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It's wild that people think that having £1m in a pension pot isn't rich.
Reminds me of the bellend on QT a few years back who insisted that his 80k salary was below average.
How much does one have to invest to end up with a £1m pension pot at age 55?
Some googling brought me to this web page;
https://www.nutsaboutmoney.com/pensions/average-pension-pot-uk
<table class="tg">
<tbody>
<tr>
<th>Age</th>
<th>Average pension pot</th>
</tr>
<tr>
<td>16-24</td>
<td>£2,700</td>
</tr>
<tr>
<td>25-34</td>
<td>£9,300</td>
</tr>
<tr>
<td>35-44</td>
<td>£30,000</td>
</tr>
<tr>
<td>45-54</td>
<td>£75,500</td>
</tr>
<tr>
<td>55-64</td>
<td>£107,300</td>
</tr>
</tbody>
</table>
So to claim having a £1m pot is not wealthy is deluded.
FFS! Gotta love this forum. 3 ****ing developers and this is what we get...
Age Average pension pot
16-24 £2,700
25-34 £9,300
35-44 £30,000
45-54 £75,500
55-64 £107,300
I don't actually believe those numbers. They're insane.
Ie, I agree with doomanic
Are they too big or too small in your opinion? Averages are easily skewed by a few people with large pension pots. Don't look unreasonable to me. 100k is f all if you're hoping to retire on it, you'll get about 5% per year ie 5k.
@thegeneralist, the calculation is simple. But the pain is in the value of DC contributions in the NHS. Suppose you earn 80k per year and accrue 1/60th final salary. Times that by the HMRC 20 gives a value per year of 1/3 of your salary or 27k of the annual allowance of 40k
Now suppose you earn 120k, then that 1/3 annual value for pension is the max limit of 40k. Earn any more and the pension contribution doesn’t stop, but you will have to pay tax on any contributions made over 40k. Since there is no real money in this Ponzi scheme, the tax due comes out of the worker salary via self assessment. Also recall that the effective tax rate at 100k is 60% as the personal allowance is eroded to nil, and senior consultants just don’t see the value in additional work.
I had a significant bonus a few years ago and was in the same situation. My pension annual allowance was also eroded and my DC 20x contribution couldn’t be turned off. My effective income tax rate for the year was 51%! Don’t feel sorry for me.
Calculating pension increase of mhs pension year on year is far from simple. Google Tony Goldstone NHS Pension for the long winded explanations as ehs written loads on it.
A five figure tac bill for one years pension growth is entirely possible, and once you get into that problem the only solutions is to leave the scheme or drop hours, both of which are an issue for the NHS.
Yes the pension is a good one but there are a number of consultants finding themselves in a position where early retirement leaves them better off than continuing to work.
Which is madness!
Are they too big or too small in your opinion? Averages are easily skewed by a few people with large pension pots.
According to the link I shared it's far too small. The people with the large pots will be compensating for the people with even smaller pots.
Are they too big or too small in your opinion?
They're absolutely miniscule. That cohort that is about to retire is looking at an annual income of £4k + state pension (later on)
Don’t look unreasonable to me.
Don't they ? 😉
They looked damned unreasonable to me.
100k is f all if you’re hoping to retire on it, you’ll get about 5% per year ie 5k.
Sounds like we're in full agreement.
Age Average pension pot
16-24 £2,700
25-34 £9,300
35-44 £30,000
45-54 £75,500
55-64 £107,300I don’t actually believe those numbers. They’re insane
They look about right to me. I consider myself (lower) 'middle class' and am somewhere near these figures. MrsD is below.
I and many of my old uni friends were still paying student loans into our 40s, and didn't get on the property ladder until our 30s, with mortgages due to run until we're around 60. Ok, so I spent 7 years as a skint musician, but still, I don't think those numbers are way off.
Whether or not they're unreasonable - I don't find those numbers surprising.
Oh, i agree they are hopelessly small, but I believe they are probably representative. Lots of people have next to no independent pension and will be relying on whatever the state provides.
(There are also a bunch who have investments other than a personal pension, admittedly this is probably a small number.)
@tired I’m not sure that’s entirely right.
The NHS scheme is DB, not DC, and pension growth depends which scheme you’re in.
For the sake of argument, each year’s service in the 2015 scheme gives you (I think) 1/54th career average salary, which is then multiplied by 20 to give the pension growth.
