Reply With QuoteI was in Andalusia 2 weekends ago, still lovely weather.Originally Posted by Mick P
Seems reasonable to me, although as others have said letting a property is a PITA even when you’re young - more so if you’re a long flight away.
You seem to also be making some assumptions about taxation which I’m not sure I understand. If you need £72k net then your gross would be £99k if you’ve used up all of your tax free mechanisms. Even your £800k cash will be attracting tax on interest unless you find a better home for it, so not only inflation to factor in.
In my experience things get a lot more clear as you get within 5 years of your planned retirement date. At least you have a plan in mind. The ticking time bomb is that most people in this country don’t.
I was in Andalusia 2 weekends ago, still lovely weather.
Part of my retirement plans are to dispose of any investment property; it's a PITA now, average investment and going to become more difficult under future governments ...
I had a meeting with my accountant on Friday. She said her clients with BTLs (which appears to be most of them) aren't getting rid just yet but equally aren't adding to their portfolios either. She suggested I look at EIS and VCT investments first as they will reduce my tax liability.
I'd be using cash from ISAs, property sale, plus 25% SIPP tax free element to fund the first 10+ years, plus the income from the rental.
That being said you and the IFA gentleman make sense about property rental being a PITA and logically why would I buy a flat to rent for £1k a month in the UK and also rent a flat for £1k a month in Thailand?!!? Now it makes no sense lol. Better to just buy the apartment in Thailand for that same price, the net in/out position is the same as I lose the £1k monthly rental income but lose the £1k monthly rental payment but the advantage is I will have £12k of my personal allowance/tax threshold still to keep meaning less tax payable on any SIPP withdrawals
As others have said Ryan - you really ought to see a financial planner. You can get a fixed fee review of your financial position and plans, and the advice will likely be far more valuable than the outlay.
I like reading articles like this just to test our thinking on where we will move to once I retire. We have three main criteria:
1. Must have very good NHS services
2. Needs good international airport access ie. less than an hour
3. Must be close to a good city which feels like it is on the up, with good public transport connections
The frontrunners are Northumberland and Nth Yorkshire, and possibly Worcestershire/Herefordshire. It's an ongoing discussion in our house. We are fortunate to have so many choices of towns & villages with varied landscapes and history to choose from but once you think about what is important to you, the list starts to shrink and you can hone in on what really suits your lifestyle and expectations.
Had quite a long meeting today with private client tax professional with my mum. So many things you might not have thought of and worth doing although the cost is awful.
Had no idea you could effectively make a will private through a pilot trust, also didn’t know the current advice is to (potentially) use savings before drawing down on a private pension as savings form your estate and are subject to IHT whereas a private pension pot can fall outside although it is taxed as income when it gets to your beneficiaries so perhaps pointless depending on the tax rate of your beneficiaries.
One positive is that my google sheets retirement calculation I made for my mum seems good enough and there isn’t an immediate need to go through their financial planning department unless it’s to calculate gifting and retirement.
I’m not an academic and was out of my depth for 90% of the call so I may have got some of the above wrong or mixed up but if you guys are employing IFAs and planning for retirement I would consider estate planning too.
It is very much a dark art with the IFAs, my accountant kept inviting 'his' IFA to the odd meeting, so felt it was missing the I from the IFA title.
IAF also had a bit of a David Dickinson colour complex about him, a bit Marbella on my money feeling, so never did progress.
Getting my pension statements coming in currently, and think it is time to knuckle down and have the chat with one, maybe even WestBerks on here as he is likely local.
Would like to retire by 55, but pot & savings need to be exactly where I want them. Know I should probably look to create a trust with one investment in the future, but the trust management cost is scary as hell to get my head around even with the returns it gives.
Would likely not fully retire immediately as love what I do and what I can bring to other companies, but maybe stay working on a day rate to keep things ticking over - a few days a month for a few k, tax making sense & could be the right solution.
Or just move west now, swallow the cost of a once-a-month office trip & get our forever home with garage space for a few toys whilst still employed and decisions are easier!
Where in the ‘west’ are you thinking about??
Semi active discussion in our house but we we haven’t done much about potential locations.
