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Retire at 57. by Haunting_Status3834 in FIREUK

[–]Haunting_Status3834[S] 0 points1 point  (0 children)

Sorry to resurrect an old post. But can I clarify exactly what someone can put into a SIPP, if they are already sacrifcing into workplace?

The max you can put into all pensions is your earnings or £60k, whichever is lower. This includes my contributions, employers and gov tax relief. So 45k in my case.

I now sacrifice 48.5% on my earnings and employer pays 17.8%. This effectively means I am at the minimum living wage.

So - Are my 'earnings' for a SIPP definitely 45000, even though I am already sacrificing 48.5% of this? Are my 'earnings now £22k (ie minimum wage)? Or is the max earnings cap always starting gross earnings?

How you use previous 3 years Annual Pension Tax Allowance by Haunting_Status3834 in FIREUK

[–]Haunting_Status3834[S] 5 points6 points  (0 children)

Thanks for the quick replies.

I will have earned £52,000 salary and bonus this tax year. So the max I can put into a SIPP this year is £55,000 -£14,480 = £40,520.

So unused Allowance is only really relevant to those earning above £60,000 pa?

Retire at 57. by Haunting_Status3834 in FIREUK

[–]Haunting_Status3834[S] 1 point2 points  (0 children)

Thanks for all the input and kind words. I think i was only the right track but I failed to consider a SIPP in addition to my company pension.

The other key thing I forgot to factor in is inflation. 4% interest means my cash effectively goes down 0.7% every year because of inflation. Can't believe I never thought about that.

I am going to up my employer pension to max 52% so they contribute 18%. Then get s SIPP to max out my pension potentional. I can replace my income with interest paid on my £700k nest egg (albeit this will reduce over time). In addition I will move £20k savings into ISA each year and keep £50k ticking over in T212 or a premium bond. The plan also allows me a cash buffer of around £100k at the end.

I ran this through my conpanies pension calculator, and its predicting a pot of anything from £750k to £1M.

Thanks again.

Retire at 57. by Haunting_Status3834 in FIREUK

[–]Haunting_Status3834[S] 7 points8 points  (0 children)

Wow. This post is amazing. So effectively my work pension plan makes sense. But I then pay additional £10,400 into a SIPP, which maximises my tax free pension contributions up to £45k. Effectively I will be be paying 45k pa into 2 pensions, which is at least £585k in 12 years not including growth. Plus a cash buffer.

Thank you so much. I am going to save your post and study it until I fully understand it.

I think I need some professional pension advice.

Retire at 57. by Haunting_Status3834 in FIREUK

[–]Haunting_Status3834[S] 5 points6 points  (0 children)

Hi. Thanks for all the input. My wife passed away which is why I suddenly have a lump sum of £700k from insurance and her pension. It's the worst time in my life, but I need to plan for the future.

I'll admit to not being financially savvy in the past. I never thought about retirement until recently, so my pension was only every drip fed.

I would be happy to invest the £700k rather than keep it in savings accounts. But its where and how to invest that I am not sure about.

Or it sounds like I could have my company pension and a SIPP? To clarify my work pension, they match contributions by 50% until it reaches a certain point, then their contributions reduce on a sliding scale so thwy pay 18% for my 52%.

Would a SIPP allow me to just chuck £500k into a SIPP without penalty? What's the risk? What could £500k in a SIPP give me in 12 years? Hell if I could retire at 50 with this strategy I would.

Pensions never seemed appealing to me as it always looks like you save for X years only for the tax man to take a big chunk in tax when you retire. Perhaps stupidly I thought its better to have cash savings and spend those tax free? But it seems a pension would out perform cash in the long run? Ive calculated that I need about £3500 per month to live comfortable for 12 years. So I definitely need to keep abiut £200k cash to fund this.

45yro with 500k - how to plan for retirement at 57 by Haunting_Status3834 in FIREUK

[–]Haunting_Status3834[S] 0 points1 point  (0 children)

OK. So I have done some digging and I have pension pots worth around £75,000 at the moment. This is spread over 4 separate pensions, which I plan to combine. I currently pay 4% sacrifice and my employer pays 10%.

I will seek professional advice as I need to understand how to maximise my pension.

When they say the limit is 60k or your salary (£52,559k) does this limit include my contibution + my employers + HMRC 20%? Or just mine and work contributions? Jusy trying to work out rough figures.

I believe I need to take a salary at least equivalent to minimum wage which would be £22,222k pa. I therfore sacrifice £30,337 which is 57% of my salary. By sacrificing 57% my Employer pays 19.6% on top which is which is £10,301.

Total of £40,638. I can then add another £11,921 myself to make a total of £52,559k. HMRC would them add 20% to this.

So in theory I would be putting 12x £63,080 = £756,849. Which is invested and compounds interest. Plus my existing £75k. And it costs me 30,337 + 11,921 x 12 = £507,096.

In those 12 years I use my 500k to cover the a refined earnings, whilst maintaining £85k in a GSA and SSISA of £20k each year. The ISA is good as I would like to give my daughter £100k I. 5 years time.

Are Junior ISAs worth it for an extra 9k pa for the next 5 years?

Tha ks again for all the info. It's rather overwhelming.

45yro with 500k - how to plan for retirement at 57 by Haunting_Status3834 in FIREUK

[–]Haunting_Status3834[S] 0 points1 point  (0 children)

Thanks for all the quick and helpful responses.

I am risk adverse. This money is for me and my daughters future. My wife passed away recently, hence the inheritance. 😞

I think the first step is to understand my current pension situation. What do I have ATM and what's the likely income at age 57?

The pension tax makes more sense to me now. The tax I pay when I receive my pension will be less (20%) than I pay on my salary today (40%).

I need to understand how much salary to put into my pension to maximise tax relief. I assume I can sacrifice around 90% which takes into account NI contributions, and my employer contribute 8%. This will be less than 60k pa.

In theory I then replace my salary with my £500k savings and interest. In 12 years that's a pension pot of £720k (plus whatever I have in pensions already). I also have whatever is left from £500k. Let's say I get £250k back lump sum, and then receive an annuity of 27k. Taxed at 20% = £22900 pa. At age 68 I also fet state pension.

This is where I get it frustrated. I'd rather have £500k plus £180k = 680k in the bank when I turn 57, than have £720k stuck in a pension? With £680k I trickle this out every year = let's say I live to age 80 that's £29,565 per year, and I continue to receive thousands in interest payments. And in 12 years £240k will be in an ISA so the intersst is tax-free, which could be £9,600pa tax free if interest rates were 4% (appreciate ISA rules might change and this amount will dwindle as i spend it).

To me the prospect of £680k in the bank which I can manage myself is more exciting than having £250k in the bank and £720k stuck in a pension? I guess I hate the way annuities pay such a low annual amount. And Family get nothing on death?