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Maxed out my ISA and SIPP as much as I could after leaving the UK. Not paid into any of the German schemes as being self employed my accountant says I was better off doing what I had been doing.
Been away from the UK for so long that I'm now no longer eligible to pay Capital Gains on my UK money. How that works when it comes to realising that money with the country I reside in I'm not sure, but then if they don't know it's there how can they tax it? (Am currently officially of no fixed abode and have cut ties with Germany).
That is my point, the decade following the .com crash also included the 2008 financial crisis, it was called the lost decade for a reason - it took 10 years to recover to the previous level. The market historical average was meaningless for that particular 10 year period.
Last couple of years have been above average.
And it is widely acknowledged that markets are cyclical.
Yeah we can guarentee crashes and corrections will happen, we just can't time when, but time in the market will win -that's why with investing they say a 10 year+ time in the market will ride out any crash to recovery*
Calculating gains, I'd be conservative and assume a 7% per year average for a global ETF or whatever, so if you happen to be lucky and average 10% then happy days.
*unless you are stuck in the unfortunate position of being forced to cash out during a big dip - but that's why they also say you should have fund in savings/cash ISA etc, too, so you can use that if you have to, while you wait for your investments to recover.
Am currently officially of no fixed abode
I'm pretty sure you will be resident *for tax purposes* in either UK or Germany (unless you're moved somewhere else on a fairly permanent basis). Which, I have no idea - and you may be able to choose. NB this does not necessarily correlate to any specific visa, legal residency, nor where you happened to sleep last night.
I’d also be really interested in hearing what pension-top-up, part-time jobs people are doing. And how that’s working out.
I think the challenge is finding something part time that pays a good hourly/daily/salary. I have been looking at non executive director type roles in the public arena - boards with NHS trusts, public agencies etc, as they generally are around 30 days a year and between £300 and £500 a day, plus expenses, so both interesting and well rewarded for the hours carried out.
As for being a tax resident, thecaptain, I left the UK and was never contacted by HRMC. I left Spain and was never again contacted by the Spanish authorities. If you don't spend more than half a year in any country and don't have an address I don't see how a country could claim you as a fiscal resident. When you do decide on a base, Alpin, do a lot of profit taking so all of your investments are new without profits.
As for being a tax resident, thecaptain, I left the UK and was never contacted by HRMC. I left Spain and was never again contacted by the Spanish authorities. If you don't spend more than half a year in any country and don't have an address I don't see how a country could claim you as a fiscal resident. When you do decide on a base, Alpin, do a lot of profit taking so all of your investments are new without profits.
that seems like skating on very thin ice to me, and I'd certainly not assume that simply based on the fact that the tax authorities hadn't been in touch.
you might think differently but personally I think contributing to the countries you spend your time in and whose tax funded services you are relying on, is a moral obligation.
Ai generated answer-
No, you cannot legally avoid paying tax anywhere by simply spending half your time in one country and half in another. Tax systems are designed to ensure individuals are tax-resident somewhere, and splitting your time often results in becoming a tax resident in one or both countries, subject to their respective laws and double taxation agreements.
Why this approach does not work
Dual Residency: It is possible to be a tax resident in two countries simultaneously, a situation known as dual residency. Both countries might have rules (like the "183-day rule" or "center of vital interests" tests) that could classify you as a resident.
Double Taxation Agreements (DTAs): To prevent paying tax twice on the same income, countries have DTAs. These treaties include "tie-breaker" clauses to determine which country has the primary taxing rights, meaning you will ultimately pay tax in one of them. You cannot use a DTA to avoid tax altogether.
Worldwide Income Taxation: If you are a tax resident in a country that taxes worldwide income (like the UK or the US), you are generally liable for tax on all your earnings regardless of where the income is generated or where you spend your time.
Strong Ties: Tax authorities consider various factors beyond just the number of days spent, such as where you have a permanent home, your family, your business interests, and your bank accounts. These "ties" can establish residency even if you spend fewer than 183 days there.
Source of Income: Income is often taxable in the country where it arises, regardless of your residency status. For example, UK rental income is still taxable in the UK even if you are a non-resident.
The "Tax Orphan" Exception (Highly Limited)
The only potential, highly complex, and difficult way to be a non-tax resident anywhere is to become a "fiscal nomad" with genuinely no permanent home, no strong ties, and by spending very short, non-tax-triggering periods in multiple countries. This usually requires continuous travel and is not feasible for most people with established lives or consistent income sources.
