Can we retire please? How much money do you really need need?

[Vipar]

I’m living the high life on top of my ladder

 

[gus-lopez]

Does being self employed reduce your eventual pension? My NI contributions are very small.

No

I see . It’s only the monthly ones I have noticed - only about £20 I think.

Yes , class 2 is the weekly/monthly amount & class 4's on year end profits

 

[Wh05apk]

Ive got a new tenants moving in next week, he earns £55k and she earns £25k but properties in this area are out of their reach, it’s all a bit grim for younger people.

Sorry but have to disagree with you on this, on that income (which is well above average) they should be able to get a mortgage of close to £400k, in most of the country something is possible at that level, I suspect the reason they cannot buy is more lifestyle, bin that they have not saved, spending big on holidays and the latest cars/phones etc.

 

[ElddisNotElvis]

Well that was an interesting & expensive experience - mostly in the art of patience.
But, hopefully, ultimately rewarding.
Called the Future Pensions Forecast Team as advised on this thread.

Confirmed the lower figure on forecast is what I'd get now with my NI record.
Confirmed that if I paid the past 4 years + this years NI [which has not yet been published, but he told me what it was!], my weekly pension would increase to very nearly the maximum, all bar £2.08

He said that I might wish to consider if paying the 2021/22 contribution [estimated at £850] would be worth it for an increase of £108.16 a year

His calculation for back payments matched mine.
All good.

But to make the payment, I had to call HMRC [ 0300 200 3500 ] and use the phrase "Spoken To Future Pensions" to their answerphone bot, otherwise I'd end up back where I started.

After a short wait, I spoke to a very nice lady, who agreed the figures, and the current year's. Both our totals matched so she generated some sort of payslip on my tax record which created a 18 digit reference number to ensure my payment was connected to my NI record.

Online banking - paid £3683.80
If all goes to plan, my state pension should increase by £1301 pa and I should start "winning" in less

Guys you need to check out personal marriage allowance to get your tax code sorted mine is 50M
Basically you get any unused wife’s tax allowance added to yours. Back dated for a couple of years. And you get a refund we got £945.00

You can only apply to transfer £1250 of spouses unused tax allowance to yourself?

Marriage Allowance

Marriage Allowance allows you to transfer some of your Personal Allowance to your husband, wife or civil partner: what you get and how to apply for free.

www.gov.uk

 

[MaidinDevon]

A financial advisor, suggested that it is better to put savings into a Stocks and Shares Isa, than a pension. I am very unlikely to hit the 40% band, so would get 20% tax relief.

I wondered, can you put savings into the pension, and then transfer into the ISA in April.
Thereby getting the tax relief, and then sheltering it from tax on profits later.

Karen

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[Minxy]

A financial advisor, suggested that it is better to put savings into a Stocks and Shares Isa, than a pension. I am very unlikely to hit the 40% band, so would get 20% tax relief.

I wondered, can you put savings into the pension, and then transfer into the ISA in April.
Thereby getting the tax relief, and then sheltering it from tax on profits later.

Karen

If you mean taking it out of the pension pot and putting it into an ISA (as in savings) if the amount is within the tax exempt amount when you take it out and within the £20,000 annual ISA allowance then you shouldn't pay tax on it in the future.

 

[Minxy]

Guys you need to check out personal marriage allowance to get your tax code sorted mine is 50M
Basically you get any unused wife’s tax allowance added to yours. Back dated for a couple of years. And you get a refund we got £945.00

You can only apply to transfer £1250 of spouses unused tax allowance to yourself?

Marriage Allowance

Marriage Allowance allows you to transfer some of your Personal Allowance to your husband, wife or civil partner: what you get and how to apply for free.

www.gov.uk

Your SPOUSE can apply to transfer it to you, you can't do it, so you need to keep your spouse in a good mood. Once done it cannot be removed until the next tax year though so you can go back to being your grumpy self-afterwards!

