Author Topic: Private Pension Access Age - Changes and Speculation  (Read 2374 times)

Playing with Fire UK

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Private Pension Access Age - Changes and Speculation
« on: March 20, 2018, 02:12:59 AM »
A couple of the journals have been discussing the possible changes to the Private Pension Access Age and what this would look like.

I didn't find the way of the mustache until after I'd FIREd, in my case the precipitating and completely unplanned for event was a redundancy offer that was too good to turn down.  Life happens, right?  Life will happen to you too and your path will become clear when it does.

Re: private pension age.  This is not something the government has much control over.  Everything you have paid in so far has been paid in on the basis of a certain pension age and that is set in stone in the agreement you have with your pension provider and which will be enforced by the courts on your behalf against your pension provider.  Changes in pension age only happen for the state pension and pension schemes funded and run by employers themselves, and even then in employer schemes only in relation to future contributions.  It is just about possible I suppose that the government could change the tax advantages it gives to pensions and say for instance that you can only put pension contributions into a pension which pays out when the recipient is at a greater age than at present (55, usually).  But again, that's not going to apply to contributions already made and would be subject to a long process of consultation and legislation if it were to apply to future contributions, and there's been no hint of it that I've heard and I highly doubt there will be - too many people with a vested interest in it staying as it is.  More likely that there would be a further reduction in tax-free contributions, perhaps to take off the higher rate allowance.


If they do give any kind of protection for existing scheme ages as they did when it went up from 50 to 55 that probably won't help you unless your work scheme offers drawdown as you lose the protection if you transfer out.  (Yes I have been spending far too much time reading up on pensions these last few years!)

Do you have resources on how the protection worked last time and speculation on how it might work next time around? I didn't pay much attention last time but was under the impression that I didn't have useful choices when the change was made.
Try this: https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/protected-early-pension-age/#  Ignore the first few paras about the right to retire before 50!
The problem is that you lose that protection if you transfer out (unless the whole / a large part of the scheme transfers together) so you are stuck with whatever options your scheme offers and you have to take ALL your benefits under the scheme at once.  In my case I have both DB and DC funds in a protected scheme, but the only way to use that protection would be to accept the huge actuarial reduction in the DB pension AND to but an annuity with the DC funds - so basically useless.  The only place I have seen any discussion of what will happen next time they increase the age is on the pension forum on MSE (I hang out their sometimes under a different name) and the consensus was that no-one could see the rules being much different to what they were the previous time, apart from probably a minimum 10 years notice.

Thoughts?

cerat0n1a

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Re: Private Pension Access Age - Changes and Speculation
« Reply #1 on: March 20, 2018, 02:51:39 AM »
It's currently 55. The coalition government announced in 2015 the intention to keep it at 10 years below the state pension age, so that it would rise to 57 in 2028. They did not announce whether it would rise to 56 when the state pension age moves to 66 (in 2020), but the implication was that it would not do so.

I think they have been pretty good (in the past) at introducing changes quite slowly - giving people at least a decade of warning as to what was going to happen. (For example, the gradual increase in the pension age for women to match that for men, which started in 2010 and completes in 2020, was announced in the early 1990s and the law passed in 1995.) Unless there is some real big crisis in government finances, I don't expect that to change.

Far more likely is further restrictions on how much can be paid in, limits on tax relief and perhaps further significant reductions in public sector pensions offered to new joiners. It seems unlikely that the situation of middle ranking civil servants having a pension that is impossible for anybody in the private sector to achieve will be allowed to persist.

PhilB

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Re: Private Pension Access Age - Changes and Speculation
« Reply #2 on: March 20, 2018, 04:17:11 AM »
I'd be very surprised if the govt didn't follow the announced intention to raise the private pension age in line with the state one.  The last time it happened with remarkably little fuss - what people on here tend to forget is how few people do actually retire that early!  Last time they started the consultation in Dec 2003 and implemented it in April 2010.  I would hope for more notice next time (10 years), but I wouldn't necessarily bet on it.
As in my post above, yes your existing contributions were protected last time, but not if you transferred out and only if you took all benefits at once - basically limiting you to only the options offered by your current scheme.

