Retirement

[halfpast3]

Retirement is for enjoying life, holidays, seeing the world, enjoying some of the finer things in life which you've not been able to do due to a job.

Might as well keep working until your grave if you're barely getting by, and not really going for it in retirement IMO, but people are different.

I get that, but even if you couldn’t do absolutely everything it would still be better to be retired and just comfy than grafting. 2 grand a month is a lot of fun money assuming bills of about a grand

 

[Matt Hopkins]

You'll just then pay the 20% back when you draw it. If you've got a decent number of years in CS pension and /or on a decent wage, then CS pension will be higher than the personal allowance.
The only tax benefit you'll get on the SIPP is taking 25% of it tax free, so effectively getting a 5% tax break. You then need to decide if that small tax break is worth the loss of flexibility & political interference of the ISA option.

If the 25% tax free lump remains, then is the uplift not 6.25%?

 

[Darlo1973]

I think the point is that you can enjoy a good retirement on a lot less since you no longer have the same outgoings. Most people do tend to overestimate how much they need in retirement. Another thing to factor in is front loading your pension income to earlier years as later on you'll need less as health reduces

I certainly intend spending a lot more in my first few years of retirement than I typically do while working but, yes, there will come a time when outgoings can be reduced to the absolute minimum.

Thankfully the days of buying an annuity have gone as a lot of people got screwed over by them. Being able to draw down means that your pension pot will continue to be invested as long as you are alive.

 

[Matt Hopkins]

Thankfully the days of buying an annuity have gone as a lot of people got screwed over by them. Being able to draw down means that your pension pot will continue to be invested as long as you are alive.

Annuities aren't always a bad thing though, the ability to chose is a good thing

 

[42]

If the 25% tax free lump remains, then is the uplift not 6.25%?

If you put £1000 into pension, the government bumps it upto to £1250.
However, what is really happening is that you've contributed £1250 & the government is returning £250 to you.
The net effect of both is exactly the same.
So in cash terms it appears you're getting a 25% uplift, but in reality it's a 20% tax break.

 

[Flip]

I was born in the 80s and will have a retirement age of 68 at least. My workplace pension is linked to national retirement age as well so it can't just be taken at 60 without a massive reduction.

Life expectancy for a male living in Sunderland is 76 and isnt increasing. Which starts to beg the question how much money do I actually need to live for 8 years. The stats show that as you reach 70yo your spending decreases dramatically as you are generally not as fit as you are in your 60s, meaning less holidays and less trips out. It's highly likely that cash will simply become generational wealth that will potentially be hit by huge inheritance taxes or be swallowed up by care costs.

At which point you start to consider if this actually represents real value. If the retirement age was 60 and I had 16 years to play with then it absolutely would be worth it. But I'm not sure the maths works out for my generation.

If you were born in the 80s hen you still have time to plan IF you have reasonable income as at that point it comes down to priorities I'm not being preachy as for all I know you have 4 kids an ex wife and a parent in a home BUT if the money is mainly yours its about choices and speaking to experts

I think people need to focus less on the "you might die tomorrow" and more on the "you almost certainly won't die tomorrow" and the "unless you already have a terminal or life-limiting disease, you are a quite a bit more likely to live beyond 80 than die before 70".

I cannot think of any time worse to be in poverty than old age. Good memories don't heat the water or pay the grocer.

I accept that people need to enjoy themselves when they are younger, but like anything, it's about balance.

Youthful fun doesn't have to cost much either. I remember walks in the park and rolls in the hay as fondly as any expensive holiday, and more than any possession.

I agree to a point BUT its pintless being the richest man in the cemetary, like on an earlier thread a good mate has luekemia at 48 so for my mind its not about being rich at retirement its about being comfortable. I'm now looking at what I would need to do to get out at 55 as opposed to 58 - lifes too short. As someone on a previous page posted chances are you'll run out of time before you run out of money.

Annuities aren't always a bad thing though, the ability to chose is a good thing

Agreed I'll get some some sort of annuiity but not my whole pot - something that gurantees 10K or similar so I can put heating on anrun a basic house

 

[Matt Hopkins]

If you put £1000 into pension, the government bumps it upto to £1250.
However, what is really happening is that you've contributed £1250 & the government is returning £250 to you.
The net effect of both is exactly the same.
So in cash terms it appears you're getting a 25% uplift, but in reality it's a 20% tax break.

I'm either having a thick moment or talking at crossed purposes. Putting money in a SIPP as opposed to an ISA, as a basic rate tax payer, you are 6.25% better off if the 25% tax free part remains?

 

[42]

I'm either having a thick moment or talking at crossed purposes. Putting money in a SIPP as opposed to an ISA, as a basic rate tax payer, you are 6.25% better off if the 25% tax free part remains?

You're better off to the tune of an effective 5% tax break, but sacrificing flexibility

 

[archiesdad]

One of the things I hear loads on various fb groups and to a point on here ref retirement is "you can survive", "you can make do on".... Fuck that. I ain't working 40 yrs to survive, I'm going to thrive. You might as well keep working if retirement means turning the heating off. Sorry if that sounds a bit aresy but I'm only going to retire if I can enjoy it!!

 

[Barista]

it's not called the "miracle" of compound interest for nothing. I just wish I had started my pensions earlier in life but I spent most of my 20s in temp jobs, I got screwed over by the first proper pension I had

Was that pension with Equitable Life? One of my first pensions was with them and then they had a high court case brought against them by some of their with profits policy holders who were at retirement age iirc and as a consequence the money awarded to them had to come out of all the other policy holders pensions.
I don't think it cost me too much in the end as I wasn't with them too long and it was early on in my career.

