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Author Topic: For all you younguns out there  (Read 9889 times)
Cf
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« Reply #15 on: January 16, 2017, 06:56:50 AM »

Bought my house at 30 and am only now properly putting money into pension. I do 10% per month which my employer matches.

Getting the house first was the important part I think. It's already gone up in value name the money being put in isn't burnt rent money.

I can see how for most getting a house would be too expensive. And student debt these days is obscene. I managed to do uni before things became as bad as they are now.
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« Reply #16 on: January 16, 2017, 08:41:50 AM »

(Removes regulated Adviser's cap momentarily)

1. High rate debt should not be tolerated under ANY circumstances. It's one of the greatest ills of 'civilised' society that the highest rate interest is typically charged to those who are least well off, causing (at least in part) a self-perpetuating cycle of difficulty. --> PAY OFF ANY DEBTS FIRST THAT ARE AT A RATE OF INTEREST YOU CAN NOT FEASIBLY EXPECT TO ATTAIN WITH THE ALTERNATIVE YOU WILL TAKE.

2. People in the U.K. perceive property as the proverbial 'no brainer', but memories are short and often people neglect liquidity risk and the leverage inherent in the investment, both of which can hurt. Recent tax changes have made second (and beyond) property ownership highly punitive for most in a position to buy such properties. The capital appreciation point stands, but I often see individuals far too heavily concentrated towards property. --> BUY THE ROOF OVER YOUR HEAD IF YOU CAN AFFORD TO DO SO BUT HAVE A PLAN FOR WHAT HAPPENS IF AND WHEN RATES RISE.

3. I meet so many individuals that neglect to pay into pension citing either complexity or inaccessibility as their reason. If you are getting tax relief on your contributions (which all do, to a limit) and an employer match then think this one through, if you are a basic rate tax payer you can have £8 in your pocket or £20 in pension. For a higher rate taxpayer £6/£20. For an additional rate taxpayer £5.50/20. The reality is often a little better still though salary sacrifice and NI saving sharing. --> YOU HAVE TO LOOK AFTER THE SHORT TERM, OF COURSE, BUT THERE IS NO BETTER VEHICLE TO SAVE FOR 55+.

4. You can't spend yourself rich. Investment in skill development is different of course, but every £ you spend is a £ you don't have. Senseless expenditure can kill your chance at compound growth.

5. If a self-employed individual aspires to work until 55 then that is around 32 years all told. If said individual works 8 hours per day, but is only productive in 7 of those, they could feasibly expect to retire four years later than their aspiration.
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« Reply #17 on: January 16, 2017, 12:19:23 PM »

Something I thought was a bit 'odd', or perhaps just journalists being journalists, in that article they pick on £20,000 as a pension target to aim for because of the report saying that a bit over £20,000 is the average expenditure of a retired household.

But won't most retired households have 2 people in them? At the very least some will. So if that expenditure is for an average of 1.7 people (for example) then the pension they each need goes down to about £13,000 - which makes the extra amount above the state pension seem a lot more achievable. Particularly as I would assume that average expenditure is disproportionately skewed upwards by the extra expenses any retired households have in London.

How could 2 people possibly live off £20k even in retirement!?
I mean, are they taking it in turn's to go to Vegas?


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« Reply #18 on: January 16, 2017, 12:36:10 PM »

Is this 20k figure including what folks get from state pension, or is it state pension + 20k a year private pension?

20k + state and assuming house is paid off seems decent, but I am a northerner.
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« Reply #19 on: January 16, 2017, 12:40:07 PM »

As an aside, the fact that you are reading and posting in this thread self selects you are somebody who is going to probably be better than average in retirement. Back before I became the worlds greatest pokery writing n that fella, I worked in pensions and it was horrifying how little thought most people had put into this.

