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  • FIRST POST
    • earlbrutus
    • By earlbrutus 13th Mar 18, 1:28 PM
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    earlbrutus
    Pensions Late Starter
    • #1
    • 13th Mar 18, 1:28 PM
    Pensions Late Starter 13th Mar 18 at 1:28 PM
    Ok so I'm a bit of a late starter with Pensions, not really putting anything aside until I was age 37. Now I'm 42 and having a bit of a sort out. I now have £65k with a standard life 'passive plus 3' and put 14% of my income in there. Will have a £400k house paid off in 19yrs and currently no dependents. I also invest £300 a month into a company share scheme and that pot is currently worth £20k. I keep £10k cash for emergency fund and have no other debt. The SL pension projection shows ill get about £11k a year on retirement based on current payments, and doesn't increase a great deal unless I put in significantly higher monthly payments ( ie need to add 2.5k a month to get a retirement income of £30k!).

    Any advice on whether I should keep going as I am or some other investment vehicle to consider?? Or just not retire!
Page 1
    • dunstonh
    • By dunstonh 13th Mar 18, 1:53 PM
    • 92,982 Posts
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    dunstonh
    • #2
    • 13th Mar 18, 1:53 PM
    • #2
    • 13th Mar 18, 1:53 PM
    Or just not retire!
    We cannot tell what you need based only on what you have said. However, if we are looking at ballpark figures for an average person, then you are light on your provision.

    You are around half where you should ideally be at this time. You dont mention what you currently pay into the pension. However, the first £200pm is approx what you need just to pay to catch up. to where you should be now. Not where you probably want to be.

    How much are you paying?

    The SL pension projection shows ill get about £11k a year on retirement based on current payments, and doesn't increase a great deal unless I put in significantly higher monthly payments ( ie need to add 2.5k a month to get a retirement income of £30k!).
    Don't take much notice of those. Unless you understand the assumptions being used, the figures will be garbage.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • earlbrutus
    • By earlbrutus 13th Mar 18, 2:24 PM
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    earlbrutus
    • #3
    • 13th Mar 18, 2:24 PM
    • #3
    • 13th Mar 18, 2:24 PM
    £520 / month or 14% of salary goes in to SL pension, and £300/month goes to the share scheme. Could in practice save another £500 month with some lifestyle changes but should this go to pension, shares , isa, or another means of investment?
    • cloud_dog
    • By cloud_dog 13th Mar 18, 2:28 PM
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    cloud_dog
    • #4
    • 13th Mar 18, 2:28 PM
    • #4
    • 13th Mar 18, 2:28 PM
    Are you:
    • HRT / 40% payer?
    • Are you self employed
    • Are you a director of a Ltd company?
      (For the above two I'm assuming not, as Share Save tend to be from larger companies)
    • If employed (not as a Ltd company), does your company pay using salary sacrifice?
    How much do you think you need when you retire?
    Personal Responsibility - Sad but True

    Sometimes.... I am like a dog with a bone
    • earlbrutus
    • By earlbrutus 13th Mar 18, 2:42 PM
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    earlbrutus
    • #5
    • 13th Mar 18, 2:42 PM
    • #5
    • 13th Mar 18, 2:42 PM
    fully employed 40% tax payer, and yes £300 of the 520 a month is done as salary sacrifice ( the other 220 direct from employer), I am only now thinking about retirement needs but I reckon I could cope on £1500/month retirement income as house will be paid off and I don't have any extravagant hobbies!
    • dunstonh
    • By dunstonh 13th Mar 18, 3:18 PM
    • 92,982 Posts
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    dunstonh
    • #6
    • 13th Mar 18, 3:18 PM
    • #6
    • 13th Mar 18, 3:18 PM
    Pensions, ISAs and other tax wrappers all share the same investments and at the same costs. So, if you used the same investments in the ISA and the pension then the returns would be the same. The only difference is tax and maturity process.

    As a 40% taxpayer, the pension is a no brainer. ISAs wont come close to that as the Govt is paying 40% of your contribution for you. With ISAs you pay the full contribution after you have been taxed. The pension will be taxed on withdrawal but with your figures, it is unlikely you will be a higher rate taxpayer in retirement. So, 40% relief in and 20% (on 75% of the value as 25% is tax free) means pension beats ISA.

    If there is salary sacrifice available, it gets better still.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • cloud_dog
    • By cloud_dog 13th Mar 18, 3:42 PM
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    cloud_dog
    • #7
    • 13th Mar 18, 3:42 PM
    • #7
    • 13th Mar 18, 3:42 PM
    Would echo the above.

    What are the options you have for additional contributions in to the works scheme? For salary sacrifice your additional savings is 2% NI savings for HRT, and 12% NI savings for LRT. Some of this is dependent on how your company 'manage' the NI savings.
    Last edited by cloud_dog; 13-03-2018 at 3:58 PM.
    Personal Responsibility - Sad but True

    Sometimes.... I am like a dog with a bone
    • earlbrutus
    • By earlbrutus 13th Mar 18, 4:02 PM
    • 4 Posts
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    earlbrutus
    • #8
    • 13th Mar 18, 4:02 PM
    • #8
    • 13th Mar 18, 4:02 PM
    Then I will increase my salary sacrifice payments to the Standard Life pension so that gets me closer to the target 18k retirement income at 67, ill keep doing the share save scheme as well. I could also plan to downsize at retirement to half the size of house so id have say 100k cash lump sum out of the change from buying smaller.
    • dunstonh
    • By dunstonh 13th Mar 18, 5:35 PM
    • 92,982 Posts
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    dunstonh
    • #9
    • 13th Mar 18, 5:35 PM
    • #9
    • 13th Mar 18, 5:35 PM
    I could also plan to downsize at retirement to half the size of house so id have say 100k cash lump sum out of the change from buying smaller.
    Dont count on it. In general, most people get that wrong. They under estimate the costs of moving (stamp duty, fees etc).

    Plus, they often fail to realise that downsizing is not necessarily where the money is made. For example, there is just £40,000 difference between 5 bed detached houses in our area and much smaller 3 bedroom end terraces. Yet the same size houses in a less desirable part of the town are over £100k cheaper. So, downsizing could really mean moving down market. That can be tough to do after 40 or so years in a better house in a better area. Plus, you get accustomed to space. Giving it up is harder than you realise. Moving out of area into a cheaper area (e.g. London to the regions) is certainly viable.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • atush
    • By atush 13th Mar 18, 6:10 PM
    • 16,806 Posts
    • 10,488 Thanks
    atush
    £520 / month or 14% of salary goes in to SL pension, and £300/month goes to the share scheme. Could in practice save another £500 month with some lifestyle changes but should this go to pension, shares , isa, or another means of investment?
    Originally posted by earlbrutus
    Depending o if salary sacrifice and your tax position, id split the extra 500 between both pension and a S&S isa.

    Edit to you see you pay HRT plus SS. Does your current 14% take you out of HRTax? Even if not, with SS it makes sense to pay the extra into pension. You can build up a S&S isa pot with your matured share schemes.

    When your share scheme matures, id move those finds into a S&S isa.
    Last edited by atush; 13-03-2018 at 6:13 PM.
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