Bath / Bradford on Avon area - wife grew up here, I lived there from 12yo, just a lovely part of the world with so much on the doorstep, possibly lakeside in the Cotswolds etc.
Sounds lovely!
My wife is from west London and we won’t be going back there. Currently live in my home town but trying to get the rest of the family on-side to move and clear the mortgage.
West or south-west would be an option if we (I) can find a place to explore.
I’m not sure I understand the drive to relocate when you retire. Haven’t you spent a lifetime building a network of friends and contacts that you leave behind.
Dark art indeed. They present you with multiple options but every option has pitfalls and a trap door, you have to work out the least bad option with no certainty. Worthwhile if you’re rich but a bit rough for an accidental BTL.
For a run of the mill flat on the edge of London we were told a regular trust is prohibitively expensive and for people with actual wealth. They suggested a life interest trust or a licence to occupy and I think we will go with one of them. Either way it’s an unbelievable headache.
If you clear the BTL mortgage you can put it in a trust and let a direct family member live there but if you clear the mortgage you just make your estate bigger increasing the inheritance tax. By the end I thought just forcing the sale of everything and paying inheritance tax is probably worth the money.
If you move and have a mammoth commute, even once a month, it might be easy to get sick of it after a year and speed up retirement. Not necessarily a bad thing.
My mother who retired at 60 exactly fits this pattern. Up to 70 she had to watch her budget. Between 70-80 it became a lot easier - less clubs/activities, less driving, simpler holidays etc. Since 80 she's actually been accumulating cash as she doesn't spend anywhere near what her savings and investments bring in.
Its not necessarily a drive, more of a way to have a change of lifestyle. We're not that wedded to the town we live in and would like to at least explore some alternatives. Also, its a way of becoming mortgage free by selling our existing house and buying something outright.
Ultimately, its all a drive to have the choice to work or not or to just have options.
We've also thought about buying a place overseas for a completely different option, but think we'd both like a base in the UK too.
Also, although we have a great network of friends etc. here, we also have friends all over the place.
If anyone has any links or ideas about resources to help understand locations that would be helpful - at the moment I'm using an old-school road atlas and then following up on Right Move. We did to go Bournemouth to look at some areas a while back and that was really helpful as it helped us to start to clarify what we might be looking for. We're not looking for a place to retire as such, just a different way to live.
Last edited by bambam; 4th October 2023 at 11:07.
I guess if you live in London I can see the desire to exit.
I was born in Kent, lived in London for 15 years then moved back to Kent via a couple of years overseas.
I sometimes fancy moving to the Peak District or similar but I have a network of friends and family here that I’d miss. Although sometime a fresh start seems appealing when I’m sorting out someone else’s mess …
We used to live in west London but have been in Berkshire for over 15 years now (never got round to changing location on my profile!).
I think we need to explore a few more areas so that we can at least have a couple that appeal to us and then we can focus a bit more.
Something coastal would be nice I think.
I live on the North Kent coast. The outflow from London keeps our property market going.
When we are in the UK, we live within 4 miles of our 3 sons and even our grandchildren who work also live in the immediate area, so we have a really good network of family and friends.
We also spend 5 months in Spain and enjoy a good social circle with other expats and since the internet took off in Spain about 10 years ago, we have regular chats with the family via WhatsApp so we don't feel isolated. Also you can pick up British TV, so it's not like being out in the sticks.
We nearly fell into the trap of watching too many "A place in the country" programmes and were close to buying a nice house in rural Devon where I was born and grew up. We didn't do it for two reasons.
Firstly places like Devon attract loads of retirees and due to the weather they spend a lot of time in or around the house and we could become one of them. In Spain we are nearly always out of the house.
Also areas with high levels of retirees from other areas migrating into them struggle to maintain decent levels of medical care and there is a below average availability of hospital beds.
So unless you are prepared to self insure for private treatment you could find yourself in the position of struggling to get medical treatment at an age when you most need it.
Evidently this is a serious problem in Wales.