Playing with Fire UK

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Re: Private Pension Access Age - Changes and Speculation
« Reply #3 on: March 20, 2018, 08:14:39 AM »
The protection also didn't work for a SIPP.

I'm hoping for FIRE before 40, so 10 years notice for a significant change would still occur after I'd said goodbye to the world of work, and potentially after my CV had atrophied. It's one of the biggest question marks around my FIRE date. 

aoedae

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Re: Private Pension Access Age - Changes and Speculation
« Reply #4 on: March 20, 2018, 09:09:06 AM »
It seems the government's aim for a lot of schemes is for the release to track 10 years under the state pension age.

Those will increase as laid out here:
https://www.gov.uk/government/news/proposed-new-timetable-for-state-pension-age-increases

I'm 25, and based on the LISA I recently opened which only allows access from 60, I strongly suspect they are projecting for the state retirement age to be 70 by the time I get there. This also means all my SIPPs etc. will probably be access from 60 onwards by that point.

never give up

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Re: Private Pension Access Age - Changes and Speculation
« Reply #5 on: March 20, 2018, 11:22:05 AM »
Quote
It's one of the biggest question marks around my FIRE date.

I can relate very much to these fears. I'm 41 and have decided to tackle this by assuming in my spreadsheets I'll take my company pension at 60. It's 55 at the moment as others have said. I would hope for sufficient notice that I can adjust if it becomes 62 or something.

The disadvantage here is that I potentially work longer than I have to saving money outside of the pension to cover ages 58-60, when the age I can take the pension may actually turn out to be 58 for me.

I did read one article (and it may have just been scaremongering) but it suggested company and private pensions may be aligned to be 5 years before state pension age. That one really scared the life out of me! Although the article may be nonsense the point is its not inconceivable this could be proposed and introduced. A company/private pension age of 65 would not be good news for UK people with our mindset. I appreciate it may be years down the line and affect those in their 20's more, but still.

It really does make me think about the ISA/company pension balance and ensuring the initial tax advantages of the company pension don't seduce me too much. ISA's to this point have certainly had a lot less tinkering and obviously have no age restriction.

PhilB

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Re: Private Pension Access Age - Changes and Speculation
« Reply #6 on: March 20, 2018, 12:17:23 PM »
If you wanted to retire at 35 in the UK you would basically need to do all of your saving outside of pensions and therefore pay a whole lot more tax I'm afraid.  I suppose there are always VCTs if you have the stomach for them.

cerat0n1a

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Re: Private Pension Access Age - Changes and Speculation
« Reply #7 on: March 20, 2018, 02:56:06 PM »
If you wanted to retire at 35 in the UK you would basically need to do all of your saving outside of pensions and therefore pay a whole lot more tax I'm afraid.  I suppose there are always VCTs if you have the stomach for them.

VCTs I guess are liable to have their rules changed at any moment on the whim of the treasury - changes for this year are already being floated. Our ability to stash money away free of tax exceeds what is available in pretty much any other non-tax haven western country and the direction of travel in recent years has mostly been in our favour, with the large increases to ISA allowances and removal of the requirement to buy an annuity out of pension funds.

ExitViaTheCashRamp

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Re: Private Pension Access Age - Changes and Speculation
« Reply #8 on: March 21, 2018, 12:57:55 PM »
A Corbyn government scares me the most. Often Labours front bench complains and moans about the Tories feathering the rich and/or millionaires - I think in practice tax hikes and changes will end up catching us folk in a variety of ways:

1) Still lower LTA
2) End of 25% tax free lump sum
3) A Gordon Brown style grab on reinvested contributions
4) Raising access age of pension (I am now penciling in 60 but that might be over optimistic, I am 39 now)

 Or something more dramatic such as a straight out wealth tax mentioned in the left leaning papers recently. Currently I have most of my wealth in my private pensions - I really fear I have made a bad mistake here and my plans have a lot more governmental risk that I thought 18 years ago when I started the journey :(

Manchester

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Re: Private Pension Access Age - Changes and Speculation
« Reply #9 on: March 22, 2018, 07:37:55 AM »
I can never understand how the government can legally be allowed to determine when you're allowed to access a SIPP. 