The actual tax due 'benefit' is £250 pa (ie £1,250 x 20%) so I assume Vipar had it backdate more than a couple of years to get what he has, eg from 2016/17 tax year or is in the higher tax bracket so might have got £500 pa.

 

[Vipar]

Yes it was back dated. It was introduced by Gordon Brown I think in 2016. I never knew anything about it until my sil told me about it. Evidently there are millions to be claimed still.

 

[Langtoftlad]

A financial advisor, suggested that it is better to put savings into a Stocks and Shares Isa, than a pension. I am very unlikely to hit the 40% band, so would get 20% tax relief.

Well there's a surprise - an FA will most likely get a commission on stocks & shares.

Contributions to a pension are tax free
Contributions to an ISA are from tax paid income.

Pensions are taxable, ISA's are tax free.
Pensions have controls on how you get your money out again, ISA's you can cash out anytime. so how is your self control & self discipline?
Pensions usually have an employer's contribution and they will pay the fees.
Think compound interest and this can be considerable.

When you withdraw an ISA, that lump sum has to last as long as you do.
When a Pension is payable, it lasts as long as you do.

It's not straightforward.
Both schemes have plusses & minuses.

 

[Fragle]

You can only apply to transfer £1250 of spouses unused tax allowance to yourself?

Marriage Allowance

Marriage Allowance allows you to transfer some of your Personal Allowance to your husband, wife or civil partner: what you get and how to apply for free.

www.gov.uk

More Excellent info Thanks

It took all of 5mins to apply

We sit back and await a nice cheque

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[Odd-no-more]

Does being self employed reduce your eventual pension? My NI contributions are very small.

Mrs. Ex is self employed and for the last couple of years has only worked 2 mornings a week as she cares for her dad, her low earnings means she need not pay NI, and she paid voluntary contributions, which still gave a full years NI.

 

[Odd-no-more]

The thing I am finding hard to get used to is the bank. After years and years of putting money into my bank and then into my pension, I find it difficult to take money out of the bank every month
For an obscure reason we have 2 bank accounts, the one my pay used to go into has all the direct debits but now has no money going in, my state pension is paid into my Nationwide account for the free travel insurance, so every month I have to put money into the other account. After years of watching the balance go up every month I can't get used to it going down.

 

[Deneb]

For an obscure reason we have 2 bank accounts, the one my pay used to go into has all the direct debits but now has no money going in, my state pension is paid into my Nationwide account for the free travel insurance, so every month I have to put money into the other account. After years of watching the balance go up every month I can't get used to it going down.

Only two? Everyone should have at least two bank accounts. If you use one as an everyday account, keep some emergency funds in the other, then if there are problems with internet banking, cards not being accepted at store terminals or ATMs etc. as happens from time to time, you have another option.

A few years ago, when banks were paying decent interest on current account balances, and each bank would let you have several accounts each, we had over 30 current accounts between us. Just sent £1K on a round robin between them all to meet the monthly deposit requirements and creamed off the interest. It paid me more per hourly rate spent on it than my salary. We're down to three accounts now, one we only keep because it's the only one of the three that allows cheques to be paid in by a phone app, otherwise it's a drive to the nearest branch to pay in DVLA refund cheques etc.

 

[The Wino]

A financial advisor, suggested that it is better to put savings into a Stocks and Shares Isa, than a pension. I am very unlikely to hit the 40% band, so would get 20% tax relief.

I wondered, can you put savings into the pension, and then transfer into the ISA in April.
Thereby getting the tax relief, and then sheltering it from tax on profits later.

