought I’d post an update with my new numbers and see if the collective wisdom has any fresh perspectives or tips for the next phase.

The Goal: Retire as early as possible, ideally by 57. I'm 49 in June.

Monthly Expenses: Mortgage-free. My comfortable lifestyle costs £1,800/month all-in (food, bills, car, entertainment).

The Portfolio:

• ISA: £116k in a 60/40 fund. It's been performing well, with a consistent ~7% growth rate.

• General Investment Account (GIA): £61k in the same fund. My plan is to bed-and-ISA £10k/year into my ISA for tax efficiency.

1. Is there anything in my overall strategy you would do differently? Any tips, tricks, or potential pitfalls I'm missing?

I really appreciate any thoughts you have

I would definitely not be putting money into a cash ISA when you have money in a GIA. My priority would be to get everything into an ISA asap so at the rate of £20k pa not £10k which would be far more tax efficient.

Ah - it’s a stocks and shares isa.  The fund is with vangaurd.

I would also be utilising your full ISA allowance from your GIA as well. Don’t know what your CGT position in the GIA is, but CGT allowances have been reduced by so much recently, I’d definitely want the money out.

Could you then use the other £10k to increase pension contributions?

QrizB

Smudgeismydog said

I would also be utilising your full ISA allowance from your GIA as well. Don’t know what your CGT position in the GIA is, but CGT allowances have been reduced by so much recently, I’d definitely want the money out.

OP this won't help if you're single, but if you're married you might want to stuff your partner's ISA too.

Divorce is a risk; tax is a fact.

DRS1

Redscope77 said:

I tend to move around jobs quite a bit and I usually work for myself via umbrella companies.  I've only recently moved into a role where I am employed as a permanent member of staff.
I like the flexibility Pension Bee gives me.  By contributing 20k net, 25k Gross and then claiming the tax relief back from HMRC I have managed to adjust my tax code up to 2288.  


Also my employer doesn't do matched contributions, so I am getting the full "free" cash from them. The WBP plan is also fix so I can't swap it to other funds sadly.  

I take onboard what you said about the NIC savings and will investigate if I want to adjust my current plan 

Fair enough.

On here people seem keen on salary sacrifice.  Sometimes as mentioned by others you can get the benefit of (some of the) employer NICs savings and sometimes not.  But even if you don't there will be some employee NICs to be saved compared to the PensionBee contributions.  But maybe that is only a small percentage.

And I can understand if you don't like the investments in the workplace pension that you would keep the contributions to that low.

I confess I don't know the significance of the tax code but other people do use their pension contributions to get them to a lower tax rate (40% down to 20%) or to get under say the £100k barrier.  You don't say if that is part of your planning.

On the ISA question I see you are putting 10k in from the GIA and the rest from earnings.  Nothing wrong with that but do you look at the CGT position on the GIA?  Did you hit on £10k on the basis that it keeps you under the £3k CGT allowance?  With that allowance being so low now it would make sense to use it up each year even if that means you are selling a bit more than £10k of your GIA investments.

Redscope77

Smudgeismydog said:

Redscope77 said:

jimjames said:

Redscope77 said:

Hi everyone,

About two years ago I posted my situation and got some incredibly helpful and insightful advice that really helped me focus and improve my financial position – so a big thank you to those who contributed!

I thought I’d post an update with my new numbers and see if the collective wisdom has any fresh perspectives or tips for the next phase.

The Goal: Retire as early as possible, ideally by 57. I'm 49 in June.

Monthly Expenses: Mortgage-free. My comfortable lifestyle costs £1,800/month all-in (food, bills, car, entertainment).

The Portfolio:

• ISA: £116k in a 60/40 fund. It's been performing well, with a consistent ~7% growth rate.

• General Investment Account (GIA): £61k in the same fund. My plan is to bed-and-ISA £10k/year into my ISA for tax efficiency.

1. Is there anything in my overall strategy you would do differently? Any tips, tricks, or potential pitfalls I'm missing?

I really appreciate any thoughts you have

I would definitely not be putting money into a cash ISA when you have money in a GIA. My priority would be to get everything into an ISA asap so at the rate of £20k pa not £10k which would be far more tax efficient.

Ah - it’s a stocks and shares isa.  The fund is with vangaurd.

I would also be utilising your full ISA allowance from your GIA as well. Don’t know what your CGT position in the GIA is, but CGT allowances have been reduced by so much recently, I’d definitely want the money out.

Could you then use the other £10k to increase pension contributions?

Agreed, as I said I would be using the GIA to bed and ISA.  So I will make the full ISA contributions of 10k from the GIA and 10k from salary savings.     I can't move any more than 10k pa from the GIA to the Investment ISA due to CGT.  Thankfully I originally invest about 120k in thee GIA so I can withdraw more than the current low CGT threshold without tax

Redscope77

DRS1 said:

Redscope77 said:

I tend to move around jobs quite a bit and I usually work for myself via umbrella companies.  I've only recently moved into a role where I am employed as a permanent member of staff.
I like the flexibility Pension Bee gives me.  By contributing 20k net, 25k Gross and then claiming the tax relief back from HMRC I have managed to adjust my tax code up to 2288.  


Also my employer doesn't do matched contributions, so I am getting the full "free" cash from them. The WBP plan is also fix so I can't swap it to other funds sadly.  

I take onboard what you said about the NIC savings and will investigate if I want to adjust my current plan 

Fair enough.

On here people seem keen on salary sacrifice.  Sometimes as mentioned by others you can get the benefit of (some of the) employer NICs savings and sometimes not.  But even if you don't there will be some employee NICs to be saved compared to the PensionBee contributions.  But maybe that is only a small percentage.

And I can understand if you don't like the investments in the workplace pension that you would keep the contributions to that low.

I confess I don't know the significance of the tax code but other people do use their pension contributions to get them to a lower tax rate (40% down to 20%) or to get under say the £100k barrier.  You don't say if that is part of your planning.

On the ISA question I see you are putting 10k in from the GIA and the rest from earnings.  Nothing wrong with that but do you look at the CGT position on the GIA?  Did you hit on £10k on the basis that it keeps you under the £3k CGT allowance?  With that allowance being so low now it would make sense to use it up each year even if that means you are selling a bit more than £10k of your GIA investments.

I claim back higher rate tax relief on my pension contributions through my tax code, which is now 2288L

Cobbler_tone

MallyGirl said:

I didn't get the ER NI savings but OH does and it is separate from the cap on matching

I was curious and did some modelling on this. It is quite interesting, clearly depending on the scheme. If the company applies a max % (e.g. 12%) and then your contributions are flexible, it can make quite a saving for the employer the more you put in.
e.g. if you were on 50k and put in 40% as opposed to 6% (leading to the peak employer cost of 12% pension contribution and NI) it would save them over £2,500 a year to employ you.

I guess they could argue that ther NI savings are all baked into the initial 12% which does have a significant cost.
Proper socialist scheme