In summary, attempting to use split time to avoid all tax is considered tax evasion by most authorities if done improperly, and legal tax avoidance methods require working within the specific rules and treaties of the relevant countries. Professional tax advice is essential for anyone in this situation.
If you don't spend more than half a year in any country and don't have an address I don't see how a country could claim you as a fiscal resident.
The UK rules are a little more complex than that for a start:
You will be regarded as resident in the UK during a tax year if :
· You spend 183 days or more in the UK during the tax year, or
· Although here for less than 183 days, you have spent more than 90 days per year in the country over the past four years (taken as an average). You will then be classed as UK resident from the fifth year.
Strong Ties:
Source of Income:
GF is resident in Germany despite not spending more than 183 days in the country as all her clients (bar two) are based in Germany, therefore her main source of income is Germany.
I'm not working, least not officially, and the German tax office has told me I need not worry unless I register my residence in Germany again.
you have spent more than 90 days per year in the country over the past four years (taken as an average). You will then be classed as UK resident from the fifth year.
No chance! Not spent more than three months in the UK since I left in 2008.
Circling back to Voluntary NI contributions:
I completed a CF83 early September and got a letter back from HMRC outlining which years I could contribute to, and what cost.
Anyway, the mechanics of the payments wasn't entirely clear to me so I called up the phone number (only on hold for about 10 minutes 👍) and when they checked my records they said I could contribute back further than the standard six years that the letter referred so as there was evidence on their system* I had asked about this is the past...
So, those of you interested in this, it might actually to worth calling HMRC as, I presume, they are being lenient about restricting contributions to six years...
(Frankly, I don't remember any details other than a call multiple years ago after which I'd changed my mind about making the voluntary contributions anyway)
^^
How much are the contributions and does it make sense financially?
If, for example, they want 18k for the last 18 years and I then receive £500* a month after the age of 67 I'm not sure it's worth it.
* I've no idea what the minimum state pension is or would be in 25 years time.
The minimum is £58.24/week, but you have to have contributed 10 years of NI.
The maximum SP is a little over £1000/month (with full contributions - 35 years is it?)
How much are the contributions and does it make sense financially?
If you're not employed, Class 3 voluntary contributions are around ~ £900 per year. For any years you are employed, you may qualify for Class 2 contributions which are ~ £165 year.
The exact amount is determined by which (UK) tax years you are "missing" and which you are actually able to contribute to. In my case, nearly all past years would be Class 2 as I was employed (as opposed to self-employed).
But I retired last year, so for 24/25 tax year and any future tax years, I'd have to pay at Class 3 rates.
Theoretically for me (I'll believe it when my NI records are actually updated), I can max out my contributions (38 years in my case) as Class 2.
Whether it makes financial sense....? I'm still in the process of sorting this out with HMRC but, currently, my forecast pension is ~£160 per week based on 27 years current NI contributions but would increase to £230 per week if I can pay missing contributions up to (my) maximum of 38 years.
That's supposedly gonna cost my around £1900 but the pay back period is only around 27 weeks and I'll be ~£70 per week better off (before tax) after that point....
You'd be paying class 3 given what you've said on here, Alpin. To quote someone I had on the phone from HRMC back in the paper trail days "it's a no brainer". If you think you'll live beyond 70 it's worth it. If you start again now you'l be able to get 35 years. I restarted again too late so will only get to 29 years.
This usually requires continuous travel and is not feasible for most people with established lives or consistent income sources.
so possible
When you read stuff about voluntary payments not being worth it, it's for those who already have sufficient years contributions, but continue to work (self employed etc).
When you read stuff about voluntary payments not being worth it, it's for those who already have sufficient years contributions, but continue to work (self employed etc).
True.. It's on a sliding scale too once you've got over the minimum amount of qualifying years.
If you check your NI record it will tell you how much state pension you'll get as it stands under the current rules, compared to what you'll get with the full amount of years.
This usually requires continuous travel and is not feasible for most people with established lives or consistent income sources.
so possible
Yes, possible. I didn't say it wasn't, but I definitely wouldn't rely simply on 'HMRC didn't contact me'
It's completely possible to be resident and not declare income as well (I've heard of people doing it with multiple rental properties). You might get away with it. It doesn't make it legally or morally right.
Lol at the idea that an intelligent poster might assume they have no tax liabilities just because authorities haven't contacted them at some particular time or place.
I think for most of us, resident in UK, it is possible to pay very minimal tax on pension drawdown if cleverly combined with ISA income etc, though it appears that the more you have the easier it is, unfortunately! ….. which comes back to the original point, of how much of a pot to retire early, say about 60.