Karen

No you can't. Once it's in a pension there are rules on how much of it you can access so it wouldn't really work. If you're over 55 you could withdraw 25%tax free and put it in an isa . It's something to just ask the adviser as it's not straightforward but sounds a lot of faff for not much return. I'm not sure how any withdrawls would affect the future pensions contributions limit I think as long as it's just the 25%its not a problem but if you touch the rest there is tax payable and future contributions are limited.
Between the two I suspect the pension is a better bet if you are unlikely to want to get the money out quickly as you are guaranteed the tax saving on the way in and if you draw it out later are unlikely to pay a lot of tax on it unless you have an occupational pension already.
If you go down the isa route or pension it's pretty easy to sort it out yourself although you will be able to see the advisers fees before deciding.
But what do I know I'm a dabbler not an expert.

 

[carolyn]

Only two? Everyone should have at least two bank accounts. If you use one as an everyday account, keep some emergency funds in the other, then if there are problems with internet banking, cards not being accepted at store terminals or ATMs etc. as happens from time to time, you have another option.

A few years ago, when banks were paying decent interest on current account balances, and each bank would let you have several accounts each, we had over 30 current accounts between us. Just sent £1K on a round robin between them all to meet the monthly deposit requirements and creamed off the interest. It paid me more per hourly rate spent on it than my salary. We're down to three accounts now, one we only keep because it's the only one of the three that allows cheques to be paid in by a phone app, otherwise it's a drive to the nearest branch to pay in DVLA refund cheques etc.

To think we were getting 3% on our Santander 321 accounts not so long ago, 0.3% now. I used to do like you. Great fun. Hardly worth the bother now.

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[Pablo19]

No you can't. Once it's in a pension there are rules on how much of it you can access so it wouldn't really work. If you're over 55 you could withdraw 25%tax free and put it in an isa . It's something to just ask the adviser as it's not straightforward but sounds a lot of faff for not much return. I'm not sure how any withdrawls would affect the future pensions contributions limit I think as long as it's just the 25%its not a problem but if you touch the rest there is tax payable and future contributions are limited.
Between the two I suspect the pension is a better bet if you are unlikely to want to get the money out quickly as you are guaranteed the tax saving on the way in and if you draw it out later are unlikely to pay a lot of tax on it unless you have an occupational pension already.
If you go down the isa route or pension it's pretty easy to sort it out yourself although you will be able to see the advisers fees before deciding.
But what do I know I'm a dabbler not an expert.

I tend to agree that it's hard to match the tax relief in a pension but obviously need to know you won't need to draw it out again. Also, once you have drawn out the 25% you can't do it again whereas if you hold off until later you get 25% of your presumably bigger pot.

FWIW I did stick some cash into 2 S&S ISAs, during the first lockdown after the slump and I'm currently just over 25% up on the investments. I suspect this won't be the case over the next 8 months though

 

[Otter Spotter]

Well there's a surprise - an FA will most likely get a commission on stocks & shares.

Contributions to a pension are tax free
Contributions to an ISA are from tax paid income.

Pensions are taxable, ISA's are tax free.
Pensions have controls on how you get your money out again, ISA's you can cash out anytime. so how is your self control & self discipline?
Pensions usually have an employer's contribution and they will pay the fees.
Think compound interest and this can be considerable.

When you withdraw an ISA, that lump sum has to last as long as you do.
When a Pension is payable, it lasts as long as you do.

It's not straightforward.
Both schemes have plusses & minuses.

WRONG Financial advisers cannot receive commission for arranging ISA, or Pensions. They have to charge a fee agreed in advance.
as regards ISA,s v Pensions they both have their pros and cons which if you want me to list I can do.

 

[dabhand]

A financial advisor, suggested that it is better to put savings into a Stocks and Shares Isa, than a pension. I am very unlikely to hit the 40% band, so would get 20% tax relief.

I wondered, can you put savings into the pension, and then transfer into the ISA in April.
Thereby getting the tax relief, and then sheltering it from tax on profits later.

Karen

That depends entirely on your age and how long your working life is going to continue as well as your personal financial circumstances, if you don’t need access to the money and you are a U.K. taxpayer, a £2000 refund of tax for every £10,000 of tax paid is a bit of a no brainer really, (it’s money that would be paid in tax anyway) put it in a pension. If you need the access put it (or at least the amount you may require in the short term) into a stocks and shares ISA and don’t forget the dealing costs involved.

