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The £100-£120 a week I reckoned above doesn't include booze, as my wife is the only one who likes a red wine in our house, and she generally buys that separately. Although shes been off the plonk for about the last 3 weeks or so anyway. It does include fruit juices and occasional fizzy water etc, but also includes some of the dog's food too, thinking about it.
Two of us, average of £242 per month last year, both non drinkers.
Non eaters as well by the look of those numbers!
How the hell do you get by on £60 a week shopping?
Non eaters as well by the look of those numbers!
How the hell do you get by on £60 a week shopping?
Google says average UK is £250 to £420 for a couple, so not far from the bottom end.
Family of 4 adults in the house here, we are about £230 a week, excluding booze. That’s a big weekly delivery from Morrisons and some top ups from M&S typically.
Google says average UK is £250 to £420 for a couple
I'm intrigued if it really says that. If so then someone needs to explain to Google what the **** average actually means. 🙂
For 2 of us, average monthly food spend last year which includes booze (only me, light drinker) and some household supplies was £525 (£340 M&S, £125 Sainsburys, £60 local bakery).
Was just reading the cost of living thread and wondered how those in the early retirement space are feeling about the escalating cost of things, and the impacts that the geopolitical situation are having in reducing most SIPP pensions pots at an alarming rate.
On the basis of working just 4 days a week and having 26 days + bank holidays, my wife pointed out that I actually work less than 50% of the year anyway - so I'm happy to keep working & earning* till I'm 70 which is when my wife reaches state retirement age. Seems a decent thing to do to keep the wolves at bay & hopefully boost my pension in the meantime.
* So long as they keep paying me
the impacts that the geopolitical situation are having in reducing most SIPP pensions pots at an alarming rate.
I'll answer this bit although I'm strictly not in your target demographic yet...
My investments look to be about 4 to 7.5% down overall from recent peaks. Which is probably where they were at two months ago or so, so nothing major yet.
OTOH I put this year's bonus entirely in my pension so at least I bought a chunk at lower cost.
( Caveat to concede that the current "dip" could well be a mere stepping stone on the way to a proper slide)
Was just reading the cost of living thread and wondered how those in the early retirement space are feeling about the escalating cost of things, and the impacts that the geopolitical situation are having in reducing most SIPP pensions pots at an alarming rate.
I haven't noticed any real change and I don't care anyway - despite my minimal income. I'm done with work and don't care if I am poor
Was just reading the cost of living thread and wondered how those in the early retirement space are feeling about the escalating cost of things, and the impacts that the geopolitical situation are having in reducing most SIPP pensions pots at an alarming rate.
Not too vexated tbh, petrol has obviously rocketed which impacts a little but we're not changing any plans as yet.
Was just reading the cost of living thread and wondered how those in the early retirement space are feeling about the escalating cost of things, and the impacts that the geopolitical situation are having in reducing most SIPP pensions pots at an alarming rate.
Not too vexated tbh, petrol has obviously rocketed which impacts a little but we're not changing any plans as yet.
Either way, it would help everyone who is commenting on how much money they have to live on or hope/need to live on, if they just used net figures. We can't avoid tax* and we don't all have they same circumstances so have different tax arrangements
*I'm assuming there's no billionaires living in the Caymans on STW
I've been working on my retirement plan this week, had a bit of a unpleasant change in circumstances recently meaning starting again at 45 🙁
Anyway, I've always had a loose plan to semi-retire at 60, take a part-time, low-stress job to keep me busy and out of the pub. That's no longer a possibility.
As it stands today, my mortgage will be cleared when I turn 68, my youngest will be 31 so I'll be free and clear there. I'll have a total annual income of £28,500 (two workplace pensions and state pension) which is £1946 per month after tax and £92k tax-free lump sum.
I'm not going to complain about that, my monthly costs today aside from Mortgage is £450 or so, not including food, so I'll have a modest but comfortable income and a big pile of money to use to keep myself entertained. If I get to the point I need my arse wiped for me I'll have to sell up, my Children will be taken care of financially regardless.
I really don't want to work until I'm 68 though, plus whilst all these figures should grow in line with inflation, I'm not confident that the next 22 years are going to be plain sailing. I'd like to increase my pension contributions by £500 a month within the next year or two which will allow me to semi-retire at 60 as long as the rules don't change too much.