PhilB

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Re: Private Pension Access Age - Changes and Speculation
« Reply #10 on: March 22, 2018, 03:56:32 PM »
I can never understand how the government can legally be allowed to determine when you're allowed to access a SIPP.
Errrmm... because they are the ones who set the rules for giving you that tax break in the first place?

sea_saw

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Re: Private Pension Access Age - Changes and Speculation
« Reply #11 on: March 23, 2018, 04:59:36 AM »
Right... I thought the whole point of the tax break was to incentivise people to save money for an age in which they're unlikely to be able to earn enough money to support themselves through work. This is why there are exceptions for e.g. being seriously ill.

I'm not an expert but it also strikes me that if you could put money into a SIPP, get the tax refunded, AND you had the option of accessing it any time, a lot of people with variable incomes could use this to contribute much less taxes while working, by smoothing out the peaks and filling up the troughs. 

If you prefer, invest in ISAs/taxable accounts where you've paid your dues upfront, so can access it any time. (My current priority!).

Manchester

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Re: Private Pension Access Age - Changes and Speculation
« Reply #12 on: March 23, 2018, 06:46:14 AM »
I can never understand how the government can legally be allowed to determine when you're allowed to access a SIPP.
Errrmm... because they are the ones who set the rules for giving you that tax break in the first place?

But don't you pay tax to withdraw it?  So someone who FIRE's would be paying tax on their pension for a longer period of time?


Manchester

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Re: Private Pension Access Age - Changes and Speculation
« Reply #13 on: March 23, 2018, 06:50:59 AM »
Right... I thought the whole point of the tax break was to incentivise people to save money for an age in which they're unlikely to be able to earn enough money to support themselves through work. This is why there are exceptions for e.g. being seriously ill.

I'm not an expert but it also strikes me that if you could put money into a SIPP, get the tax refunded, AND you had the option of accessing it any time, a lot of people with variable incomes could use this to contribute much less taxes while working, by smoothing out the peaks and filling up the troughs. 

If you prefer, invest in ISAs/taxable accounts where you've paid your dues upfront, so can access it any time. (My current priority!).

I think this is the best route for me to go down.  I can get a pension contribution where I work up to 10%, but my issue is that I'm 24 and want to be retired by the time I'm 40.  Is there any point contributing this money as it won't help my financial situation between ages 40-58+.  I would prefer to work to 45 and pay the extra tax and retire then, compared to getting a great incentive now and having to wait until I'm 58?  I know I could be incredibly loaded if I went down that route, but isn't the point of mustachianism to live within your means?  I'd just end up with a load of money I don't need.

sea_saw

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Re: Private Pension Access Age - Changes and Speculation
« Reply #14 on: March 23, 2018, 10:11:41 AM »
Quote
But don't you pay tax to withdraw it?  So someone who FIRE's would be paying tax on their pension for a longer period of time?

Not really, because you get 11,500 tax-free every year, then pay 20% from there until 45k, etc. People generally expect to have much lower gross incomes while drawing down from their pensions than when they were contributing to them, so that's a big part of the tax advantage.

For example, if you're a basic rate taxpayer, the money you're putting into a pension would have been taxed at 20% if you'd taken it as income, but if you're drawing e.g. 20k/year, your effective tax rate is under 10%. Or if you're a higher earner, you got 40% tax relief on the way in but probably only pay 20%ish on the way out. It makes a big difference.

Plus you get that money upfront to invest and compound, money now is worth more than money later.

Quote
I can get a pension contribution where I work up to 10%, but my issue is that I'm 24 and want to be retired by the time I'm 40.  Is there any point contributing this money as it won't help my financial situation between ages 40-58+.

If your pension contribution is matched it's basically always worth it to contribute that's free money that will easily beat your other options, and can't be recovered retrospectively if you turn it down now. Don't shoot far-future-you in the foot. Above that, if you plan to FIRE it gets a bit fiddlier to try to get the perfect division of assets in your pension/SIPP and ISA/taxable accounts. But it's a fairly technical problem, and there's no reason to entirely reject the leg up that pensions give you just because they can't take you the whole way alone.

