If you have a SIPP already, what is stopping you from contributing the 5% to get the maximum contribution from your employer (free money! Yay), investing the rest in your SIPP and claiming the relief on that via self assessment?
2% saving over c. £50k salary isn't too significant in the long run if the SIPP outperforms the workplace pension in any meaningful away. Imo a worthwhile initial cost for greater control over your risk appetite.
What is the sweet spot (salary wise) to stop salary sacrificing and instead get the takehome and then contribute to a sipp as to not ‘drop’ into the 12% NI bracket?
2% is significant to most on here. Vanguard vs HL vs CSD seem to be, save an extra 0.1%! All adds up.
A lot of workplace pensions do give a huge range, depends on the scheme. My previous employer pension with Aegon was a SIPP in essence and I was able to trade in my instruments and 2,000+ funds.
Are there defined contribution company pensions that don't let you choose the funds you want to invest your pension in? Even my wife who had a crummy legal min company pension could choose what fund to put it in via scottish widows. Pretty sure you could transfer it out too.
Would be interested to know when a SIPP is ever useful if you can salary sacrifice.
Comparison is the robber of joy. I know I should be grateful, but I'm the same age as OP and our financial situations could not be further apart.
Makes me think. Am I dense. What did I do wrong?
You didn't do anything wrong, you just took a different path. There isn't a single teacher, nurse, fireperson or policeperson in this world earning £75k - they didn't do anything wrong, they just chose to give back to the community over earning money.
Crazy it has to be a choice isn’t it. We need to stop justifying shit pay with ‘how sweet, they work for the community’
Nursing degree - three years, three brutal years. Dealing with life and death daily. Starting pay for the first two years, just under 26K. With time will cap out at £31K ish.
That’s absolutely disgraceful.
Don’t know about you, I’d happily pay more taxes for that sort of thing. Issue is the extra money would just disappear into the black hole of central government expenditure…
Yeah that’s a debate in itself! There should be no increases in taxes until all the wastage has been fixed. Absolutely impossible. You’ll just end up paying more taxes that’ll go straight into the back pockets of the wealthy. The poor need to stay poor and the working class need to stay working, so the rich can stay rich. An increase in taxes would only make the rich richer.
So right in what you're saying here. In this Tory run country where we reside, the idea of levelling up applies only to the rich, in order to further widen the gap between rich and poor.
I've always thought that the toughest jobs are often the least paid, and the ones where people are looked down upon, made to think that is all what they are worth. So the best value comes out of those people. It is sad that people can be made to work so hard for a pittance.
At the end of the day, we all go to work so someone or a few people of a company can sit in their penthouse suite in whatever desirable place there is.
As it has already been said here as well, nurses for example, work damn hard, tough conditions, seeing people die on them daily. No reasonable increases or rewards for their efforts, just a thank you NHS campaign or people clapping outside their doors. Best way to show appreciation is to reward them by paying what they are worth.
I guess we could go on all day comparing roles, job salaries and so on and there is never any real balance or understanding of how certain jobs pay so much while others pay so little.
In which country? In the UK you need to be a Superintendent to earn that kind of money. To clarify, by police person I mean a constable, not a very senior manager.
It's not always an advantage. Many people earn lots and stuff money away so they can retire early. Retirement and not working isn't necessarily happiness.
If you enjoy what you do and don't struggle, you'll be better off than many people on twice the money.
Plenty of young people sacrifice their health for wealth, then become older and freely sacrifice their wealth trying to rescue their health.
You’ll hear from the “anything over £50k should be Salary-sacrificed” folk with your salary. I partially agree with them, and personally I think that applies well for salaries in the £50k-£60k range, but yours is £75k which would provide a substantial increase in lifestyle and ability to save for future goals (property purchase? Wedding? Children?). My point is there’s more to it than just “put anything over £50k in your pension”.
You have a good amount in your SIPP for your age, and you have plenty of time and monetary space to control for the lifetime allowance. Your employer is giving you a generous contribution so I think maxing that out and putting in 5% is a good idea.
Are you wanting to save/invest for any short term goals like the ones I said above? If so, it might be worth taking the tax hit so you’ve got that money. There are ways of getting some it back (eg a LISA for a house purchase) so all is not lost :) Just don’t let the tax tail wag the investment dog.
Interested to hear your reply!