Employee Personal Allowance	£12,500.00 per year £240 per week £1,042 per month
Basic tax rate	20% on annual earnings above the PAYE tax threshold and up to £37,500

so if you earn £30,000 a year and you put £5000 into a pension it would cost you £4000.

How much you actually pay into your pension: £4,000

Amount of basic-rate tax relief added: £1,000

Amount of higher-rate tax relief you can claim back: £0

The total amount of tax relief you earn: £1,000

The total cost of your pension contribution: £4,000

 

[ElddisNotElvis]

More Excellent info Thanks

It took all of 5mins to apply

We sit back and await a nice cheque

I’m glad that I’ve been able to pass on to others my research to improve my finances in retirement.

Also, besides not knowing about the allowance, as you will have found out, you can backdate the claim to 5th April 2016

 

[Otter Spotter]

Re State pension,
just an update
in 2016 forecast for me was £155.20 and £134.55 for Dee, both were contracted out at some time.
I am due to start receiving my pension April this year Dee Jan next year.
today received new figures
£182.14 and Dee £175.20 with no COPE deduction. I am happy with that, with my work settlement and drawdown We will be drawing more net income than we did when we were both working, so assuming we are still alive after lockdown ends we can go and empty our bucket list.

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[The Wino]

I tend to agree that it's hard to match the tax relief in a pension but obviously need to know you won't need to draw it out again. Also, once you have drawn out the 25% you can't do it again whereas if you hold off until later you get 25% of your presumably bigger pot.

FWIW I did stick some cash into 2 S&S ISAs, during the first lockdown after the slump and I'm currently just over 25% up on the investments. I suspect this won't be the case over the next 8 months though

But you could draw 25% of your pot put it in an isa and if it acheives the the same rate of growth take it tax free whenever you want unless you're already at the isa limit you can also take part of your 25% and the rest later.

 

[The Wino]

Re State pension,
just an update
in 2016 forecast for me was £155.20 and £134.55 for Dee, both were contracted out at some time.
I am due to start receiving my pension April this year Dee Jan next year.
today received new figures
£182.14 and Dee £175.20 with no COPE deduction. I am happy with that, with my work settlement and drawdown We will be drawing more net income than we did when we were both working, so assuming we are still alive after lockdown ends we can go and empty our bucket list.

I don't think we will be getting the same net income but were saving a fair chunk so if we decide to spend all we get in plus the capital would probably have way more spending power than we had before.
Its 5 years since we sold our business at the end of this year and our net worth is still a bit higher than then (we have done some part time work not much) but we're still 5 years off state pension age.
It's really hard changing your mindset.

 

[Fragle]

The thing I am finding hard to get used to is the bank. After years and years of putting money into my bank and then into my pension, I find it difficult to take money out of the bank every month
For an obscure reason we have 2 bank accounts, the one my pay used to go into has all the direct debits but now has no money going in, my state pension is paid into my Nationwide account for the free travel insurance, so every month I have to put money into the other account. After years of watching the balance go up every month I can't get used to it going down.

I think this will be my issue as well. habits of a lifetime hard to change. It's the same as making the decision to stop work. I've wanted to retire early for so long and now its upon us we are dithering a little covid is giving me an excuse with lockdown and winter once the better weather hits i'll put the notice in

I’m glad that I’ve been able to pass on to others my research to improve my finances in retirement.

Also, besides not knowing about the allowance, as you will have found out, you can backdate the claim to 5th April 2016

I've done that as well. Thanks for the info

 

[Odd-no-more]

I think this will be my issue as well. habits of a lifetime hard to change. It's the same as making the decision to stop work. I've wanted to retire early for so long and now its upon us we are dithering a little covid is giving me an excuse with lockdown and winter once the better weather hits i'll put the notice in

The only regret I have is, I went back to work last winter when my old firm asked me. Even with Covid I'm happy not working.