Lol at the idea that an intelligent poster might assume they have no tax liabilities just because authorities haven't contacted them at some particular time or place.
Yeah, but I've contacted them. 🙂 I've mentioned having an account with HRMC above - there is simply no record of my "nowhere" years in the 80s. For one year I contacted HRMC hoping to get tax back on some temping I'd done and paid PAYE on, but they ignored me. I've been in touch with Spain about pensions records and they haven't raised the question of where or when I paid tax since I left. Since 1992 I've been a fiscally resisdent in France and they have never raised the question of the "nowhere" years prior to that even though I'd worked seasonal nomad jobs in France. For 5 years travelling around and no fixed address for more than 6 months I was ignored.
I’m sure others will disagree and let us know how they’re doing great with much less but for early retirement I still have the 1 mill figure in my head, as soon as I’m nearly there my notice is getting handed in!
I’m sure others will disagree and let us know how they’re doing great with much less but for early retirement I still have the 1 mill figure in my head, as soon as I’m nearly there my notice is getting handed in!
I'm 57, nowhere near £1m and no chance of getting there, like the majority of people I know. They all seem to be managing to cut their cloth or pick up a few days part time work without living in poverty, and I'll be joining them in 3 years and 6 months time.
for early retirement I still have the 1 mill figure in my head, as soon as I’m nearly there my notice is getting handed in!
Similar things have been mentioned in the thread before but I'm still unclear whether this is pp or per couple.... Will your spouse have similar?
Mine is insistent that we both need that amount before she'll even consider it. Which just makes me think we'll be working too long, dying early of exhaustion and paying stacks of IHT 🙂
think for most of us, resident in UK, it is possible to pay very minimal tax on pension drawdown if cleverly combined with ISA income etc,
Dunno about minimal, but about 3/8 of my pot is in savings and should get transferred to ISAs in the next few years so I guess I'll pay about 7% income tax in retirement..
( OAP will fill the nil rate band, then perhaps £22k taxable at 15% from my pension, then tax free top-up from my ISA)
Which is weirdly close to the tax rate I currently pay ~6.5%
I’m sure others will disagree and let us know how they’re doing great with much less but for early retirement I still have the 1 mill figure in my head, as soon as I’m nearly there my notice is getting handed in!
Do yourself a favour and take 2 years off your projected date and retire then. You get another 2 years to enjoy life and you really won't need that much money.
Similar things have been mentioned in the thread before but I'm still unclear whether this is pp or per couple.... Will your spouse have similar?
Mine is insistent that we both need that amount before she'll even consider it. Which just makes me think we'll be working too long, dying early of exhaustion and paying stacks of IHT 🙂
I think retiring as a couple with a £2M pot would put you into a fairly narrow band of wealthy retirees. My recent research shows the majority retire with less than £1M per couple, and many a lot lot less.
Depends, as always.
Mortgage paid? Worried about paying for care? Several expensive holidays a year? Need a new car every few years?
Most would get by on a lot less than £1m.
My recent research shows the majority retire with less than £1M per couple
Indeed. This ONS data is fairly dense but 500k would still put a male very comfortably in the top 25%, and that's after they've stripped out all the people whose pension pot is £0, as they drag down the average...
Mortgage paid? Worried about paying for care? Several expensive holidays a year? Need a new car every few years?
Yes
No
Yes
No
I'm 57, nowhere near £1m and no chance of getting there, like the majority of people I know.
This. Same age as you, I have a small pension (around £110,000) and a SME business that I may or may not be able to sell in the future (but I am assuming I won't be able to sell it as we've tried and not getting any tangible interest). My wife has a similar value pension to mine, and we'll both be eligible for full state pension. We may or may not come into an inheritance but, if not, we'll just have to make it work. Fortunately we could downsize our house, still own our own place but get a reasonable lump sum – of course that would mean any inheritance our kids would be vastly reduced though.
Mortgage paid? Never had one. We rented till we had enough to buy.
Worried about paying for care? No but junior should be given the laws here.
Several expensive holidays a year? I don't fly and enjoy simple holidays so no.
Need a new car every few years? Yup, I'd live without but I'm married. It's usually many years rather than few though.
A million? Nope, miles off. Even if I lived to 95 which I really hope I don't that would be 33 333 a year on top of annuities - what would I do with it?
Mortgage paid? Worried about paying for care? Several expensive holidays a year? Need a new car every few years?
