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arbboy
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« Reply #30 on: January 16, 2017, 03:51:49 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.

No there was no pension at the accountancy firm (GThornton) for trainees set up automatically.  There was one there which was optional but i never signed up.
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« Reply #31 on: January 16, 2017, 05:04:15 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.

I'll doff my own "regulated" cap to that - good post.
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EvilPie
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« Reply #32 on: January 16, 2017, 05:25:00 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.

This is brilliant.

1. - I wonder how many people out there keep a 'rainy day' savings pot of a few grand whilst at the same time having a few grand on a credit card at 19.9%? Paying off expensive debts can save a fortune. My personal triumph is managing to shift a car loan at 6.9% APR on to 0% credit cards saving myself over £160/month. Takes discipline to do this but the savings can be huge.

2. - I think a first property is a no-brainer as you can't go wrong if you have a roof over your head. Second, third etc. are nowhere near as good as people think especially with the new tax rules on their way. I don't think they're a great pension pot at all now but definitely good to have as part of a diversified pension fund.

3. - Being self employed I always forget about the employer contribution. Are there many employers who would match say a 10% pension contribution? I know I wouldn't.

4. - Pretty sure I'd be rich now if I never spent anything. I'd have had a pretty shit life though.

5. - The amount of times this reality hits me is scary. My personal target is to finish at 55. A recent trip to Vegas that went slightly wrong left me thinking '55 and 3 months it is then...... Cheesy'

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« Reply #33 on: January 16, 2017, 05:56:46 PM »


3. - Being self employed I always forget about the employer contribution. Are there many employers who would match say a 10% pension contribution? I know I wouldn't.


We get a fixed 7% employer contribution as long as ours is more than 3.5%. Plus it's done via salary sacrifice so we get the small additional benefit of the employers NI contribution saving.
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edgascoigne
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« Reply #34 on: January 16, 2017, 07:08:30 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?

Individuals who have a genuine, proven mechanism to generate a return on capital are a slightly different kettle of fish to the average punter (pardon the pun). The flip side however would be that if you don't diversify future income-source exposure you are placing total emphasis on your punting. Some people like it this way, others it would scare the life out of.

If paying nil income tax I would suggest an approximate route of...

1. Voluntary NICs to accrue State Pension. Effectively an annuity but at a fantastic rate (versus the annuity market).

2. Personal pension payment of £2,880 grossed to £3,600 by HMRC. Each individual can contribute this even with no relevant earnings.

3. ISA allowance (diversified stocks and shares, not cash please) for £15,240pa.

4. CGT exemption (many neglect to use this) enables realisation of £11,100pa of tax free gains. Similar investments to in your ISA but in 'unwrapped' Unit Trusts.

5. Dividend Allowance - a new one from last April that sees the first £5,000 of dividends free of any taxation. Again, a Unit Trust portfolio is the way to address it.

6. Internationally-domiciled investment bonds (a tax structure, rather than them being actual Corporate Bonds) see gross roll up, i.e. Nil tax on the way. You will pay some tax on the way out, however.

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EvilPie
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« Reply #35 on: January 16, 2017, 07:26:19 PM »

Ed. Regarding number 5, the £5k tax free dividend. If you're not earning any taxable income anyway how does this change anything? Wouldn't it have previously fallen in to their tax free allowance?

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edgascoigne
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« Reply #36 on: January 16, 2017, 07:31:18 PM »

Ed. Regarding number 5, the £5k tax free dividend. If you're not earning any taxable income anyway how does this change anything? Wouldn't it have previously fallen in to their tax free allowance?



Yes although it no longer 'wastes' the Personal Allowance. In this manner you could have the following and pay nil tax:

£11,000 'taxable income' - State pension, rental income etc - sits within Personal Allowance
£5,000 dividend income - separate £5k dividend allowance
£11,100 capital gains tax exemption - completely separate allowance for realisation of gains

Without even getting into tax-advantaged investments etc. etc.
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cheesies
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« Reply #37 on: January 17, 2017, 12:49:40 PM »

As a financially sensible but also financially illiterate younger person, thanks for all the advice thus far Smiley


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+.
....
2. Personal pension payment of £2,880 grossed to £3,600 by HMRC. Each individual can contribute this even with no relevant earnings.

3. ISA allowance (diversified stocks and shares, not cash please) for £15,240pa.
....

Would add here that this could be a good option come april for self-employed/pokery people: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/508117/Lifetime_ISA_explained.pdf. I've seen it billed as a pension for self-employed people. In short it acts as a regular isa but you get 25% bonus per year on deposits up to £4k (ie £1k per year) from the government. Then once you're 60/want to buy your first home you get the full amount tax-free. Only for us young'uns though Smiley

Any thoughts on this vs. personal pension? Or could both be best - say you could save £7k/yr, I assume it would be best to put the 4k/yr into the isa and then the £2880 into the pension to maximise free monies, rather than lumping the whole lot into either?
« Last Edit: January 17, 2017, 12:52:49 PM by cheesies » Logged
vegaslover
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« Reply #38 on: January 17, 2017, 05:57:45 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.