That said at 24 I should think the biggest complicating factor isn't at what exact age you can access your pension, it's everything else. E.g. what income you think you'd like to have post FIRE, how much you expect to earn between now and then, where you want to live, do you have a partner, or kids, etc etc are all likely subject to change and your required numbers will leap up and down as your life plans develop.

As I keep saying in these forums, just by thinking about this now and learning how to save and invest for the long term, you're ahead. If you end up realising in 5 years that you're better off contributing more/less into a pension you can adjust course easily enough.

At 24, from my grand old age of 31, I personally would recommend erring on the side of keeping your money available. You might want it to put down a deposit on property, or invest in further education, or make a risky geographical/career move and live off a cushion of cash, or etc.

You can also use the past three years' unused SIPP allowance (and receive that snacky top up for the lot), so you have a lot more flexibility moving money in to one than taking it out!

never give up

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Re: Private Pension Access Age - Changes and Speculation
« Reply #15 on: March 23, 2018, 10:39:37 AM »
I agree with sea_saw here. I think probably for most people some sort of hybrid approach is the way to go. In the new tax year I'm going to be roughly 50:50 in terms of company pension versus ISA contribution. I'm slightly older so my post 58 pot is as important as my pre-58 pot.

I think there is quite a good article on Monevator if I seem to remember on SIPP versus ISA.

cerat0n1a

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Re: Private Pension Access Age - Changes and Speculation
« Reply #16 on: March 23, 2018, 11:27:54 AM »
Is there any point contributing this money as it won't help my financial situation between ages 40-58+.   

Short answer, yes, definitely.

Long answer, yes. You can build up your "stash" very much faster by using pensions. You get an employer contribution and you get to make your contribution free of tax. You didn't say how much you have contribute to get the employer 10%, but for example, if it's 5%, you are effectively tripling the money - every 1 you put in gets an extra 2 from the employer  and 25p from the government (if you're a 20% taxpayer & even more if you're a 40% or higher rate payer.)  So you forgo 1 now in order to get 3.25 being invested for the next 24 years on your behalf. It almost never makes sense to turn down the employer contribution (unless you need your own pension contribution to pay off the loan sharks or something.)

Therefore, you want to contribute at least enough to attract the employer match (but probably no more than that). You might think that pension money is of no use to you as you can't touch it until you're 58, but the point is, you need your total stash to be 25x your annual spending (4% rule.)

So in your case of retiring at 40, you want 18x annual spending outside of pension, ideally inside the ISA wrapper and you run that amount down to zero by the time you hit the access pension age at which point your pension supports you from 58 onwards. (Obviously a slight simplification, but you see the principle, I hope.)

londonstache

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Re: Private Pension Access Age - Changes and Speculation
« Reply #17 on: March 26, 2018, 05:16:26 AM »
It seems the government's aim for a lot of schemes is for the release to track 10 years under the state pension age.

Those will increase as laid out here:
https://www.gov.uk/government/news/proposed-new-timetable-for-state-pension-age-increases

I'm 25, and based on the LISA I recently opened which only allows access from 60, I strongly suspect they are projecting for the state retirement age to be 70 by the time I get there. This also means all my SIPPs etc. will probably be access from 60 onwards by that point.

aoedae, I'm thinking much the same. I'm 34 so nearly 10 years ahead but I anticipate state retirement at 70 when I get there too. I intend that FIRE is based on S&S ISA and some other forms of income, although I don't think I'll be in the position to pull the trigger before 50.

Manchester

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Re: Private Pension Access Age - Changes and Speculation
« Reply #18 on: April 09, 2018, 03:29:52 AM »

Quote
I can get a pension contribution where I work up to 10%, but my issue is that I'm 24 and want to be retired by the time I'm 40.  Is there any point contributing this money as it won't help my financial situation between ages 40-58+.


That said at 24 I should think the biggest complicating factor isn't at what exact age you can access your pension, it's everything else. E.g. what income you think you'd like to have post FIRE, how much you expect to earn between now and then, where you want to live, do you have a partner, or kids, etc etc are all likely subject to change and your required numbers will leap up and down as your life plans develop.

As I keep saying in these forums, just by thinking about this now and learning how to save and invest for the long term, you're ahead. If you end up realising in 5 years that you're better off contributing more/less into a pension you can adjust course easily enough.