Most would get by on a lot less than £1m.
First point.... The majority of retirees are sitting in properties that are way too big for their needs. My old man is in a three bed property with a garden that's so big you can play golf in it (diagonally and with a wedge, but still). Same goes for many aunts and uncles..... Whilst their kids are putting off having a family because they can barely afford the rent (let alone a deposit and mortgage) on their pokey flat.
Most retirees could sell up and live off the profits of their fortunate position for years.
WRT to your second point.....
A mate of mine recently organised it for his old man to legally top himself. His dad was 70-odd but had the onset of dementia. He didn't want to be sat in a home with some random wiping his arse with little clue as to what was going on. Mate's mum topped herself four years ago but didn't do it right and ended up in hospital for a week before passing.
Kinda respect the geezer for going through with it.
I know a nice place in Tuscany where the fumes escaping from an old volcano (Monte Amiata, good bike park there too) will put you to sleep within 20 minutes. That's kinda my plan. Nice bottle or two of Barolo, Chianti or Morellino di Scansano and let nature take its course.
Point three... Holidays needn't cost much. If you want to sit on a cruise ship swaffing G&Ts then it might cost you, but it needn't be the case (my nan died on a cruise ship swaffing G&TS, so let that be a warning to you).
On your last point.... I don't get why some people seemingly need a new motor every other year or two. More fool them.
Most would get by on a lot less than £1m.
The majority have no other choice!
First point.... The majority of retirees are sitting in properties that are way too big for their needs. My old man is in a three bed property with a garden that's so big you can play golf in it (diagonally and with a wedge, but still). Same goes for many aunts and uncles..... Whilst their kids are putting off having a family because they can barely afford the rent (let alone a deposit and mortgage) on their pokey flat.
Most retirees could sell up and live off the profits of their fortunate position for years.
I think that was quite common with my parent’s generation, not mine, and I’ve just taken early retirement at age 59, and nowhere near a £1M pot..
You can’t have annuities and then factor in taking money out each year as well - it’s one or the other.
Ref whether I meant £1m for 1 or two people - something inbetween. My wife has a teachers pension which will pay out maybe 10k per year depending on when she takes it, and then a defined contribution still running which might eventually be worth something similar in 5 years or so - so 20k per year total b4 state pension kicks in. Plus my private pension and investments are whatever they end up being.
I think that was quite common with my parent’s generation, not mine,
Yeah definitely, but then of the Gen X and Millennials I know who do own their own property, they generally have three bedrooms or more. Do they need that when they're retired and (presumably) their kids have left home?
My sister has a gardening business in Essex. All her customers are old codgers who can no longer take care of their garden, let alone their three or or four bed house.
All her customers are old codgers who can no longer take care of their garden, let alone their three or or four bed house.
fair enough, but this thread is about taking early retirement, so wrong demographic for comparisons.
If you look at the price difference between a three bed semi and decent two bed flat in a similar area then it's probably not enough to make it worthwhile for loads of people. Around here 250-325k house to 150-250k flat and the 150k flat would be dark, pokey with little to no storage.
And bungalows are usually more than the semis
Around here 250-325k house to 150-250k flat and the 150k flat would be dark, pokey with little to no storage.
Just shows how screwed up the housing market is.... It's the same story in Germany. Parents of friends living in gaffs that are essentially far too big for their needs whilst their kids are struggling to pay rent on a pokey flat.
Just seen a post come up on x (can't get the link), that is suggesting that salary sacrifice schemes are going to be capped at 2K on pensions at next budget... Has anyone else seen this I thought it would have been much bigger news? If it's true, then I wonder what would happen with bike to work type things as well.?
Sal sac schemes only save a tiny bit of National Insurance, it’s a non-issue. Doesn’t affect tax relief one bit. Different from eg bike to work that save you a ton of tax.
suggesting that salary sacrifice schemes are going to be capped at 2K on pensions at next budget
The FT ran this story last week - https://www.ft.com/content/556ba05c-6a30-4d8c-834d-7125856215e4
Reeves is set to introduce a new threshold of £2,000 that can be put towards such a scheme, above which it will incur national insurance payments at the usual rates — 8 per cent on salaries under £50,270 and 2 per cent on income above that.
If my back of an envelope maths is right, then an average wage person on £40k-ish would be unaffected if they're putting in 5%, and £180 a year worse off if they're putting 10% in. Or their pension would be, anyway.
The effects on businesses might be harder to calculate.