The way I think about it myself is right now I live on about a grand a month after my bills are paid, my bills are about £300 a month (minus the mortgage). So I have a minimum number I want to get to make sure I get that £1300 a month pension. Any more Is icing on the cake and means I can go on more holidays etc. I don't want to rely on the state pension either. No effing way I'm staying in the corporate game until 67, want to be gone before 60.

Wouldn't surprise me down the line if they start to means test pensions also, another reason why I won't rely on that....

Woodsey does that £300 include everything?, seems very low to me

Buying a property, if you can, should be a no brainer. Saves you sooo much money, just in the rent each month that you no longer pay.
I used to pay into an NHS pension but stopped when I left the NHS. Saying that, the pension has been devalued significantly in the past 10 years and will continue to do so.

Have a house that I rent out and will be keeping that as an income source in retirement.
I actually cashed in my peps/isas a few years ago to pay off the mortgage on my first house, saved me thousands in interest and the pep/isa earnd fk all in the 10 years I had them.

Problem with pensions nowadays, is so many company schemes have gone tits up, and that will only increase imo.
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Woodsey
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« Reply #39 on: January 17, 2017, 06:12:02 PM »

Just checked, it's actually £370.....
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The Camel
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« Reply #40 on: January 17, 2017, 06:16:19 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.

This is brilliant.

1. - I wonder how many people out there keep a 'rainy day' savings pot of a few grand whilst at the same time having a few grand on a credit card at 19.9%? Paying off expensive debts can save a fortune. My personal triumph is managing to shift a car loan at 6.9% APR on to 0% credit cards saving myself over £160/month. Takes discipline to do this but the savings can be huge.

2. - I think a first property is a no-brainer as you can't go wrong if you have a roof over your head. Second, third etc. are nowhere near as good as people think especially with the new tax rules on their way. I don't think they're a great pension pot at all now but definitely good to have as part of a diversified pension fund.

3. - Being self employed I always forget about the employer contribution. Are there many employers who would match say a 10% pension contribution? I know I wouldn't.

4. - Pretty sure I'd be rich now if I never spent anything. I'd have had a pretty shit life though.

5. - The amount of times this reality hits me is scary. My personal target is to finish at 55. A recent trip to Vegas that went slightly wrong left me thinking '55 and 3 months it is then...... Cheesy'



I think people leave some money to one side and keep in debt in case the credit card company shuts them off and leaves them without access to money.
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« Reply #41 on: January 17, 2017, 07:37:30 PM »

Just checked, it's actually £370.....

Jeez, really? Council tax, gas, electric, buildings/contents/life/car insurance, TV, phone, water etc.?
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Woodsey
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« Reply #42 on: January 17, 2017, 07:58:44 PM »

Just checked, it's actually £370.....

Jeez, really? Council tax, gas, electric, buildings/contents/life/car insurance, TV, phone, water etc.?

No car costs mate, company car, no insurance, no petrol, work pay for life insurance etc . Plus I don't live in a big house, I downsized a few years back because I was rattling around where I lived before. Also I live off company dime half the week when I'm out and about and they pay for at least half of my food/booze etc mon-fri. So I'm lucky in many respects simply because of my job.
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arbboy
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« Reply #43 on: January 17, 2017, 08:11:18 PM »

Just checked, it's actually £370.....

Jeez, really? Council tax, gas, electric, buildings/contents/life/car insurance, TV, phone, water etc.?

No car costs mate, company car, no insurance, no petrol, work pay for life insurance etc . Plus I don't live in a big house, I downsized a few years back because I was rattling around where I lived before. Also I live off company dime half the week when I'm out and about and they pay for at least half of my food/booze etc mon-fri. So I'm lucky in many respects simply because of my job.

Plenty of income tax at 40% though on the BIK of having a company car.  Don't you count that as a cost?  If you didn't have the car your take home pay would be substantially higher so there is a car cost you just don't pay it yourself it just comes directly off your payslip every month to the tax man.  Still incredible fiscal control to spend so little every month on your bills.
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Woodsey
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« Reply #44 on: January 17, 2017, 08:20:13 PM »

Just checked, it's actually £370.....

Jeez, really? Council tax, gas, electric, buildings/contents/life/car insurance, TV, phone, water etc.?

No car costs mate, company car, no insurance, no petrol, work pay for life insurance etc . Plus I don't live in a big house, I downsized a few years back because I was rattling around where I lived before. Also I live off company dime half the week when I'm out and about and they pay for at least half of my food/booze etc mon-fri. So I'm lucky in many respects simply because of my job.

Plenty of income tax at 40% though on the BIK of having a company car.  Don't you count that as a cost?  If you didn't have the car your take home pay would be substantially higher so there is a car cost you just don't pay it yourself it just comes directly off your payslip every month to the tax man.  Still incredible fiscal control to spend so little every month on your bills.

We'll I don't because it's taxed out of my salary before I see it.....always has been since I've done a 'proper' job.

I only add up stuff I actually pay each month. Probs saved about £75 a month through Martin Lewis site from about 18 months ago.
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