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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.