UK/European TashMasters

[tummyrubbingjesus]

Hi all,

The blog and forum posts here are definitely inspiring. Some of the people who have managed to save for early retirement and the advances in their personal wealth have really been quite remarkable. I've been looking into investing for a good number of months now and so bought a house (eventually to rent out) and started developing some other revenue streams. All in all though i really felt quite underwhelmed by the idea of investment in index funds etc.  Reading some of the posts here on the blog and forum however have inspired me to start up my own fund and hopefully tap into the growing US/European markets.

Having saved a lot of money, i realise that it'd have been better spent held in a fund and so i took the leap.

I am however quite interested in people on this forum and part of this community who are UK or Europe based. A lot of the advice, while applicable all over the world has very specific details that are associated with living in North America. Some of the investment companies (fidelity, betterment) only really offer US residents options and some of the deals really only apply over there.

So this thread is for the UK/European Tash-hacks that people are aware of and providing advice along these lines to help make the Moustache community a more global entity.


TRJ

[force majeure]

There a few of us UK / Europe-based Mustachians lurking on here.
It is harder than in the US, but it is possible to go the ERE / MMM route, if you are determined, can get your savings rate up to a meaningful %, and asset allocation is a whole other afternoon's research. If you are UK-based, you have tax advantages on dividend income, advantages of an ISA umbrella, but are limited by selection of GBP quoted ETFs, you are going to need to go global as well.

Suffice to say, the balanced multi-fund / ETF strategy, low cost, is the way to go. If you can shovel enough into such funds, the performance against broad market indexes, bond and equity, should not bother you. Again, the savings rate is the key to achieving FI.

[ThatEnglishGuy]

Hey :)

I'm from the UK... England to be specific! Currently in my first year at university, however, so I don't have too much to add. Just wanted to work on increasing my net worth etc... from a relatively young age :)

[Two9A]

Yep, same same. I'm in England, starting from a low base (£250k of mortgage debt at its worst, a few years ago), and slowly clambering out of the hole. The MMM philosophy is definitely helping, as is working two jobs ;)

The tax advantages in the UK are better than the US, if anything: £17k-or-so in an ISA per year, £50k in a SIPP, probably lots of allowances and accounts I don't know about. There's no chance of me hitting both those limits any time soon.

[NearlyThere]

You need to read monevator.com thoroughly. These guys are the most knowledgeable bunch in all of the UK when it comes to investing like a mustachian. My blog covers some of the basics, but monevator is where I've learnt everything.

Investment companies:

Hargreaves Lansdown
Youinvest
TD Direct Investing
X-O

Investment Types
Anything in the Vanguard Lifestrategy range depending on your risk tolerances.

[Playing with Fire UK]

Also from the UK, also love Monevator.

My only 'hack' at the moment is funnelling any pay over the higher rate tax band into a pension because I think the tax relief is going to get worse.

I'd also advise my former self to go sooner into a fixed fee platform rather than a percentage platform - it's building up more quickly than I thought it would - which is great, but means I'll soon be better off moving it over.

Shout out for the Getting Fired blog - some good insights from MFP and Simple Living in Suffolk is very funny in a British way.

[NearlyThere]

Completely agree that pensions will change for the worse and as soon as next year I imagine. Definitely worth putting this years investments in there.

Cheers for the props PwF. Blogging is a terribly lonely process until the blog is established.

[Bloodbuzz]

Hi! - im a fellow UK mustache newbie too, yay.

I have a question I was hoping someone could help me with:

I've opened a Stocks and Shares ISA with IWeb and I am able to save enough to fill the allowance each year and I will be investing in Vanguard lifestrategy 100%, aiming to retire early around age 45 give or take a few years.

I will have a bit of extra savings each year once I have filled the ISA allowance - so what should I do with this money? - id like to invest it so I can maximise the amount I have for early retirement.

Should I just put it in the share dealing account that IWeb opened when I opened the IWeb ISA? and invest in more index tracking funds? - this will be heavily taxed however - does anyone know how much this would be taxed roughly?.
I could open a SIPP account - but i understand I won't be able to access this until im 55? (10 years after when I plan to retire)

Or I could save up for a house deposit (say for a 1 or 2 bed flat) as im currently renting - to live in and also as an investment - if I am lucky enough to pick the right area and house prices rise (but this seems a bit of a gamble to me). 