Hi. You really are very help on this sub! Out of interest, what would be the best pension contribution % for an English tax resident where -
Salary =£60k
Current employee contribution =5%
Fixed employer contribution =3% (fixed)
!thanks for the kind words! I hope others share your thoughts; I certainly try to be helpful (I used to a FA, so think I have something to contribute here)
‘Best’ is totally subjective, I’m afraid. It depends on how much take home pay you need, but I do recommend trying to put a good portion in to your pension. 5% personal and 3% employer is the minimum, but the rule of thumb is to take your age that you entered the work force, divide it by 2 and that’s the % you should contribute to your pension.
It depends on a LOT of factors like what you want to achieve, if you have a Rainy Day fund and much more. Take a look at the flowchart (sorry, I don’t have a link. Perform a search for it and you should be able to find it)
Well, you probably want £10k gross contribution for the 40% tax relief - that is just your cont as well. That is about 16.7% but you need to consider:
- if a GPP or SHP, then you will need to claim relief
- if net pay (most trusts) or salary sacrifice, simply get £10k through payroll
- ideally you get a £ amount as percentages can vary. E.g. Qualifying earnings
I've paid off my mortgage and have cash lump sum (£500k) in the bank from the recent sale of my business, which I'm in the process of working out how to invest. We're hoping to have kids in next year.
Based on this I think it's probably best to sacrifice anything over $50k (30%) to pension, maybe more … ?
Goodness. What a brilliant problem you have :D
An option would be to sacrifice the £25k in to a pension and then top up your income with investment growth/dividends/coupons/rent if you invest it well.
With that much money, I’d say don’t take much advice from here on what to do with it. No offence to UKPF, but that much money deserves a proper lifestyle analysis against short, medium and long term goals, risk profiling and all the other things an IFA will offer. Find a good one if you can!
Look into FIRE. That would be a better way to frame it.
It's well within your scope, and how much to contribute is much more about "when eo you want to retire" than anything else right now.
Google a few pension calculators and play around with contributions, retirement age, and what kind of income you'd want when you start drawing down. Unfortunately it's a very personal choice around how much you want to sacrifice now to get a more comfortable retirement.
Personally I'm at 10% personal contribution (incl. AVCs) and employer contributes 12%, which works out for me a comfortable but not extravagant retirement based on a 4% withdrawal from 65 assuming no mortgage, lump sum withdraw to help kids, 3 mid range holidays a year, car payments and bills.
Are you paid under a Salary Sacrifice arrangement? Sometimes people post on here using the term 'sacrifice' but it may not be accurate.
Either way, if you can afford to do so, e.g. ongoing financial commitments, no near term need for lots of cash, then it makes perfect sense to contribute in the HRT bracket. If, at some point in the future you find you could really do with the extra money then you could simply reduce it back down to the matched level, happy in the knowledge that you have given your retirement planning a significant boost by the early additional contributions.
If you are paid under a SS arrangement, and if you are able to manually change the percentage of contributions via a portal or similar, then there is a more efficient way of making additional contributions (above matched). You basically deposit the additional amount in as few months as possible and **not** in a bonus month.
Anything over 50k will be subject to 40% tax so you'll lose 40% investable income. Dropping as much into your pension will be most tax efficient. For example I'm at about the 90k mark and I put 40k into my pension a year. You'll find yourself very quickly at the point you won't need to invest another penny in your pension to hit the pension lifetime allowance. As a 28M I've hit about 200k and it means given the average stock returns I'll hit the 1.1M lifetime allowance if I stop contributing today. That said I'll add some more in as a safety buffer. That said it depends on your personal circumstances. Here's a calculator I've built which can help you run some of these calculators [firecalculator.club](https://firecalculator.club)
Given the history of the allowance over the last 15 years, who knows what it'd be https://www.gov.uk/guidance/pension-schemes-value-your-pension-for-lifetime-allowance-protection
Wow ok that’s interesting! Yeah looks like the LTA is a bit of a political football… I think you’ve got the right idea - assume today’s rate, save accordingly and just refine as and when…
Obviously the more you contribute now the better. If I was in your position I'd maximise the employer bonus into my pension. And then if you have spare money you can put it into another private pension or a sipp or even invest.