If you look at the price difference between a three bed semi and decent two bed flat in a similar area then it's probably not enough to make it worthwhile for loads of people. Around here 250-325k house to 150-250k flat and the 150k flat would be dark, pokey with little to no storage.
And bungalows are usually more than the semis
Very much this - our 4 bed detached is worth maybe £300k, a 2 bed bungalow at least £250k. Costs and fees for moving leave very little to live on
salary sacrifice schemes are going to be capped at 2K on pensions at next budget...
Shit, hope not. That would be a proper pain. Is that per year !
Sal sac schemes only save a tiny bit of National Insurance, it’s a non-issue.
Do you mean for HMRC or people?
For me it would make a huge difference. I' d be about £650 a month worse off. (TBClear. I'm not expecting anyone to get the tiny violins out, just saying 🙂 )
No you won’t be! The only difference is that with a sal sac scheme it’s taken off your gross salary so you obviously don’t pay any tax on it. If the contributions are instead deducted from your net pay, 20% tax relief is added back by the gov’t and then higher rate tax relief claimed back through your tax code. End result exactly the same from a tax point of view.
The only financial difference is you save Nat Insurance because your take home salary is slightly lower. It’s a small amount in relative terms. Company pension schemes will carry on as before they’ll just not be run completely via salary sacrifice.
Thing with the big houses, is they were the family home and people don't want to live anywhere else. We tried that with FIL and MIL, but they didn't want to move. By the time it was sort of needed it was too late. MIL lived in the lounge and slept in the dining room in later years. The four bedrooms were never used. My folks are rattling round in a large five bed house but they won't downsize. Dad is starting to struggle with the gardens.
First point.... The majority of retirees are sitting in properties that are way too big for their needs. My old man is in a three bed property with a garden that's so big you can play golf in it (diagonally and with a wedge, but still). Same goes for many aunts and uncles..... Whilst their kids are putting off having a family because they can barely afford the rent (let alone a deposit and mortgage) on their pokey flat.
Most retirees could sell up and live off the profits of their fortunate position for years.
That's nonsense. When was the last time you visited many of the midlands/northern towns and cities with (for the UK) very average house prices ? Loads of places with sub £300k 3 and 4 bedroom houses but as others have said...downsizing makes no sense as apartments (or worse..those McCarthy Stone managed apartments) and small bungalows cost a small fortune.
As part of our early retirement plan we have looked at moving area and downsizing, in part to reduce the amount of crap you accumulate and a lot less gardening to deal with. The costs just don't add up however for all the reasons listed above.
I've been dropping any bonus from work straight into my pension via salary sac for the last 9 years, knowing that the base levels of contribution each month ain't going to deliver anything comfortable if I want to pack up sooner than 67. Fingers crossed they don't tinker with that too much in the budget, I can't see it myself as it would upset a lot of friends in the city.
There is always a loophole and somebody will find it long before the chancellor sits down.
There's a new building I know in a really nice place. It's not an old people's home but has a handicapped access label, is near the hospital and all the local services you could wish for. It's, warm, light, sound proof, comfortable and very easy to live in. It's mainly populated by people who have sold homes worth half a million or more which were too much for them, and where they felt isolated and car dependant. Speaking to some of them their objective is to live independantly and comfortably for as long as possible. Not downsizing in financial terms but a change of lifestyle to suit their age. I think they've made a good choice.
When I worked on a campsite the ageing owners had done the same buying a flat in the town and leaving the campsite to their children. Seemed wise.
So rather than just downsize how about moving to a nice place where ageing will be less of a problem. I thought about my own place and it ticks a lot of those boxes, easy access, no stairs, bus stop under 100m away, good local services, don't need a car... .
No you won’t be!
Oh yes I will!
The only difference is that with a sal sac scheme it’s taken off your gross salary so you obviously don’t pay any tax on it. If the contributions are instead deducted from your net pay, 20% tax relief is added back by the gov’t and then higher rate tax relief claimed back through your tax code. End result exactly the same from a tax point of view.
Err no.
The only financial difference is you save Nat Insurance because your take home salary is slightly lower. It’s a small amount in relative terms. Company pension schemes will carry on as before they’ll just not be run completely via salary sacrifice.
Aha. Cool got there eventually*. NI indeed. Buy it's not just employee's NI that I save but also Employer's NI as my company is fin savvy and kindly chucks the 13.8% they don't need to pay on top. (I'm pretty sure it ought to be 15% more since emp NI increased, but I'm not going to split hairs.)