To me, it seems a better bet to put money in the pension tax free, rather than lose 42% of it to tax and ni and then pay down the mortgage.
I'm now retired at 60 and my plan is to live off my isas until they run out and then switch over to my pension in my late 60's. I always assumed I would then take the 25% tax free lump sum and reinvest it in isa's and then draw down the pension year by year. But someone has suggested that I take £12.5k out of my pension every year from now because it is tax free as I have no other income. Does this mean I'm eating into the 25% tax free lump sum? It seems like a better suggestion because it's 12.5K which is below the yearly isa limit - I wouldn't know how to reinvest 25% of my pension because is exceeds the £20K isa limit. Thanks
To me, it seems a better bet to put money in the pension tax free, rather than lose 42% of it to tax and ni and then pay down the mortgage.
Probably. Especially if you'll take it all out at the other end at the 20% tax band.
I'm now retired at 60 and my plan is to live off my isas until they run out and then switch over to my pension in my late 60's. I always assumed I would then take the 25% tax free lump sum and reinvest it in isa's and then draw down the pension year by year. But someone has suggested that I take £12.5k out of my pension every year from now because it is tax free as I have no other income. Does this mean I'm eating into the 25% tax free lump sum? It seems like a better suggestion because it's 12.5K which is below the yearly isa limit - I wouldn't know how to reinvest 25% of my pension because is exceeds the £20K isa limit. Thanks
Currently if you take 25% tax free with each payment rather than a lump sum you can get "paid" £16760 per year without paying tax.
With Pension rule changes coming next year I understand most people are being advised to run the pension down before ISAs.
I'm not pensions advisor... but am going through the throes of doing.my sums and looking to retire early.
In terms of taking the £12.5k per year.
I think you *can* do something like that, BUT BUT BUT you have to be careful how you take it, so as to not lose the right to the 25% tax free.
I've been looking at my DC pot to use to bridge til I'm 67. As I understand it, I can take it in 1 of a few ways.
- take *up to* the 25% tax free lump sum at the start. Then the remainder as and when I want but taxed (so the first 12.5k PA is tax free. But remember if tou don't take the 25% tax free at the start, that's it, no second chances for the tax free part
- what's called 'partial encashment'. You take a segment of your total pension pot and for that segment, have it 25% tax free and the remainder taxed as per the normal. So that could allow you to take £16,666 out a year without paying any tax (25% tax free lump sum ie £4166, then the £12,500 taxed - but not really taxed as you have the £12500 annual untaxed allowance. The remainder of the pension hasn't been taken so continues to rise (or fall). Repeat each year.
- turn it to an annuity.
- leave it be for now. Not take anything.
Some pension schemes don't enable all of the possibilities, and you have to move your £££ pot to one that does. Eg my workplace one with Scottish Widows allows the 1st but not the 2nd option unless I move the pot to a different account.
What I believe you cannot do is start taking the taxable part of your pension now and leave the 25% lump to later.
This tries to explain it. Particularly see the 2 charts
Thanks robertajobb, this has completely upended my plans and geeky spreadsheet - I think in a good way!
Claudie
I've read your post a few times and still don't quite understand it, nor the one that follows. But the key thing I'd say is make sure you use your zero rate tax band allowance every year. Ie don't just use ISA income or tax free pot income in any particular year. Otherwise you'll pay more income tax later on.
I think you've got that sussed in your post but am writing it here just to be sure.
Thanks thegeneralist - I didn't have that sussed and have not been using my zero rate tax band for the last few years that I have been retired. So thank you for clarifying it. Still a bit confused about the 25% tax free lump sum vs. how long Im allowed to take £16,666 / year ...
Claudie,
You have 7 years until your state pension kicks in - so seven years of nil rate band you can use up (maybe six because you've almost certainly left it too late for this tax year). You really should be doing this.
Via UFLPS or Fexible access drawdown you can take 16,760 per year from your pension each year without paying any tax. 25% tax free and 75% taxable at zero percent. That's if you have no other taxable income obviously. When your state pension kicks in then it will use up your nil rate band all by itself so you will start to pay tax then.
Everything left in the pot continues to grow tax free and you'll still be entitled to 25% of it tax free (there is a limit but probably irrelevant here). Whether you take it all at once or continue with UFPLS/FAD is a decision you can make at the time.