Early on a phone call with a customer really shook me up. He joined a company pension maybe 20 years earlier, didn't check up on how it was going once, rang up about four weeks before he was set to retire and discovered he was getting next to nothing on top of his state pension. He started blaming the government, 9/11 and the company I worked for, but (IMO of course) the fact that he just blindly assumed everything was going to sort itself out for 20 years was the culprit.
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« Reply #20 on: January 16, 2017, 12:52:38 PM »

Most people are not going to get close to a big enough pot for £20k though are they?

If the dream is done at 60 with £20k + state we need over £500k in the pot? Is that right?
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« Reply #21 on: January 16, 2017, 01:11:17 PM »

(Removes regulated Adviser's cap momentarily)

1. High rate debt should not be tolerated under ANY circumstances. It's one of the greatest ills of 'civilised' society that the highest rate interest is typically charged to those who are least well off, causing (at least in part) a self-perpetuating cycle of difficulty. --> PAY OFF ANY DEBTS FIRST THAT ARE AT A RATE OF INTEREST YOU CAN NOT FEASIBLY EXPECT TO ATTAIN WITH THE ALTERNATIVE YOU WILL TAKE.

2. People in the U.K. perceive property as the proverbial 'no brainer', but memories are short and often people neglect liquidity risk and the leverage inherent in the investment, both of which can hurt. Recent tax changes have made second (and beyond) property ownership highly punitive for most in a position to buy such properties. The capital appreciation point stands, but I often see individuals far too heavily concentrated towards property. --> BUY THE ROOF OVER YOUR HEAD IF YOU CAN AFFORD TO DO SO BUT HAVE A PLAN FOR WHAT HAPPENS IF AND WHEN RATES RISE.

3. I meet so many individuals that neglect to pay into pension citing either complexity or inaccessibility as their reason. If you are getting tax relief on your contributions (which all do, to a limit) and an employer match then think this one through, if you are a basic rate tax payer you can have £8 in your pocket or £20 in pension. For a higher rate taxpayer £6/£20. For an additional rate taxpayer £5.50/20. The reality is often a little better still though salary sacrifice and NI saving sharing. --> YOU HAVE TO LOOK AFTER THE SHORT TERM, OF COURSE, BUT THERE IS NO BETTER VEHICLE TO SAVE FOR 55+.

4. You can't spend yourself rich. Investment in skill development is different of course, but every £ you spend is a £ you don't have. Senseless expenditure can kill your chance at compound growth.

5. If a self-employed individual aspires to work until 55 then that is around 32 years all told. If said individual works 8 hours per day, but is only productive in 7 of those, they could feasibly expect to retire four years later than their aspiration.

Good post Ed.  In my circumstances of paying no income tax legally and having no employer matching any contributions is this the best vehicle for me saving for 55+?  I don't see any advantage of having a pension tbh over just growing my bankroll the way i have tax free/fund manager fee free for years.  Anything else i should be considering over than the tax implications?
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« Reply #22 on: January 16, 2017, 01:37:45 PM »

Most people are not going to get close to a big enough pot for £20k though are they?

If the dream is done at 60 with £20k + state we need over £500k in the pot? Is that right?

I think there are a couple of mentions in the article that suggest that £20k (including the state pension) is ambitious.
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« Reply #23 on: January 16, 2017, 03:13:00 PM »

Most people are not going to get close to a big enough pot for £20k though are they?

If the dream is done at 60 with £20k + state we need over £500k in the pot? Is that right?

Yes, that's correct. You'll need approx £500k in today's money to have an annual pension income (taxable) of c£20k. The state pension of £155 p/wk is on top - assuming that relevant NI contributions have been made during the period. (Making voluntary contributions to this is perhaps something arbboy might investigate, as he will not qualify otherwise, I believe).