* Well mostly. It's not 20% added back on it's 25, but anyway
Sorry yes it’s giving you back the 20% tax you have paid on your original earnings but in reality making £80 up to £100 is a 25% addition.
The remainder if not paid via Sal Sac you can claim back via your tax code if you’re a higher rate taxpayer. There are still rumours about abolishing higher rate pension tax relief which would cost a lot of people a good deal more money if it happened.
Obviously you can retire on less than a million, but I do think it's a good milestone for when you should be retiring unless you really love your job or some other compelling reason not to (e.g. not having an isa to bridge to retirement age). Who knows if I'll make it or not - depends on the stock market!
I think the whole downsizing thing with the current market incentives are a bit unrealistic. Most people don't want to leave their home where their kids grew up. Too many memories and they want to host everyone at Xmas. I live in a bungalow so I guess I'm set anyway!
It may be a good milestone, however I think less than 3 or 4% of us will ever achieve it.
good milestone for when you should be retiring
The thing is, the longer you wait to hit that "magical" number the less time you'll have in retirement and the longer you'll stay in work.
Cut your cloth to suit and you can stop work earlier.
Aha. Cool got there eventually*. NI indeed. Buy it's not just employee's NI that I save but also Employer's NI as my company is fin savvy and kindly chucks the 13.8% they don't need to pay on top
If NI of 2 + 13.8% (that's a great deal, MrsDoris' company just pockets the difference) is £650pm, you're kicking in over £50k a year to your pension and, yeah, that'd sting a bit. I understand the comment about violin size now!
I suspect that the 2k figure has been very carefully chosen so that they can - just about - say the average earner won't be affected...
So rather than just downsize how about moving to a nice place where ageing will be less of a problem. I thought about my own place and it ticks a lot of those boxes, easy access, no stairs, bus stop under 100m away, good local services, don't need a car.
I've just moved my father into a place with 1 or 2 bed flats, built around communal garden, a cafeteria that sells hot meals 5 lunchtimes a week, a lounge area where all sorts of clubs (singing, knitting, gardening, walking, photography etc) meet most days. There's a bike shed, a garden budget, a community council etc. It's 'semi sheltered' in that it has warden 9-5 Monday - Friday, plus cook and caretaker/handy person. It's an absolute delight of a place and has made my father realise how lonely he has been recently, and how choosing a few healthy hot meals a week can really help his health. Shops and buses are on the doorstep, so his car is being given away in December.
Sounds expensive, but all things relative is cheaper than running a big house and way, way more suitable for most folk. It's a huge lifestyle 'win'. He's chosen to sell up and rent, but most are owned and pay fees.
The important thing is it's run by a charity - not a MacArthur and Stone profiteering situation..
No you won’t be! The only difference is that with a sal sac scheme it’s taken off your gross salary so you obviously don’t pay any tax on it. If the contributions are instead deducted from your net pay, 20% tax relief is added back by the gov’t and then higher rate tax relief claimed back through your tax code. End result exactly the same from a tax point of view.
Apologies but could someone explain the 20% tax relief part? Is this something I need to claim or is it automatically paid/allocated\allowed for in tax code? I’ve recently increased my pension contributions via salary sacrifice. I know this saves me tax and NI as contributions taken off taxable salary, but not sure about any additional relief?
I ought to be looking for that kind of thing for my mother, Matt, but I think she'd resist. If they have anything in the Midlands or South West I'd appreciate the name of the charity.
If your contributions are by salary sacrifice you are getting full relief against your marginal tax rate (and NI) There's no further relief.
If the contributions are from net, then you need to claim the relief. I can't remember if there's a sliding scale or if it's flat rate (I think the latter).
Sam is correct, but this may help make it clearer:
Apologies but could someone explain the 20% tax relief part? Is this something I need to claim or is it automatically paid/allocated\allowed for in tax code? I’ve recently increased my pension contributions via salary sacrifice. I know this saves me tax and NI as contributions taken off taxable salary,
The bits in bold are one and the same thing. < Edit, they only show bold when editing. PoSF>
but not sure about any additional relief?
If you're a basic rate tax payer there is no additional relief.
Basic rate tax relief is added on automatically to any pension you pay into other than Sal Sac where you haven’t actually paid any tax.
If you’re a higher rate taxpayer you need to inform HMRC of your monthly pension payments (with proof) and then the higher rate tax relief is claimed back via your tax code. Or you can do it in your tax return if you want but you get it back quicker via your tax code - which effectively means you extend the amount of money you pay 20% tax on.
I won’t be a happy bunny if R Reeves gets rid of this…!