Robertajob,
I think you *can* do something like that, BUT BUT BUT you have to be careful how you take it, so as to not lose the right to the 25% tax free.
.......
But remember if tou don't take the 25% tax free at the start, that's it, no second chances for the tax free part
I don't think this is right. Or I'm not understanding your point. It's not possible to take taxable income without taking a pension commencement lump sum
Robertajob,
I think you *can* do something like that, BUT BUT BUT you have to be careful how you take it, so as to not lose the right to the 25% tax free.
.......
But remember if tou don't take the 25% tax free at the start, that's it, no second chances for the tax free partI don't think this is right. Or I'm not understanding your point. It's not possible to take taxable income without taking a pension commencement lump sum
It is with UFPLS
No it isn't.
You *must* take a tax free lump sum as part of every UFPLS payment
I don't think this is right. Or I'm not understanding your point. It's not possible to take taxable income without taking a pension commencement lump sumI don't think this is right. Or I'm not understanding your point. It's not possible to take taxable income without taking a pension commencement lump sum
UFPLS isn't PCLS. It does trigger MPAA though. There is a taxable element in UFPLS as well as a tax free element so the statement above about not being able to take taxable income without triggering PCLS is incorrect.
It's possible to start with UFPLS, perhaps to bridge the gap to SPA, and take your PCLS later when the state pension is using up your annual allowance.
You have 7 years until your state pension kicks in - so seven years of nil rate band you can use up (maybe six because you've almost certainly left it too late for this tax year). You really should be doing this.
Via UFLPS or Fexible access drawdown you can take 16,760 per year from your pension each year without paying any tax. 25% tax free and 75% taxable at zero percent. That's if you have no other taxable income obviously. When your state pension kicks in then it will use up your nil rate band all by itself so you will start to pay tax then.
Everything left in the pot continues to grow tax free and you'll still be entitled to 25% of it tax free (there is a limit but probably irrelevant here). Whether you take it all at once or continue with UFPLS/FAD is a decision you can make at the time.
Totally agree with almost all of this.
I'd be tempted to contact your pension people and see if you can take a chunk ( Ie £16k) out before the end of the tax year. ( Donald could well be correct that it's too late, but worth a try)You can always chuck it in an ISA and then use it once your pension kicks in and you start to pay more tax
OK. Let me rephrase that.
It's not possible to take taxable income without taking 25% tax free at the same time.
That's a lot of acronyms, I need to do more research! Thanks again all
Rather than starting a new thread i thought id ask my question here
So my current employer's private pension scheme is a salary sacrifice scheme but when we log in to check/adjust the percentage of the contribution we make we noticed that we can change the scheme from salary sacrifice to a net pay one
One of the more switched on people in the company said if we do this then we would pay less in personally as its done from net pay but the government would pay 20% in which would mean we would have more net pay each month but still have the same amount of money going into our pension pot each month
The majority of us are 20% tax rate payers, we were also told as we have been paying into a salary sacrifice scheme for more than 5 years if we change to a net pay scheme we can claim back 4 years worth of the 20% tax relief the government give
Can anyone confirm if any of this is true?
You won't be able to claim relief back on the 20% tax you've never paid. So that's not right.
You also will pay tax on the net pay you recieve, so you won't have more in your pay packet either. If you then pay some or all of that net pay into your pension the government willy the relief to that but it'll still be in your pension pot.
The main purpose of salary sacrifice is to reduce the employers NI contribution with no net loss to you. There might be a difference in loose change in your net pay but probably slightly worse you'd pay NI on it.
It sounds like unmitigated bollocks from start to finish, but perhaps that's just because I didn't understand it.
One of the more switched on people in the company said if we do this then we would pay less in personally as its done from net pay but the government would pay 20% in which would mean we would have more net pay each month but still have the same amount of money going into our pension pot each month
You’ll want to think this out. I believe you’d gain nothing. Salary sacrifice is usually the most efficient and painless way to contribute to pension schemes for employees.
as folks have already said, if you pay out of gross salary (salary sacrifice) this means you will not pay NI on the money paid into your pension scheme. The contribution will already include the 20% ‘extra’ because income tax has not been taken.