Difficulty is that consultants didn’t have to do that much extra work pre-pandemic (funnily enough HMG increased the taper threshold during COVID) to taper, where the tax bills came in.
I had a colleague who got hit for £75k.
I appreciate this affects a small, highly paid cohort.
Utter ignorant bollocks.
Double down on it a couple of times and then I’ll explain it to you.
Please do as I’d really like you to explain.
suggests that there were 32.7m income tax payers for 2021/22.
reckons 51.7m over 20.
63%.
I suspect (with no basis) that that's a "low" proportion more because a lot of people don't earn enough to pay income tax, rather than they've earned so much that they've hit the pension limit.
suggests that there were 32.7m income tax payers for 2021/22
I suspect that number is artificially lowered by self employed people who pay exactly the max tax free salary they can then pay the rest as dividends.
The average pot numbers may be skewed by the large number of people with no pots because they're
A)on very low salary
B) on a defined benefits pension
Income tax is less than a quarter of the total tax take.
Obviously it suits a certain political viewpoint to minimise the contribution of the less wealthy and exaggerate the contribution of the rich, but it takes some chutzpah to pretend that the only tax that counts is income tax.
A five figure tac bill for one years pension growth is entirely possible, and once you get into that problem the only solutions is to leave the scheme or drop hours, both of which are an issue for the NHS.
Yes the pension is a good one but there are a number of consultants finding themselves in a position where early retirement leaves them better off than continuing to work.
So what we're actually saying is the NHS pension system is so generous at the top end of salaries? Taxpayers money going into private pensions at a crazy good rate, with of course a 40%+ tax benefit.
Time to solve that at a contractual/salary level.
It’s not going into private pensions, our pension contribs go straight back to the Treasury. The nominal pension pot doesn’t actually exist.
At the top end, the scheme is actually less generous than it is at the bottom - it’s a defined benefit scheme (which I appreciate is a lot better than most private sector schemes) but contribs are tiered so people earning less have lower deducted contribs for the same proportional benefit.
Time to solve that at a contractual/salary level.
If by that you mean reducing doctors’ salaries, I rather think you need to look at how the NHS is struggling to recruit people. I suspect most medics could earn considerably more if they worked privately.
Again, it’s not that simple - because of the system we have in the UK, doctors functionally have a monopoly employer. If you want to do PP it’s usual to work full time for the NHS as well to be credible.
However we’ve had 30% real terms pay erosion in 10 years and when, for example, the Irish are offering a consultant salary double what the NHS is, never mind Aus/NZ…
Obviously it suits a certain political viewpoint to minimise the contribution of the less wealthy and exaggerate the contribution of the rich, but it takes some chutzpah to pretend that the only tax that counts is income tax.
Utter ignorant bollocks 😀
It sounds like the top NHS paid staff either reach the LTA or exceed the Pension relief taper which are both pretty first world problems especially if you are a lowly paid nurse or porter etc..
The easiest low for people to have a large tax bill is to stop paying into a pension is you exceed the LTA or hit the pension relief taper (which starts at £205k in salary and employer pension contributions)
As above, I am fully aware this is a problem affecting a small, highly paid group, but comparing consultants with porters isn’t comparing like with like (which is not to suggest portering isn’t important, but you don’t need 5 years of university and 10 years of postgrad training including higher exams to be a porter)
When people who are hard to replace go early or decline to do work over and above contract for fear of punitive tax bills, and hospital waiting lists get longer and longer as a result, at what point does this become everyone’s problem?
sounds like the top NHS paid staff either reach the LTA or exceed the Pension relief taper which are both pretty first world problem
It may be a first world problem for them, but if the behaviour it drives is them leaving the profession then it becomes a problem for all of us.
In my company we can elect to have our pension contributions paid as cash. Obviously you're taxed on them, but it avoids this being a problem as you approach your pot limit
We all hear about the issues with the NHS but your max pension tax free amount per year going from £40k at an annual £240k to £10k at around £300k seems like a pretty minimal reason to leave the profession. General Pressures on people in the NHS make people leave.
Yes, but as above the threat of tax bills make people retire earlier than they would, and it’s not as simple as being able to pay £40k in - if it was, none of us would have a problem. Remember that the psychological threat of a massive tax bill is almost as important as the reality, and while you’re right about general pressures being important, the pension tax issues (which are a massive subject of online discussion) don’t help people feel that the system or HMG value them.