At 24, from my grand old age of 31, I personally would recommend erring on the side of keeping your money available. You might want it to put down a deposit on property, or invest in further education, or make a risky geographical/career move and live off a cushion of cash, or etc.

You can also use the past three years' unused SIPP allowance (and receive that snacky top up for the lot), so you have a lot more flexibility moving money in to one than taking it out!

Thanks for your feedback and apologies about the delay in responding.  Just so you know a bit more about my personal circumstances I'm 24, I'm with my girlfriend of 7 years and we've lived together in a house we have roughly 70k of equity in.  She's been unemployed for a few months but now working in a decent job and gets her first pay check at the end of this month.  I'm getting a big payrise this month in a company I own 33% percent of, so between us we'll be on considerably more than ever before.

My company offer a pension match up to 10%.  Due to my pay rise I should be able to fully contribute to this and still have more money left over compared to what I'm currently earning.  The rest I'm planning on investing in the Vanguard LS100 (In an ISA wrapper), along with some contributions to an emergency/holiday/big bill fund.

I can see marriage and children on the horizon, we bought our current house with this in mind.  I'm just trying to invest as much as possible to soften the financial burden that comes with children.

Currently I dont see the need to invest in a SIPP as well as my auto enrolled pension (does this class as a SIPP anyway?) 

Manchester

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Re: Private Pension Access Age - Changes and Speculation
« Reply #19 on: April 09, 2018, 03:31:33 AM »
Thanks Cerat0n1a and Never give up as well.  This forum is so helpful and it's great to have a space where you can discuss finance with people who're as interested as I am.

londonstache

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Re: Private Pension Access Age - Changes and Speculation
« Reply #20 on: April 09, 2018, 04:15:18 AM »

Quote
I can get a pension contribution where I work up to 10%, but my issue is that I'm 24 and want to be retired by the time I'm 40.  Is there any point contributing this money as it won't help my financial situation between ages 40-58+.


That said at 24 I should think the biggest complicating factor isn't at what exact age you can access your pension, it's everything else. E.g. what income you think you'd like to have post FIRE, how much you expect to earn between now and then, where you want to live, do you have a partner, or kids, etc etc are all likely subject to change and your required numbers will leap up and down as your life plans develop.

As I keep saying in these forums, just by thinking about this now and learning how to save and invest for the long term, you're ahead. If you end up realising in 5 years that you're better off contributing more/less into a pension you can adjust course easily enough.

At 24, from my grand old age of 31, I personally would recommend erring on the side of keeping your money available. You might want it to put down a deposit on property, or invest in further education, or make a risky geographical/career move and live off a cushion of cash, or etc.

You can also use the past three years' unused SIPP allowance (and receive that snacky top up for the lot), so you have a lot more flexibility moving money in to one than taking it out!

Thanks for your feedback and apologies about the delay in responding.  Just so you know a bit more about my personal circumstances I'm 24, I'm with my girlfriend of 7 years and we've lived together in a house we have roughly 70k of equity in.  She's been unemployed for a few months but now working in a decent job and gets her first pay check at the end of this month.  I'm getting a big payrise this month in a company I own 33% percent of, so between us we'll be on considerably more than ever before.

My company offer a pension match up to 10%.  Due to my pay rise I should be able to fully contribute to this and still have more money left over compared to what I'm currently earning.  The rest I'm planning on investing in the Vanguard LS100 (In an ISA wrapper), along with some contributions to an emergency/holiday/big bill fund.

I can see marriage and children on the horizon, we bought our current house with this in mind.  I'm just trying to invest as much as possible to soften the financial burden that comes with children.

Currently I dont see the need to invest in a SIPP as well as my auto enrolled pension (does this class as a SIPP anyway?)

Manchester, it might not be a SIPP as it is probably not Self Invested - it is more likely that there is a default fund, although the lines are now blurred as most reasonable pension plans let you choose from a portfolio of funds.

My temptation would be in your position to dump 10% in if there is a 10% match. Here is the logic:

Pensions are non-taxable, so given the 100% match for every 1,000 of gross salary you put in you will end up with 2,000 in your pension.
ISAs come from net income and the contributions are not matched, for every 1,000 at 20% tax band you end up with 800 invested and 600 at the 40% tax band.

