I did it and was able to retire aged 58 with 9 years to retirement age, increased my contribution from age of 40, last four years of employment ended up putting max of £40k a year in pot. At this point my income was what my future pension would be so I knew I would be ok in retirement.
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Retirement
- Thread starter Shieldsman
- Start date
Absolutely! They would get some rent assistance but that is capped, which would still make rent their biggest outlay by far. It’s also unreliable as it’s not easy to find somewhere else here if circumstances change as competition for rental properties here is tough.
On the other hand we’re contemplating knocking our place down and putting a duplex (2 semi detached homes) on the block which would give us a place to live and a place to rent out or sell.
That’s not as straightforward as I’m making it sound but it would make a massive difference to our retirement options if we went ahead
Put an extra 5% and then up it by 1% or similar every year so you don't notice it and before you know it there will 20-25% in there and you will be have the option of being out of the game at 57 - trust me this is good advice if you can afford it
Exile in Ayr
Midfield
I would make pension contributions to take me out of the 40% tax bracket if it's affordable. Gross income 50k cuts out giving the taxman an extra 20%. I don't see any UK government raising the 20% anytime soon so you can keep more of your net salary so it may well be for the foreseeable. Salary sacrifice on such a scale at 33 years old is a big commitment but early retirement becomes your choice if you get the sums right.
The
Striker
I know that’s what I tell myself if there’s a big dip. Still doesn’t look great though
42
Striker
It's all a bit psychological. It's why they always say, just chuck money in & don't look at it. The 'loss' is just on paper & not realised until you cash in.
Edinburgh Black Cat
Striker
It is hard to give perfect pension / financial advice because nobody knows how the rules will change in future.
In order, what I would do is:
- maximise any matched pension contributions
- maximise my ISA allowance (Lifetime ISA, and regular Stocks & Shares ISA). This is key because you get the compounding others are talking about but it gives you the flexibility to access £ and retire early.
- increase pension to optimise your tax payments, i.e. consider where you are in the tax brackets. Large ad-hoc contributions (quarterly for example) can save you more in tax and NI than monthly contributions. Also worth considering what your career path will be. At 33, you'll have potential to be earning 6 figures. At which point the salary sacrifice will give you a higher net saving than it will now. Notwithstanding the point someone made that future rules can change (flat rates of tax relief, lifetime allowances, retirement age, etc.)
- buy a house / spend money on travel
Remember pension tax savings aren't 100% savings, some of it is a tax deferral. Lots of people miss that point. And there's differences in terms of what counts towards benefits, what can be clawed back on care home costs, what is a heritable asset that you can pass on to your children. It isn't an exaxt science.
(I'm not a financial advisor, so this is just what I would do rather than advice)
Is it better to increase your contributions so you come back down into basic rate or hover just above the higher rate threshold and thus claim higher rate relief on your pension contributions?
Darlo1973
Striker
Indeed. Worth doing a review of your finances every few months and making any corrections required but checking on the value of pensions or investments every day is the path to madness. There was a time when you would have no idea of the value until you got your annual statement but these days banking apps making it too easy to get obsessed.
Edinburgh Black Cat
Striker
It'll vary on a case by case basis. If you go back into basic rate it could provide you a larger allowance for savings interest.
Good point.
I have bugger all in taxable savings - my cash stash is in Premium Bonds.
The
Striker
Can’t do that, that’s cheating.
Stepover
Midfield
You’d only get the higher rate relief on the amount that’s above the basic rate allowance.
So if you had £55k income and made £10k gross pension contribution you’d get £5k of it at 40% and £5k of it at 20% (£50k being the threshold). In reality the pension contribution increases your basic rate band upwards.
You wouldn’t get the whole £10k at 40% because you are in the higher rate bracket.
If you can afford it, better off trying to maximise the 40% band each year.
If lucky enough to earn 6 figures - becomes a no brainer when reclaiming lost personal allowances at £100k-£125k. Effective 60% tax relief.