I ought to be looking for that kind of thing for my mother, Matt, but I think she'd resist. If they have anything in the Midlands or South West I'd appreciate the name of the charity.
Potentially something we would consider, depending on how MrsMC disability progresses. Would maybe have been a better option for my parents, although they were very active until Covid.
In-laws went the McCarthy & Stone route - the flats were silly cheap as the service charges were so steep.
The thing is, the longer you wait to hit that "magical" number the less time you'll have in retirement and the longer you'll stay in work.
I meant more that it's a milestone that makes it a no brainer for most - if i got to 1m i'd need a really compelling reason not to be jacking it in! Obviously you can retire on a lot less!
I met with an IFA last week to go through my pension and look at options for topping up etc. His looked at my pension, asked about my wifes pension and then said that my best option for a decent, early, retirement is to ensure that I never split up with my wife.
*heads off to check latest advice on menopause thread........
Basic rate tax relief is added on automatically to any pension you pay into other than Sal Sac where you haven’t actually paid any tax.
If you’re a higher rate taxpayer you need to inform HMRC of your monthly pension payments (with proof) and then the higher rate tax relief is claimed back via your tax code. Or you can do it in your tax return if you want but you get it back quicker via your tax code - which effectively means you extend the amount of money you pay 20% tax on.
I won’t be a happy bunny if R Reeves gets rid of this…!
Sorry, I'm being really thick on this! I'm contributing via salary sacrifice so that means I'm not paying tax on it. But I am, a higher rate tax payer. Does this mean I can get additional tax relief or does it mean I'm still saving the 40% tax anyhow as just not paying it?
(Maybe I should see an IFA before actually retiring!).
I'm still saving the 40% tax anyhow as just not paying it?
This, if you are doing it through salary sacrifice payroll and tax coded on PAYE it’s all sorted out between employer and HMRC.
If you’re a higher rate taxpayer you’re already saving it by doing Sal Sac so there’s no more tax relief - you didn’t pay any!
No point worrying about how much money you won't have if you get ill before you retire. I've seen it happen too often.
asked about my wifes pension and then said that my best option for a decent, early, retirement is to ensure that I never split up with my wife.
Very much this, a mate has just downsized from £1.2M house to £400k house, the £800k balance all goes to his ex but he does get to keep all his pension pot instead.
I'm still saving the 40% tax anyhow as just not paying it?
This
It's a milestone at which you absolutely should walk out the door without a second thought unless you have a serious yacht addiction (or "work = life" identity crisis). The vast majority cope just fine with much much less.
And yeah there's room for some quibbling over whether we're talking a million in total assets including house, versus a million invested on top of the mortgage-free house, and also per couple or per person. But even a million between two, with a house as part of it, is loadsamoney. No pockets in a shroud.
Has anyone actually put a finger on a value yet? I mean an annual income rather than a pension pot value? I'd be interested to hear what people are living off and the lifestyle it affords them. Although I expect this may be a bit too personal for a lot of folk.
But even a million between two, with a house as part of it, is loadsamoney. No pockets in a shroud.
Not much left to live on if the house is worth £1m on its own though and plenty round this way are heading that way. With my 3 sons & 4+ grandchildren settled nearby I've no plans to move away from the leafy south anymore.
Edit - Probably got about £1.3 to £1.4M in assets between us but with 5 kids that we want to see get as good as possible start in life, I am not planning to retire fully until 70
We already know we could live on one income of £25 to £30k quite easily.
And yeah there's room for some quibbling over whether we're talking a million in total assets including house, versus a million invested on top of the mortgage-free house, and also per couple or per person. But even a million between two, with a house as part of it, is loadsamoney.
I think the distinction between them is more important than a " quibble". A mill each plus house could be ten times as much disposable income as a mill joint including house. And though the latter is indeed a chunk of cash the reality is that people in that category with 800k houses ain't going to be retiring soon ( little violins at the ready again)
< Edit: Dickyboy +1>
Has anyone actually put a finger on a value yet? I mean an annual income rather than a pension pot value? I'd be interested to hear what people are living off and the lifestyle it affords them. Although I expect this may be a bit too personal for a lot of folk.
I was targeting between £36 and £48k per annum. But no idea if that would be realistic
Unless your pot is 7 figures then maybe just live of the returns but the majority of us will be tapping into an ever reducing pot.
If you have a low 7 figure pot then living off the returns alone might be tricky without a big change in lifestyle.
If you have a low 7 figure pot then living off the returns alone might be tricky without a big change in lifestyle.