Therefore 10k of contributions will be 20,000 invested if you are in a pension vs. (probably) 6,000 if you are not - 3.3x more invested. Don't underestimate the massive difference that make towards FIRE - yes, you have less in the Retire Early pot, but you have a rocket-ship vehicle to jump in for the final 30-35 years of your life. You could also feasibly work something based on S&S ISAs from 40-60 and then hit the big traditional retirement pot for the final 30-35 years.

The restriction as you say is that you cannot withdraw before the release date for your private pension, but this can have some advantages too - it makes it impossible to tap these funds for a marriage, children etc. I'd be tempted to try and run a cash fund up to cover future expenses, which is what I did for our wedding. I ended up with more saved than I needed, but was able to dump the excess into investments once the financial picture was a little clearer. 

Needs to be your decision so think it through carefully, but wanted to provide some food for thought.

Congratulations on where you are financially at 24 by the way - it's really impressive. I was still a feckless fool at 24!

Manchester

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Re: Private Pension Access Age - Changes and Speculation
« Reply #21 on: April 09, 2018, 05:24:26 AM »

Quote
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Manchester, it might not be a SIPP as it is probably not Self Invested - it is more likely that there is a default fund, although the lines are now blurred as most reasonable pension plans let you choose from a portfolio of funds.

My temptation would be in your position to dump 10% in if there is a 10% match. Here is the logic:

Pensions are non-taxable, so given the 100% match for every 1,000 of gross salary you put in you will end up with 2,000 in your pension.
ISAs come from net income and the contributions are not matched, for every 1,000 at 20% tax band you end up with 800 invested and 600 at the 40% tax band.

Therefore 10k of contributions will be 20,000 invested if you are in a pension vs. (probably) 6,000 if you are not - 3.3x more invested. Don't underestimate the massive difference that make towards FIRE - yes, you have less in the Retire Early pot, but you have a rocket-ship vehicle to jump in for the final 30-35 years of your life. You could also feasibly work something based on S&S ISAs from 40-60 and then hit the big traditional retirement pot for the final 30-35 years.

The restriction as you say is that you cannot withdraw before the release date for your private pension, but this can have some advantages too - it makes it impossible to tap these funds for a marriage, children etc. I'd be tempted to try and run a cash fund up to cover future expenses, which is what I did for our wedding. I ended up with more saved than I needed, but was able to dump the excess into investments once the financial picture was a little clearer. 

Needs to be your decision so think it through carefully, but wanted to provide some food for thought.

Congratulations on where you are financially at 24 by the way - it's really impressive. I was still a feckless fool at 24!

That's a really good point about not being able to touch funds being a good thing.  My girlfriend is some-what, less mustachian than myself so having that 'excuse' would be helpful! :P

I know the American section of this forum really pushes rent over home ownership, but in the UK it's very different.  I was lucky enough to save 20k whilst living at home (and working from 16) which I put down as a deposit.  Now that is roughly 70k in just over 2 years. I know it's not a fluid asset, but it's something and one day I won't have a mortgage or rent to worry about, or health care and I'll (hopefully) get some type of state pension to contribute.  We really are lucky in this country.  In America all those bills could require $250k+ invested to support FIRE.

I'm still Feckless, hence why I'm always scouring through here asking questions.  But hopefully one day I'll be rich and slightly less feckless.  XD

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Re: Private Pension Access Age - Changes and Speculation
« Reply #22 on: May 14, 2018, 03:26:01 PM »
Sorry for the long post!

I'm not sure what your target retirement figure is, but a staged approach might be worth considering taking full advantage of the tax allowances? Adding these up can give a reasonable tax free income in retirement and may help you increase your savings rate before you FIRE...

The Personal Allowance is 11,850, the Interest Allowance is 1,000 (if lower tax rate, but tapered for those earning more) and Dividend Allowance is 2,000 plus you have an additional Saving Allowance of 5,000 if your income is from savings alone (in FIRE) and less than 18,850?