 

[TAD]

You're better off to the tune of an effective 5% tax break, but sacrificing flexibility

But whilst only 5% difference, when the gov give me the tax back straight away so that money has a chance to grow. So that's the benefit too.
For example, I put 10k in sipp every year for the next 10 years. The government gives me my 20% tax back. So I've got 12k growing every year rather than 10k (obviously assuming growth ). Is this not right.
If I put that 10k in an ISA. There's only 10k growing every year.

 

[42]

But whilst only 5% difference, when the gov give me the tax back straight away so that money has a chance to grow. So that's the benefit too.
For example, I put 10k in sipp every year for the next 10 years. The government gives me my 20% tax back. So I've got 12k growing every year rather than 10k (obviously assuming growth ). Is this not right.
If I put that 10k in an ISA. There's only 10k growing every year.

It makes no difference
10k in ISA, 12.5k in SIPP
Ignoring the 25% tax free bit to keep maths simple

Say in 7 or 8 years you get 100% growth. So 20k in ISA, 25k in SIPP
When you withdraw SIPP you pay 5k tax, so get 20k regardless. Proportionally the tax you get back to grow just gets paid back to government

 

[Ned Land]

I certainly intend spending a lot more in my first few years of retirement than I typically do while working but, yes, there will come a time when outgoings can be reduced to the absolute minimum.

Thankfully the days of buying an annuity have gone as a lot of people got screwed over by them. Being able to draw down means that your pension pot will continue to be invested as long as you are alive.

Annuity rates have improved recently.

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…
However, the market is favourable to anyone currently buying an annuity - a product from an insurance company that gives a retirement income for the rest of their life, bought only once.
One annuity expert told the BBC many people would get a better deal now than at any time since 2008, because annuity rates usually move in line with gilt yields.

 

[Matt Hopkins]

It makes no difference
10k in ISA, 12.5k in SIPP
Ignoring the 25% tax free bit to keep maths simple

Say in 7 or 8 years you get 100% growth. So 20k in ISA, 25k in SIPP
When you withdraw SIPP you pay 5k tax, so get 20k regardless. Proportionally the tax you get back to grow just gets paid back to government

You can't try and prove there's no difference by ignoring the 25% tax free bit man

 

[42]

You can't try and prove there's no difference by ignoring the 25% tax free bit man

I think the person I'm replying to doesn't quite understand the maths as keeps banging on about extra growth from the tax being paid back upfront etc.
The difference is an effective 5% tax break / 6.25% uplift whichever way you look at it as a result of the 25% tax free bit. But the extra growth you get 3/4 is just going straight back to the government. There's no benefit in terms of growth from having the tax rebate, the benefit is being able to take a quarter of it tax free

 

[Edinburgh Black Cat]

I think there is something sad but also something natural in that. By the time you retire (or approach retirement) it seems that whatever interest or good intentions you started work are gone.

I started my career with loads of enthusiasm and interest, got into doing IT stuff for large enterprise infrastructure, I do enjoy learning new stuff about it, but any passion is ebbing away and when I retire there are so many aspects of my job I'll just never things about again. Today I have been kicking off a project to get something deployed. I can't imagine sitting at 65 thinking "I wish I had deployed just one more system or could dip into work to give it just one more go".

I guess it is the feeling of been there, done that. The specifics change over your career but overall, that is just the tweaks.

I'm in my 30s and feel like that. Fed up working with idiots and narcissists.

Fortunate enough to be able to take a year off at the moment. But no idea where the motivation to return will come from.

 

[Darlo1973]

Annuities aren't always a bad thing though, the ability to chose is a good thing

That's true in some cases but too often in the past people weren't given sufficient information to make a choice and were steered towards an annuity. My dad wasn't very financially savvy so he would have just trusted what he was told without asking questions. He was the sort to buy an extended warranty on everything he bought.

 

[Matt Hopkins]

That's true in some cases but too often in the past people weren't given sufficient information to make a choice and were steered towards an annuity. My dad wasn't very financially savvy so he would have just trusted what he was told without asking questions. He was the sort to buy an extended warranty on everything he bought.

Yes but before Gideons reforms you had to take an annuity anyway so the choice has only been available 10 years

 

[Fletch]

Yeah but when you withdraw that 12.5k, you'll only receive 10k as you'll pay 2.5k in tax. The only benefit is that you can currently (which might change in the future) is that you can take 25% of the pot tax free, so you'll save £625 in tax.
Did you inform the FA that you also have a public sector DB pension? The fact the tax rebate is upfront makes no difference as whatever 25% they add on, is exactly the same as the 20% they then take off (ignoring the 25% tax free bit)

Not necessarily , you get 25% of your withdrawal (drawdown), tax free , then the rest is classed as if getting a salary so how much tax you pay depends on how much you take out , some may pay no tax , some could be 40%

We spent most of 2024 getting our shit together financially speaking. We sorted some pension consolidation, I found a pension I forgot I had as part of the process! We reviewed isas and bonds, some had just been left in under performing accounts for ages and shuffled those around to make them work harder. Finally we had a free assessment from an FA and got some ideas on what we need to do for the next 18-24 mths ahead of jacking it all in(57) We've gone from being apprehensive to excited. One of the best things I think we've ever done, wish we'd done it 10 yrs ago but let's look forward not back!

We’re in similar boat , I’m 55 later this year , wife self employed and realised 6-7 year back shit … pensions … she’s now hoping to retire in the next 12-18 months , I’m thinking 2-3yr max for me . I want to retire while still fit n healthy and not just chasing £££

 

[Horatio Moustache]

Anyone with a while to wait before getting their private pension may want to consider moving the money into different funds. My pension was giving 'ok' but not great returns, so I moved 40% of it into funds focused on equities and the remaining 60% into slightly riskier retirement plan products. This has led to the overall value shooting up.

Obviously don't do this if you're retiring in the next few years. I won't be touching mine for around 20 years.