Any ideas would be greatly appreciated!

TLDR: what is the best way to invest savings after maxing the Stocks and Shares ISA allowance?

[Playing with Fire UK]

Hey Bloodbuzz.

In a taxable account, the first £11k of capital gains that you realise per year are free (you can do things to take advantage of this over multiple years). From April 2016 the first £5k of dividends per year are tax free. Tax on funds based outside the UK is different, you might get taxed twice, or might have to claim tax back, IDK because I stay away from this. 

What is the status of your pension? If you don't have enough to see you through from 55 (maybe say 65 after the legislation changes five times before then) to forever/death, then saving in a SIPP is massively tax efficient (especially if you pay higher rate tax right now, if not then maybe wait until after the budget).  [Ignore articles about getting access to it early, they are either american or scams]

I plan to use ISAs etc to get me to 58, and then my SIPP after that. Check out the Financial Zombie article (how stable is your bridge?) for a great recent article on this. There is a balance in how much you want to run down the ISAs.

[Bloodbuzz]

Thanks Playing with Fire UK,

So for example, investing in a FTSE Index tracker through the share dealing account could be a good option for me.

I have a good work pension match but im not sure what my total is - it would be pretty small right now as I haven't been working since uni for too long yet. I'm going to pin down the numbers and get some free pension advice through my company in April when i'm able to review everything. I agree with you that I expect the legislation will keep changing to make it harder to access though. I like your ISA and SIPP plan so im going to look more into this.

Ok im going to sit down in April once I get all my pension info and work out all the numbers and put together a few rough strategies: £X% to fill ISA allowance first, then £X% for SIPP, £X% for UK Index tracking fund (for example).

I'll check out the Financial Zombie article, I hadn't heard of this blog yet so im going to go away and read all the posts - i've already been enjoying the Simple Living in Suffolk blog and ill check out the Getting Fired blog too.

[NearlyThere]

Hey Bloodbuzz, I'd consider sitting down and looking at your company pension / sipp before April. Changes are most definitely afoot with the government and the chances are they'll remove most of the tax savings within the next twelve months.

Personally I'm reviewing my own situation in Feb/March and deciding how much I can afford to put in to my SIPP. What's the worst that could happen? You end up putting more money into your retirement accounts. No brainer at this stage.

[FI-42]

Bear in mind all that early pension age will change from 55 to 57 by 2028.  This is going to affect everyone born after 1973.

From my perspective I can see 2 strategies for early retirement depending on how old you are and what your income is.   MMM style (saving from 20 and retire at 30) or (as in my case as I'm still very new to this) start at 35, put all earnings in the 40% tax bracket into retirement fund and save up enough to tide you over until 57.  The recent changes in the pension schemes meaning that you don't have to buy an annuity are a god send for people like us - 25% back tax free on the day you retire and then you can draw it down.

If your in my boat (age 35) I would recommend that you do a spreadsheet so that you can understand whether taking home taxed income (at whatever rate it may be) will make enough return by the time you retire or whether it's best to add into your pension and let it accrue there.  I believe the higher tax rate is actually 42% when also include for NI.

Please please feel free to correct me if I'm wrong.

I would also recommend 'Your money or your life' by Alvin Hall, from your local library of course.  https://youtu.be/YI7wo10XOGY

[Playing with Fire UK]

It's 42% if you can pay in to the pension via Salary Sacrifice. Mine is 40% because I pay into a SIPP due to cheaper funds and not trusting my company to not do something stupid. Some employers even pass on some of the employer NI contributions.

Drawdown is awesome, spreadsheets are awesome.

I wouldn't put off planning until you can get the free pension advice/review. I've had this in the past and found that it wasn't all that useful - it was basically a reworked ' no-one saves enough for retirement,  half your age% to retire on two-thirds of your income - (nothing about spending), and would you like to pay more for a whole host of other unhelpful services? '.

If you're only a few years out of uni, don't worry about how much is in your pot now, work out what % income you'll save and for how many years, compare that to your 25x amount assuming reasonable growth, and then figure out how much more you want in the pension pot to make up for the fact that you won't be adding to it after FIRE.

If you do go down the SIPP route, let HMRC know asap. That way you can get the tax back now, and pop that into the SIPP this tax year with extra relief, rather than wait months for a cheque (mine took until August, and I could have really used the money earlier). This year my tax code has been adjusted so I get the tax relief up front, and just need to make sure I put the right amount into the SIPP (much better cash flow).