You also have the annual 11,700 Capital Gains Allowance, 1,000 Entrepreneurs Allowance (e.g Ebay selling), 7,500 Rent a Room Allowance (per house only) and 1,000 for Other Property (e.g rent your driveway, tool share etc.). If you are married and one of you pays the basic rate tax and the other is a non tax payer, they can donate 1,185 of their Personal Allowance to the basic tax payer.

You also need to make sure you pay at least 10 years of National Insurance to get any State Pension so keep an eye on this as you can back pay Class 3 NI if needed and you'll need 35 years to get the full payment. Having this provides your 'floor' i.e. a set income you can rely on in your old age.

You should obviously aim to get the maximum pension match from your employer and some employers will allow you to salary sacrifice to your pension, which could be useful if you are a higher tax payer i.e. bring you down to a lower tax band. I've also heard that some employer's pension schemes will allow you to partially transfer to a SIPP annually or you could do that when changing jobs as I assume you don't have a DB pension and this might reduce your annual fees.

Using your ISA allowances each year is important (20,000 this year), but be careful about fine print on LISAs as you may get hit by a penalty if withdrawing early (larger than the tax advantage you obtained). You can have a S&S ISA and IFISA in the same year as long as you stay below the allowance, but can't have a cash ISA too.

If you have excess money available for investment, then the next priority would be non tax shielded accounts for interest, dividend income and capital gains. You need to keep good records for these to fill in your tax return. Monevator has some good articles on this e.g. INC not ACC, Bonds and Shares are complicated outside an ISA or SIPP etc.. If you are a lower tax payer, dividends over the allowance are taxed at 7.5% rather than the 20% tax on interest over the allowance. Watch out for changes in how cryptocurrency gains should be declared and it may be worth draining each year to keep within your CGT allowance. Bullion gains would also count for CGT...

Extra income could be gained from taking in a lodger, ebaying etc and used to raise your investment rate if you expect to beat your mortgage interest rate. It should be more tax efficient to have your mortgage paid off before you finish employment, but keep an regular eye on this as you remortgage as LTV can impact your best mortgage interest rate. You may have problems remortgaging if not earning, but some people may choose to take a longer fixed rate mortgage at a worse interest rate just before retiring early to give some flexibility e.g. using pension lump sum later to pay off the mortgage rather than using non pension funds.

At FIRE you may choose to have a combination of cash, bullion, and cryptocurrency; investments ouside an ISA or SIPP; various flavours of ISA; SIPP, employer's pension and State Pension. You need to have enough to draw from non pension income until your pensions kick in.

Be careful about taking your Pension Lump Sum early if you plan to work at any point after this, as doing so limits how much pension you can pay in to just 4,000 per year. If you are not working, you can pay in 2,880 to a SIPP each year (made up to 3,600 through tax relief) until age 75, which will help the 'stache?

Hope that helps?

« Last Edit: May 14, 2018, 03:30:18 PM by Just_Looking_Here »

PhilB

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Re: Private Pension Access Age - Changes and Speculation
« Reply #23 on: May 15, 2018, 08:59:28 AM »
Be careful about taking your Pension Lump Sum early if you plan to work at any point after this, as doing so limits how much pension you can pay in to just 4,000 per year.

Not quite.  You can take the 25% lump sum without having any impact on future contributions.  Only if you withdraw any of the remaining 75% does the AA drop from 40k pa to 4k pa.

Just_Looking_Here

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Re: Private Pension Access Age - Changes and Speculation
« Reply #24 on: May 15, 2018, 12:46:23 PM »
Yes, you need to make sure the remaining pension is deferred with your pension provider. Often at this point they will suggest annuities or drawdown so be careful not to trigger official retirement with HMRC if you plan to keep working.

If you do plan to work part time, then another trigger figure is the salary at which you start paying NI. From memory this is earning 162 per week or more so >8,424 and you'd pay 12% which would be more than your class 3 contribution.

skip207

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Re: Private Pension Access Age - Changes and Speculation
« Reply #25 on: May 27, 2018, 09:56:27 AM »
We plan to FIRE at 42 ish.  That leaves me 15 years to fill between FIRE and when I can touch my SIPP.  That's how my FIRE roadmap has it planned for now anyway.  If we suddenly find we are at 58 or 60 or whatever for the SIPP then we will just have to reduce our budget rather than OMY it.  IMHO.