 

[Odd-no-more]

Does anyone know how the pension companies work out the tax? This is the first year I have drawn anything from my pension, I had the tax free 25% then the taxable amount, I wasn't sure how much tax they would take I thought it would be 20% or even 40% as they have no information about my tax situation. When I received the money they had taken about 13% and I don't know why. It doesn't matter on the long run, I will get all the tax back when I do my tax return on April. I'm just curious.

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[Nasher]

Does anyone know how the pension companies work out the tax? This is the first year I have drawn anything from my pension, I had the tax free 25% then the taxable amount, I wasn't sure how much tax they would take I thought it would be 20% or even 40% as they have no information about my tax situation. When I received the money they had taken about 13% and I don't know why. It doesn't matter on the long run, I will get all the tax back when I do my tax return on April. I'm just curious.

I'm assuming it's a draw down pension, if so they will normally take the standard rate, currently 20%

So, if you draw £100 you would receive £25 tax free and pay tax on £75 which would be £15 meaning you should receive £85 in total

It equals 15% of the total draw down (times the draw down amount by .85) to get the after tax figure

If you have a any unused personal allowance, a tax code can be assigned to your pension provider - otherwise, as you say, it will get sorted out post tax year end - you may also get a bill if you are a 40% tax payer!

 

[Otter Spotter]

Does anyone know how the pension companies work out the tax? This is the first year I have drawn anything from my pension, I had the tax free 25% then the taxable amount, I wasn't sure how much tax they would take I thought it would be 20% or even 40% as they have no information about my tax situation. When I received the money they had taken about 13% and I don't know why. It doesn't matter on the long run, I will get all the tax back when I do my tax return on April. I'm just curious.

Normally the pension company would set up the first monthly payment out to you and they would request a tax code to determine what tax to take, this could take tax office are slow 6 to 8 weeks after that the payments should settle and The correct code would be applied. Problem can arise if you have 2 or 3 different taxable incomes, say state pension and personal or occupational pensions, then you need to contact the tax office to make sure all are using the correct code with state pension not having tax deducted as it is assumed that is within your annual allowance Of £12,500.

 

[Otter Spotter]

I'm assuming it's a draw down pension, if so they will normally take the standard rate, currently 20%

So, if you draw £100 you would receive £25 tax free and pay tax on £75 which would be £15 meaning you should receive £85 in total

It equals 15% of the total draw down (times the draw down amount by .85) to get the after tax figure

If you have a any unused personal allowance, a tax code can be assigned to your pension provider - otherwise, as you say, it will get sorted out post tax year end - you may also get a bill if you are a 40% tax payer!

That’s assuming that the pensioner hasn’t taken the tax free cash as a lump sum before drawing regular taxable income. You are right if the6 haven’t.

 

[Odd-no-more]

Normally the pension company would set up the first monthly payment out to you and they would request a tax code to determine what tax to take, this could take tax office are slow 6 to 8 weeks after that the payments should settle and The correct code would be applied. Problem can arise if you have 2 or 3 different taxable incomes, say state pension and personal or occupational pensions, then you need to contact the tax office to make sure all are using the correct code with state pension not having tax deducted as it is assumed that is within your annual allowance Of £12,500.

I only take money once a year, at the moment I'm taking the difference between my state pension, the very little I earned this year, and my tax allowance. I expect to have all the tax refunded in April. It's just a strange amount that was taken, they sent me a pay slip with the amounts but no idea how they work it out. My intention is to draw the whole year's pension on one go so I can take the minimum I need so I can minimise my tax liability. I am keeping reserves not in the pension to cover living expenses. Where it may be more unpredictable, is large items like a car etc.

 

[Robert Clark]

Does being self employed reduce your eventual pension? My NI contributions are very small.

Should a senior partner in a successful law firm concern himself with the state pension?

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