So I would think twice about moving into country areas and really avoid places on the coast that attract the dreaded grockle. The West Countriers likes the money they bring in but isn't too keen on the problems they cause such as overcrowding and overloading facilities. Also Devon is a bit regional and people who move in are still regarded as grockles until they pick up the patois which will take years. Fortunately I and the wife have the patois but you probably don't.
A better bet may be to move to that nice area you like just up the road.
To answer your last point, you will find once you get older, people quite often tend to sort out your mess.
This thread has been a great motivation to look at where we are & what we want.
So, doing the maths it appears I will retire at 57 in 10 years time and my wife at 52.
First 3 years living on my pension & using some of the TF sum to offset my wife being too young to trigger hers. Should mean we are about 80% current income for life, but will front weight things when we get there.
Then after 5 years, an investment hits a key value where compound interest allows us to enjoy life more / help siblings to clear mortgages / niece university fees etc.
Final review from an IFA on our pensions, and can then look at locking the plans into place.
Last edited by Mj2k; 11th October 2023 at 15:46.
Another great video from Shacky, and seems to back up our decision to drawdown all my wife's £150k DC pension pot between age 55 and 67, and for a state pension(and very small DB pension from 65) to kick in thereafter.
Should give her a £1k income per month from aged 55 for life without paying another penny in tax.
It has also made me think more about my forward tax liabilities and how to minimise these..
https://youtu.be/jiW4i5ErLOc?feature=shared
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If you retire early and have no other incomes you need to extract enough from a SIPP to use up all your personal allowance even if you don’t need the money. Just put any surplus in an ISA.
Once you get the state pension that uses most of your allowance.
That exactly what we are planning to do. Maximise drawdown at the limit of zero band income tax.
It is just coincidental that her pot will last around 10 years as we do this, just in time for a small DC pension (£3k pa) and then state pension (£10k pa) to kick in and take over from the personal pension which at aged 65-67 will be kaput.
As the non tax payer she has the all our savings and investment in her name (beyond any ISAs we individually hold), so intent is to withdraw maximum tax free income each year while also factoring in the £5k starter savings tax free annual allowance.
To be honest I am sure IFAs pay for themselves, but a bit of background work and if you are good at mental maths, a lot of this stuff can be done by yourself for free.
YouTube is making that easier
You Tube, some blogs and forums (like this one) and people like James Shack are definitely making us think more laterally about options.
It seems that my wife can withdraw £15,625 pa tax free (£12,500 zero band and £3,125 as 25% tax free pension). This will burn through the pot quicker than the 10 years.
So, while taking her pension is there any reason she can’t then top up £2,800 net (£3,600 gross) available to everyone each year, or would this fall foul of pension recycling rules?
This would help stretch the pension out a little longer with some further Government contributions.
I have had a quick look at t’interspere, but can’t find anything conclusive.
Anyone know for definite if this is allowed under pension recycling rules?
I don’t understand the rules on pension recycling so maybe get some advice on that.
I guess if you can prove the source of the contributions is from savings rather than a pension withdrawal that seems reasonable…
I don’t know is the answer.
Maybe there is an IFA on here who will know.?
I'd like to retire & have a hobby farm in North Yorkshire....but I don't really feel like retiring because I like the job.
I've lived in the South West for the last 40 years but I still feel much more at home in North Yorkshire. Whenever I see the silhouette of Roseberry Topping I know that I've come home. Money isn't an issue for me. I keep working because I like it. The money is a side effect. I think I love the job more these days because I don't NEED it.
Once you realise that then you also realise that you must still want to keep working because you like it...pressure is off!.....3 days a week plus one day a week passing on my skills to the next generation....so it's not that taxing. If anything pisses you off you know that you can just leave!
Another thing that I often consider....because I have my favourite rants....& The Bear Pit....It's not a lot of use being financially secure/money in the bank/awesome pension, when there's fuck all to spend it on. Try getting a builder/plasterer/electrician/landscape gardener...& dare I say dentist these days.
Yes this is allowed
https://www.hl.co.uk/pensions/insigh...ter-retirement
but your numbers are a bit wrong. The 25% is of the total, not the net, so this year a withdrawal could be £16760, 25% of which is £4190, the tax free cash, and 75% of which is the £12570 tax free allowance.