[FI-42]

I didn't realise it was 42% because of the salary sacrifice.  Useful to know.  I just started doing that last month.

The getting fired blog is quite good.  Maybe we should start writing more on the subject.  There are a lot of knowledge gaps on-line - for example company car optimisation.

[cerat0n1a]

I wouldn't put off planning until you can get the free pension advice/review. I've had this in the past and found that it wasn't all that useful - it was basically a reworked ' no-one saves enough for retirement,  half your age% to retire on two-thirds of your income - (nothing about spending), and would you like to pay more for a whole host of other unhelpful services? '.

I think when ever you see the word "advisor" in relation to financial services, it's usually best to substitute the word "salesperson" in your head. I did once get some useful and helpful advice from the pensions/tax lady at work (along the lines of phone up the inland revenue and say the following words to them), but in general, if you're seeing someone from a bank etc. they are there to sell you something. Surprised we don't have double glazing or conservatory "advisors" these days.

The difficulty with balancing ISAs (to support you up to pension age) and pensions (to live happily ever after) is that the rules seem to change annually, so you can't 100% optimise it. I'm probably going to get caught in the bizarre 62% tax zone this year, so will be putting rather more into pension this time round.

[Ogriv]

It's great to find you guys.

I'm pretty new to all this. Am 42 years old and based in London. I have a company pension which I need to learn more about.

I also heard recently about the Pensions Tracing Service, which can help you get hold of pensions from previous jobs.

I have only just become debt free. First of all I am building up a small emergency fund in an instant access cash ISA.

As I only really have a few years left of being eligible for a mortgage, I am thinking of maximising earnings/savings during the next couple of years here in London, and then relocating to a much cheaper part of the country. My state retirement age is 67, so I would be able to perhaps get a 20-year mortgage. Therefore it's important to me, after the emergency fund to build a home deposit. A help to buy ISA is no good as a long time ago for a brief period I was a home owner, so I would not be eligible.

After creating a house deposit, or possibly simultaneously if I can maximise my earnings, I will use some kind of index tracking ISA.

I notice that you guys know a lot more jargon than me. As I say, I'm new to this stuff and haven't always made the best life choices, but now am fully committed to Mustachianism.

Any UK-orientated ideas and advice are very useful.

[NearlyThere]

Hey Ogriv - firstly great work on making the first step - getting debt free.

Max out your pension and max out your ISAs, in that order in the first instance. You may find you are limited with your company pensions and so might be an opportunity to open a SIPP also.

When considering your investments, you can't go wrong with the Vanguard Lifestrategy. They offer a range of trackers that differ in their % attributed to bonds. I exclusively buy Vanguard Lifestrategy 100 which has 0% bonds in it, but this is considered a highly volatile fund.

If you have any questions, just ask.

[Don Jean]

Like the ladies and gentlemen in this post, I am based in the United Kingdom. You can further segment my status because I am also a US citizen. I have not yet arrived to a comfortable understanding of the best course of action given the options available to someone in my position but this forum has definitely been a good starting point.

Is there a London or European city meetup?

Any other "expats" out there?

[Ogriv]

Hey Facepunch that is really helpful - it has confirmed the little information I felt I already knew.

I echo the idea of a Meetup - but I don't know where we're all based.

[JrDoctor]

Hi, 25 year old from the UK, currently based in the north east.  I can only highly advocate the north east for retirement planning.  Given the stagnation of doctors wages, if you want to get retired early as a doctor, here is one of the easier places, as wages are set nationally but living is cheap here.

I often think, one person with a house paid off, could happily get by on £10,000 a year.  Would allow for holidays and mustachian hobbies with ease.

[Friar]

Another Brit here.

Does anyone know the benefits/differences between buying an ETF and buying a fund? As I understand it ETFs are bought and sold like shares but that's about the extent of my understanding.

Are ETFs better than funds? Are funds better than ETFs?

[Playing with Fire UK]

Hey Friar,

Neither is always better.

Check the charges on your platform (some charge holding/buying for one and not the other).
Check the bid-offer spread, and sale volumes on ETFs.
Check the charges on funds.