If you pay out of net salary, while HMRC credits your pension with 20% for the income tax paid you cannot get the NI back.
Paying in net income may also avoid the benefit of employer matching which some schemes do to degrees varying from adding in the unpaid NI to fractions or multiples of your contribution.
For the sake of simplicity I’ve ignored effects of the personal allowance.
edit. changing to net contributions now would not change previous gross contributions. you cannot claim tax relief for tax that was never paid.
Claudie - you can get the basic sipp too. You pay 2880 GBP and the government add 720 GBP. As a non tax payer you are still getting the uplift. Downside it costs c100gbp pa admin fee.
I have no qualifying income and after 3 years it's worth c15k. The reinvested divis compound tax free.
Cheers for the replies, i was a bit dubious when told we will be paying less without any downsides when switching to net contribution,
We can swap between salary sacrifice and net contribution with no effect on our employers contribution
Also we can make these changes to our pensions all year so a couple of people have said they are going to change to net contribution and then see next payday how much net pay they receive and how much is paid into their pension compared to the previous month
The reinvested divis compound tax free.
Not necessarily, as it's potentially taxable when you withdraw it.
The reinvested divis compound tax free.
Not necessarily, as it's taxable at your threshold rate when you withdraw it.
Not necessarily, as it's taxable at your threshold rate when you withdraw it.
Agreed. It did seem like an odd thing to say.
But the actual compounding bit, the year on year accumulation, is tax free.
Yes the tax free growth is within the sipp, once withdrawn it's taxable. The other adv is with frozen tax thresholds you can claim any high rate exposure on the 3k.
What’s the thinking on ISA’s for the new tax year ? I have a maxed out S&S one with RBS with about 40k in it. I will be able to put 20k to an ISA later on this year, and am not needing to withdraw from it for at least 12 months. Add to the RBS one ? Take out a 12 month promotional Cash one with approx 4.5% then move somewhere after a year ?, a fresh S&S one with another provider ? I’m not too concerned about risk in a S&S one as I can let it sit if things take a dive.
But the actual compounding bit, the year on year accumulation, is tax free.
This just seemed like a bit of a meaningless statement. The accumulation of the money is tax free until you want to access the accumulated money... Well yes, it is indeed.
Anyway. I digress
What’s the thinking on ISA’s for the new tax year
I just tend to go for the best one or two year fixed from a company that I may have heard of. ( CSB lately)
Some banks give better rates the more you have with them, eg RBS, but their rates were always bad/dire in the past so I transferred mine out.
Not planning on putting any more in S&S just now. If the markets do tank then I'll restart.
(Yiktitmrtttm)
Hargreaves Lansdowne podcasts were good in explaining what returns have been earned in shares, investment trusts and funds.
I m into investment trusts but their current valuations, even coming off c10%, still seem a bit high. Cty, city of London for eg, at today's price yields 4%. Merchants 5%. Cash ISA is 4.2 with no risk. Investment trusts do pay increasing divs so not a true comp.
So my current employer's private pension scheme is a salary sacrifice scheme but when we log in to check/adjust the percentage of the contribution we make we noticed that we can change the scheme from salary sacrifice to a net pay one
One of the more switched on people in the company said if we do this then we would pay less in personally as its done from net pay but the government would pay 20% in which would mean we would have more net pay each month but still have the same amount of money going into our pension pot each month
In salary sacrifice you don't pay Ni on your contributions and neither does you employer. This is better than a net pay one. You could ask your employer to add all or part of their Ni saving in but as it's how it's done they may be reluctant.
Essentially your are better off now.
Rule change in a few years means the Ni saving is only available on about £2k of sacrificed money.
But the actual compounding bit, the year on year accumulation, is tax free.
This just seemed like a bit of a meaningless statement. The accumulation of the money is tax free until you want to access the accumulated money... Well yes, it is indeed.
Because the statements above mine were disputing whether the compounding was tax free. The compounding bit is, it’s the accessing the overall pot which may or may not be taxable. If someone says the compounding is taxable it implies that there is some sort of annual drag on returns.
I would concur about finding an investment trust yielding 4% plus as a good idea for the next ISA if you are willing to lock the money away for an extended period; dividends should rise over time and after the set back in markets this might be a good opportunity to invest while sentiment is relatively low