She can contribute up to £2880 into the pension which then triggers £720 in tax relief, so effectively another £720 in tax free cash. £720 of free money every year.
I’m no FA by the way - this is the internet so
Last edited by PhilT; 15th October 2023 at 18:45.
Thanks for that Phil, and the updated numbers. I’ did since find other links that pension recycling can’t be triggered if annual PCLS is less than £7,500.
https://ivcm.com/wp-content/uploads/...ule_311019.pdf
So by your information and my reckoning my wife should take an annual pension of £16,760 and put £2,880 net back into the fund, leaving her with £13,880.
But that is grossed to £3,600, so effectively she has only removed £13,160 from her pension to get £13,880 income.
That £1,157 per month which should see her fine, as I will be working so will cover all day-to-day household expenses.
So if you keep your tax free lump sum below £7500 you can keep putting in £2880 per year?
That how I read it from the above link.
A really stupid question here, as the online calculators seem to punish early retirement.
If my pot is worth £x currently, and assuming no interest or depreciation and I invest £y in the next 10 years, how is my pension not worth x+y?
Calculators seem to take this projected to a lower retirement age of investment as being less in that time than simply the basic maths.
Bonus is no longer going to pension pre tax, as decided more valuable to us post tax opening up the greater control of early retirement with front weighting before other investments kick in.
Wish I had those investments 10yrs earlier so I could just ditch it all now, but investing aged 15 on a friends fund he hadn’t yet started would have been impossible lol.
Using up holiday currently, and had Friday off, Monday and next Friday and Monday off too, I really enjoy the ability to fit in the gym, long walks, lunch out etc every day. I can’t wait.
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You are 100% correct sir.
Can’t comment on the calculators though I am slightly cynical of those offered by pension providers as they want us to save more more more with them.
On the bonus thing, you’ll be giving up a considerable tax break at your marginal rate just to gain that flexibility… Access to a DC pension is 10 years earlier than your state pension age - possibly earlier than that depending on your age just now.
Sounds like we’re in a very similar position (and age), I’ll be using savings and DC pot to see me through to the DB kicking in.
Trouble is that does not match real returns. Also there are charges to consider which will reduce the value even if the intrinsic amount is constant. Also fund values do vary up and down - so you may not get back what you put in. The big BUT is that the pot will grow over time and with leveling your unit values will increase with regular contributions. 10y cycle should even out even big dips - maybe not the Big Reset (sorry couldn’t resist).
Not working for someone else is superb btw! I retired at 59, 1 year off my DB scheme - which I live of with my wife’s pension and I haven’t touched my DC yet - though my Portuguese account suggest I draw it all down before my 0% NHR runs out as Portuguese income tax levels are punitive. State pension starts in 5 years or so.
Last edited by MartynJC (UK); 15th October 2023 at 23:22.
“ Ford... you're turning into a penguin. Stop it.” HHGTTG
Good shout out fees; whilst being overly simplistic with no interest or depreciation, the reality is that the compound interest should offset these (I hope!) but fully aware they can go backwards.
I love the idea of not working! Know some people think you can get bored etc. My view is if I can do all the things I want & not change lifestyle at all, or even increase disposable income when the investment matures, how on earth can I possibly be bored - especially when my friends are all aiming to retire at a similar time!
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Bonus wise I’ve done the maths on the tax, and yes it is rubbish but helps me out more planning wise to be in my pocket vs locked away. We are both maxing the tax free pension allowance, but might be better with a little more tax getting paid & having the cash invested & accessible.
My spreadsheet has multiple scenarios on it currently, will take another look and no doubt add some others to it!
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All higher rate tax payers over 45 should be chucking as much in their pension as they can afford to, I reckon. As long as when you draw it as income it remains in the basic rate.
Take a pension of £30k pa. After £7.5k (25%) tax free and £12.5k zero tax band, you are only paying tax on £10k of that pension income, which works out a £2k per year (no NI on pension income). Your effective tax rate on that £30k income is 6.7%. Compare that with the 42% tax saving at source from salary sacrifice. It is a complete no brainer.