There are so many consultant gaps even with people coming through training, we cannot afford people going five years earlier than they would otherwise.
There's apparently 40,000 doctors impacted by this in the NHS, I think that's enough for a significant impact. If they're getting taxed at 40% on their pension when they pull it, it doesn't make much of a difference to the treasury
I don’t pretend to fully understand the whole thing. However Mrs FD has been advised she will not exceed her total life time pension allowance before retirement, however for the last 2 years she has been stung by substantial 4 figure tax bills.
Her salary is £120k per year and that we budget for that. However she does additional sessions and gets paid a sessional rate. She has pretty much told work she is stopping doing it because we can’t determine what detrimental impact it will have on our income
Last years unexpected tax bill is costing us £600 per month this financial year. That is already having paid roughly 50% tax on the earnings when it was received in the previous tax year, so overall a massive net loss with no ability to budget.
Basically it has cost her to go to work.
Last years unexpected tax bill is costing us £600 per month this financial year. That is already having paid roughly 50% tax on the earnings when it was received in the previous tax year, so overall a massive net loss with no ability to budget.
Basically it has cost her to go to work.
£7k additional tax on a £120k salary doesn't seem in the realms of working being a net loss.
I'm making no comment on whether the tax burden is fair or sensible, or whether it could be structured more efficiently - just that it's a long way away from costing money to work.
Basically it has cost her to go to work.
Hyperbole much?
I don’t think it’s costing money to work. But it’s one of those perverse incentives that our tax system seems to struggle with.
There are lots of bits that could be faired / squared up.
The two earner family each on 49k vs a single earner on 100k and child benefit. See also paying back the tax free allowance.
No one really objects to paying tax. They do object to the absurdities and being told that they are rich enough not to care.
I'm still not clear on the detail here, but getting the impression that Docs on around £120 to £160k are getting hit with potentially " five figure sums" of tax due to getting a non contributary pension benefit of around £40 to £50k
Izzat right?
If so, it feels pretty much in line with what nonDocs on similar salaries would be paying. Clearly the devil is in the detail.
The two earner family each on 49k vs a single earner on 100k and child benefit.
But think of what that single earner on £100k saved on childcare costs. Mitigates it a bit.
Why do you think it’s non contributory?
thegeneralist
Full Member
The two earner family each on 49k vs a single earner on 100k and child benefit.But think of what that single earner on £100k saved on childcare costs. Mitigates it a bit.
Well yes if they are alive and or present. But that’s not checked in the tax law is it…
Why do you think it’s non contributory?
Ignorance. Put me right...
If so, it feels pretty much in line with what nonDocs on similar salaries would be paying. Clearly the devil is in the detail.
The specific challenge here is the value of the DB pension scheme. That’s what’s causing the issue.
I think the essence is you are in the weird 60% tax area. Then the extra tax due on the wooden dollars pension contributions hits you hard.
But think of what that single earner on £100k saved on childcare costs. Mitigates it a bit.
Sure. £60k and £40k vs. 2x£50k, then.
@thegeneralist There’s a chart of the contributions here. Employers pay 14.38% on top (I don’t know what’s normal in the private sector but there’s no mechanism for getting these if you come out of the scheme, the employer just keeps them) and if you’re a GP partner and so effectively self employed you’re paying those yourself, as well as the employee contribs.
@lesgrandepotato I think the thing that gets people is the litany of anecdote of people who’ve done extra work who then get hit with a tax bill that exceeds the pay they earned doing the extra work (which usually means doing extra shifts for their employer, which aren’t in themselves pensionable as nothing above 40h/wk is pensionable)
Employers pay 14.38% on top (I don’t know what’s normal in the private sector but there’s no mechanism for getting these if you come out of the scheme, the employer just keeps them)
Significantly less. And it works the same, if you opt out, your employer doesn't give you the extra.
Sorry - which bit is less? What we pay, what NHSE pays, or what private sector employers pay?
"Employers pay 14.38% on top"
3% is normal in the private sector.
Oh, I see - your sentence was ambiguous. I read it as you weren't sure what the normal level of employer contributions were, rather than you weren't sure if in the private sector they were paid to you if you opted out of a pension.