Returns of £40-£50k plus state pension of £12k so £50-60K is tricky to live on? I wonder how 95% of the population manage.
I was targeting between £36 and £48k per annum. But no idea if that would be realistic
We are looking at a combined £55k per annum on retiral at 67 including both OAPs and index linked occupational pension. No mortage.
On top of that a few ££ in an ISA and around £35k in a pension pot. Under current rules though, barring emergencies, the £35 and any growth will be untouched I would be paying 42% tax on any withdrawals as I anticipate just hitting the Scottish higher rate ban with my OAP and occupationals. So currently it is there as a pot of cash/investment for Mrs IRC should I snuff it first.
I am not retiring early as per thread title as I enjoy low stress my part time job which gives me ample time for hobbies and allows us to run two cars and two dogs. I could afford to retired now rather than in 2 years but I like a bit of part time work and extra cash.
Has anyone actually put a finger on a value yet? I mean an annual income rather than a pension pot value?
As TJ has demonstrated, assuming you are mortgage and debt-free, you can get by on not very much for everyday costs if you have a decent pot of savings to use for large capital items - cars (not in TJ's case, obvs), big holidays, daughter's weddings, roof repairs, Pinarellos, Santa Cruzs.
<edit> Sorry, I didn't really answer the question. Everyone's idea of 'not very much' is different, but mine is about £25k. </edit>
I was targeting between £36 and £48k per annum. But no idea if that would be realistic
What sort of lifestyle do you want and what are you spending at the moment? FWIW last year I spent around 28k which included a new bike (frame fork and wheels, rest I already had) and a few breaks including a VERY posh biking holiday. But I don't have any debt on cars or property, and live a relatively simple life without boozing and meals out.
I’m working on basis of withdrawals from savings, and then pension, of around £3.5k to £4k a month. That’s with wife still working, part time, so maybe another £1200 on top of that.
We have no debt, or mortgage, but are running 2 newish cars (fully paid for) and 2 young adults in a 4 bedroom house who help us spend a lot on food and other consumables.
I think if/when the boys move out we will be close to £1k a month less in outgoings on average, which may tie in with wife retiring. She will have a small NHS pension and old DC fund that can be accessed at that stage, but only maybe £1k a month total very max.
I am looking for some interesting part time consultancy type work for a few days a month, which could reduce drawdown by maybe £1k which would good as my pot is no where near that £1M number and no longer growing through contributions. I am hoping to no need to touch it for 2 years from now so maybe a moderate bit of growth to come, but who knows !
I'm assuming I need at least 40-45k for the two of us I guess. My wife will have a teachers pension of some amount (not sure how much since she went part time when we had kids and the teachers pension scheme seems a bit impenetrable - i would guess 10k pa). Then we should both get full state pensions but not until 68. Assuming that i'm not paying the mortgage anymore, that should be fine I think. This is all in todays money.
This is where my million number comes from - if you have that and draw down at 4% that seems entirely doable, whilst at the same time being able to gift some of the principal to the kids at the appropriate point to let them buy a house and/or pay for uni etc.
Hard to know tho, when I put the numbers in to various models it'll normally say that's fine, but they assume a constant withdrawal rather than front loading until state pension kicks in. Hard to model for the impacts of say a significant downturn as well. I'm assuming i'll keep the money in equities rather than move into cash. I'm sort of in the process of coding a modelling tool for all of this, if i ever finish it I'll share it on here.
When we cork it, kids get the house + whatever is left over after taxes from the principal. If I manage to make it to 80, I expect we'll start aggressively gifting if it's still allowed to reduce IHT as my body feels pretty ****ed up in my 40s, and i can't see me lasting much beyond 80.
All seems very hypothetical tho I must admit and somewhat stressful! Who knows what could happen. In some (optimistic) models I could retire at 55 assuming no stock market crash for the next 10 years (which seems unlikely).
The 4% model is based on the overall pot not really being eroded. We have been pragmatic with a higher %, more like 6% or 7%, with the proviso that there will likely be a moderate inheritance boost in 3-6 yrs, but no guarantee, and also provision to release a bit from the house in 15yrs, at age 75. Also basing on taking a higher % for the first 5 yrs of accessing pension, until state pension kicks in, and then a reduced drawdown.
we will not want/need as much money at aged 75 and beyond than we do currently at aged nearly 60/55. We would like to leave our house to our kids, but not planning on a pot as well. However, no one knows what life will bring or for how long, so can only plan to an extent.