Plenty of nice cars on this forum, so assume many earn over six figures (or it is all fur coat and no knickers!?) and you get up to 62% tax relief, and only pay tax at 5-10% on the way out. The maths is mad.
I know one thing, I am absolutely caning the pension allowance at the moment. And I would borrow money to max my pension allowance contributions if I had to.
I think I may have posted this up thread ... not sure ... but here it is again just in case ... I was just having a tinker with it myself ...
https://www.2020financial.co.uk/pens...or/#calculator
What is interesting, and mentioned in one of Shack's videos, is that 100% stocks gives you a better outcome than a balanced portfolio ... you just need the guts to hold in the bad times ...
Anyone else using any on-line tools that would be useful for this stuff???
Similarly I think I posted up thread. Firecalc.com has more inputs. It uses U.S. market data and dollars, though I just substitute GBP values.
Timeline is far and away the best I’ve tried, though I think they have removed the free trial so if you aren’t already signed up then it may no longer be possible to do so.
This?
https://www.timeline.co/
Seems only available to IFA professionals .... ??
I think the link I posted uses UK historical data for modelling which I guess will be more conservative than the USA ones ... given S&P500 returns have been better.
Last edited by Montello; 16th October 2023 at 11:48.
the current FCA quoting rules make any investment seem pretty pointless..... of the 3 growth rates attributed to the quote the first 2 are so low that after factoring assumed charges you may as well put it under your mattress and the 3rd is hardly encouraging you to invest. This has come full circle from the days when you had the ability to pretty much put in whatever growth rate you wanted to! Neither does anyone any favours..
with the tax planning for pensions and then VCTs and EIS schemes there are more benefits simply due to the reliefs available and make them worthwhile. Although the latter 2 do have fairly high standard charges. For standard ISAs people get too excited over the perceived tax benefits as IHT is still applicable in most cases, although the reduction of CGT has made them a little more interesting again.
for those retiring early there is the difficult choice between utilising personal allowance to the max and drawing the appropriate amount from accessible pensions prior to state pension age and giving up the IHT benefits of holding pensions. I tend to focus on the recipients needs rather than their children's as its their money and retirement first and foremost.
I have no kids so just need to decide when to pack up, sell up and turn on the income tap. Slight difficulty is the GF has 2 kids that she needs/wants to factor in so that will need to be considered when/if we have a house together.
Yes, I recall sitting with an advisor when I had my own company discussing pensions and management of them, those numbers made it a real shocker!
We have no kids, so our siblings will get whatever is left (house / funds assuming we haven’t had to use for care homes) when we pop our clogs. Our focus is our needs and lifestyle in retirement, less about them enjoying theirs on our earnings when we are 6ft under.
Yes, will end up paying higher level tax, but can’t really see a way around that if we want to live to the best of our ability financially, especially in the first 10-15 years of it.
Thi is the link to the original US calculator that the British version was derived from. It is interesting to see how the superior long-term US stock performance affects drawdown calculations. I haven't looked into it yet but I presume I could invest my pension into USA stocks through my provider, but I need to check.
https://www.wealthmeta.com/calculato...wal-calculator
Totally follow the math and sentiment. My only concern would be what might happen under a change of Government, in theory there should be "windows" where one can freeze a position if things change but I'm not sure I could get myself totally confident that pensions won't be raided in an unexpected way.
I’ve used the USA one and it’s more generous for obvious reasons. You could of course invest your pot overseas, neither tool is perfect so I guess and average of the two may work. My plans work out using the UK tools so that’s a more conservative view.
Mine is too. Exchange rates are also a potential factor that is hard to model, especially presently where the GBP is up and down like a bride's nightie.
Are you genuinely looking at £30k pension, plus your wife’s to minimise your tax paid, or was that just a random example for the maths?
I’m more for living my life in retirement, but don’t have the kids to set up after I guess, so there are many different lenses at play based on circumstances.
Will plan for IHT as appropriate but won’t live my life differently. I’d rather treat siblings to holidays etc while alive to enjoy it with them; yoi are a long time dead, that’s the only certainty in life. Well, death and then taxes!
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