Ed's post offers excellent advice. All I would add is that there is no "one size fits all" solution. Everybody's life circumstances are different, as are attitudes to risk and life goals. I've found myself envying those people I've bumped into along the way who seem to have no cares and simply live life day to day and worry about what tomorrow might bring... tomorrow. Before long, though, I realise that not worrying about these things is just not me. It could be you, though Wink
« Last Edit: January 16, 2017, 03:16:44 PM by 4KSuited » Logged
arbboy
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« Reply #24 on: January 16, 2017, 03:28:50 PM »

Most people are not going to get close to a big enough pot for £20k though are they?

If the dream is done at 60 with £20k + state we need over £500k in the pot? Is that right?

Yes, that's correct. You'll need approx £500k in today's money to have an annual pension income (taxable) of c£20k. The state pension of £155 p/wk is on top - assuming that relevant NI contributions have been made during the period. (Making voluntary contributions to this is perhaps something arbboy might investigate, as he will not qualify otherwise, I believe).

Ed's post offers excellent advice. All I would add is that there is no "one size fits all" solution. Everybody's life circumstances are different, as are attitudes to risk and life goals. I've found myself envying those people I've bumped into along the way who seem to have no cares and simply live life day to day and worry about what tomorrow might bring... tomorrow. Before long, though, I realise that not worrying about these things is just not me. It could be you, though Wink

This is something i need to look into tbh.  I worked in UK from 1996 to 2004 unbroken.  Since 2004 i haven't had any paid UK employment and haven't paid any UK income tax or NI since tax year 2004/2005.  During this time i haven't paid any vol NI contributions at all either.  How much will this impact me longer term if i was to start paying the vol NI contributions now?
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« Reply #25 on: January 16, 2017, 03:36:28 PM »

ARB, didnt you have a pension plan with the company you worked for, i had one with mine ( was there for 8 years after left school ) and always get a letter each year even tho havent paid in since leaving company , i guess/ hope the payments i made back then kept rolling up, as it were. Started my own private one once being self employed.
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« Reply #26 on: January 16, 2017, 03:39:10 PM »

ARB, didnt you have a pension plan with the company you worked for, i had one with mine ( was there for 8 years after left school ) and always get a letter each year even tho havent paid in since leaving company , i guess/ hope the payments i made back then kept rolling up, as it were. Started my own private one once being self employed.

Forgot to say i have never had any company pension payments either when any of the 3 firms i worked for in the UK.  I know that for a fact there are no hidden pots lying around anywhere that i have forgotten about.
« Last Edit: January 16, 2017, 03:43:22 PM by arbboy » Logged
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« Reply #27 on: January 16, 2017, 03:42:31 PM »

£20K a year now will need to be what £40K in 20 years time due to inflation? So a million needed. Think Woodsey's right about starting to save ASAP.







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« Reply #28 on: January 16, 2017, 03:50:07 PM »


Forgot to say i have never had any company pension payments either when any of the 3 firms i worked for in the UK.  I know that for a fact there are no hidden pots lying around anywhere that i have forgotten about.

Not even the accountancy firm (big4 IIRC?) you started at? I'd be surprised if they didn't enrol new starters in a scheme back then. My first job after uni was from 89-95 and we had a Pru company scheme - pretty sure I didn't contribute much back then. Current transfer value is £10k.
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« Reply #29 on: January 16, 2017, 03:51:25 PM »

ARB, didnt you have a pension plan with the company you worked for, i had one with mine ( was there for 8 years after left school ) and always get a letter each year even tho havent paid in since leaving company , i guess/ hope the payments i made back then kept rolling up, as it were. Started my own private one once being self employed.

Forgot to say i have never had any company pension payments either when any of the 3 firms i worked for in the UK.  I know that for a fact there are no hidden pots lying around anywhere that i have forgotten about.

http://www.moneysavingexpert.com/savings/state-pensions

Covers everything you need to know. Looks like you can 'buy' 10 years worth of pension credits for £7300 then presumably you can start making NI contributions now to give you a full 35 years by the time you hit 67.

You can then defer by a couple of years and potentially get about £220 per week. Obviously they may not allow this by the time it applies but under current rules you could.
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