And then check out http://monevator.com/etfs-vs-index-funds-differences/

[Bloodbuzz]

Hey all - quick dumb question - If I worked abroad for a year - say teaching English in Korea - and I sent home some of my earnings to my UK bank account whilst i'm in Korea - could I transfer these savings into an ISA once i'm back in the UK?
I know that I can't put this money into a UK ISA whilst i'm in Korea - but what about that money once im back and a UK resident again? Or would the money be 'void' because it was not earned whilst a UK tax resident?
Thanks!

[connor]

Hey all - quick dumb question - If I worked abroad for a year - say teaching English in Korea - and I sent home some of my earnings to my UK bank account whilst i'm in Korea - could I transfer these savings into an ISA once i'm back in the UK?
I know that I can't put this money into a UK ISA whilst i'm in Korea - but what about that money once im back and a UK resident again? Or would the money be 'void' because it was not earned whilst a UK tax resident?
Thanks!

Maybe unhelpful, but even if you can't, just use a FIFO system whereby you spend that money first on living expenses and then put money earned back in the UK into the ISA, kind of swapping them around. This might well be what you were thinking anyway but just thought i'd make sure!

[Bloodbuzz]

Maybe unhelpful, but even if you can't, just use a FIFO system whereby you spend that money first on living expenses and then put money earned back in the UK into the ISA, kind of swapping them around. This might well be what you were thinking anyway but just thought i'd make sure!

Ah I see what you mean - yeah that's a good solution if its not possible / or just a good solution either way, cheers :)

[MarcherLady]

Yes, you could use that money for subscriptions in the future, but you can'tback date them. So could only apply them to the yearly subscription limit in force at  the point you made them.  I.e. you can't subscribe to the tax year 2014/15 because it finished in April 2015.

[Friar]

Hey Friar,

Neither is always better.

Check the charges on your platform (some charge holding/buying for one and not the other).
Check the bid-offer spread, and sale volumes on ETFs.
Check the charges on funds.

And then check out http://monevator.com/etfs-vs-index-funds-differences/

Perfect, exactly what I was looking for. Thank you.

[NearlyThere]

Hey Friar,

Neither is always better.

Check the charges on your platform (some charge holding/buying for one and not the other).
Check the bid-offer spread, and sale volumes on ETFs.
Check the charges on funds.

And then check out http://monevator.com/etfs-vs-index-funds-differences/

Perfect, exactly what I was looking for. Thank you.

Another great page on the monevator site is their compound interest calculator http://monevator.com/compound-interest-calculator/ and thank you to the kind words from those of you have emailed me based on this thread.

[Bloodbuzz]

Does anyone know/recommend any UK based financial independence podcasts?

[purephase]

Also from the UK. Some great information here especially the heads up about Monevator.com. Im currently building up my savings using a few very good UK bank current accounts which give a 5 or 6 percent interest rate, while at the same time paying off the last of my debts. Excluding my mortgage (current value of my home is around 20k more than my mortgage) my debt to savings balance will be positive by the start of this autumn. I am also lucky that my small credit card debt is on interest free for the rest of this year and my loan is under 4 percent. Looking forward to being in a position some time in 2017 to start investing far more in my peer to peer loan account and into index funds.

[NearlyThere]

Does anyone know/recommend any UK based financial independence podcasts?

I haven't come across many and none I would repeat listen to.

The main finance related podcast I listen to is Radical personal finance. Its US based but the content traverses across the Atlantic perfectly for the most part.

[SondraF]

Like the ladies and gentlemen in this post, I am based in the United Kingdom. You can further segment my status because I am also a US citizen. I have not yet arrived to a comfortable understanding of the best course of action given the options available to someone in my position but this forum has definitely been a good starting point.

Is there a London or European city meetup?

Any other "expats" out there?

I'm a US expat in London who is also completely confused about the taxation and reporting status between UK/US funds etc.  Supposedly its a bad idea for us to own Shares ISAs but I have no idea about what that means for my pension (leaving this company soon anyway), the SIPP thing, and how this all plays into a wider retirement strategy (we don't intend to retire here).  Also, we aren't planning on being here for more than another three to five years for various reasons, so right now we are paying down debt, maximising savings, and putting some cash into US investments. (I know we lose some on the exchange, but compared to getting professional advice fees and potential fines if we don't file things correctly, it seems like the path of least resistance at the moment!).

We are doing well saving in such a high cost market, but there are plenty of days when going home just seems like the smarter long term move!