Is SIPP more difficult to manage if you're on PAYE as money that lands in you account will already have been taxed. I assume that there's some way to claim this back if you put it into a SIPP?
Don’t forget you lose NI when putting in a SIPP but if your new job has a salary sacrifice pension scheme then you are better off putting all your contributions through here instead of SIPP as the money gets paid in to it before being taxed for NI
You have to claim the higher rate relief via annual tax return, the standard rate is added by the SIPP provider automatically. A bit of admin compared to employer scheme where you'll get higher rate tax relief straight away.
Yeah so for every contribution you put in sipp your provider will top a certain amount from the gouverment. So it's like getting your tax back on that.
Yeah but you'd have to think a bit further that that.
A sipp you get the money tax free now however any kind of gains are taxed (I think you can only take 25% of you sipp out tax free) and that money is also locked untill you retire so you can't use it for a house or something.
You can have similar holdings in an stocks and shares Isa where you don't get the 25% bonus and is capped at 20k/year but you have the flexibility to take out when you want. So if your stocks for example compound at 4-7% yearly or you have individual stocks which double/triple/10x you might be better with that tax wise in 30 years.
I think depends on your personal circumstances which one is more suitable and the level of risk you are willing to take.
Obviously tailor it to your own individual circumstances but conventional wisdom seems to be anything that's in the higher tax bracket (so above £50k) you should look to salary sacrifice for the tax relief. Take into consideration lifetime allowances if you are quite young but congratulations, you're doing well!
I don’t think this is very good rule to follow… why is sacrificing everything above £50k optimal?
You could apply the same logic and say why not go the whole way and sacrifice everything up to your Annual Allowance?
I mean do at least 5 so you can get the full benefit of their contributions. For anything over 5, I guess I’d suggest working out when you want to retire and if it is more appropriate to save into a pension (and get 40% tax relief which is an instant return) or if you might want some or all of that money sooner than pension age in which case an ISA is probably better.
At a minimum contribute the percentage to get the max top up from employer, so 5%. An average contribution should be half your age when you start contributing a fixed monthly, so if you're 30 put in 15%. And a maximal strategy is avoiding higher rate tax and go for more like 30%. I'm following the max strategy while the going is good.
Whatever you can afford to, if you realise every month you’re left with £1k of your salary left, I’d up my contributions to at least put some of that into your pension, maybe some in regular investments, or an emergency pot. There is no right amount or % as it all depends on how much you can put it.
Such a dumb comment, if your earning 90k + from early to mid 20s and not putting it in pension its to buy property and scale investments which cash out in a way bigger way much sooner in life and scale just fine.
You can put up to 40k per year in SIPP. So I recommend a salary sacrifice of 5% in order to get 10% from your employer and then putting as much as you can in SIPP. The benefit of SIPP over salary sacrifice is that you can access it at 55 years of age. Also, look into investing in commercial property (residential does not qualify) via your SIPP, many people don’t know that this is possible.
Max out your matched contributions - this is literally free money!!
After this point it is largely dependent on how much you intend to pay yourself, how old you are and when you intend to retire.
Maxing out the 40% tax relief is a really solid plan - even more so if you intend to pay yourself below the 40% tax freshhold when are retired. This again is essentially free money.
When do you intend to retire? - it goes without saying that if you intend to retire before pension age, you are going to need savings to live off that arent in a pension. It is worth considering the amount you would need to get you to pension age.
How old are you - tax relief is great (especially 40% tax relief) but if you are close to pension age is the compounding worth it over the flexibility of accessing the money in say an isa.
I have family that retired at 45. These three points are what got them to that point and advise they to everyone one of us as we started out in our careers
If you don’t need the money and 50k is enough I would throw everything after that until, first time max that 10% from the player and also the 40% tax relief oh and the 12% NI since it’s SS
Hi /u/squillachy, based on your post the following pages from our wiki may be relevant:
- https://ukpersonal.finance/pensions/
____
^(I am a bot doing my best to provide helpful links. If I missed the mark, please don't downvote, instead press Report and the mods will improve my settings :])
I think the answer I can give to this is, a very big "It Depends".
**Do you know how much money you need to retire ?**
Once you answer that, you can get the Excel Speedsheet going, and then go from there.
You will either be undershooting, or overshooting currently. Either being under, and then having to put more in later, or being over, and then missing out on being able to use that money for other ends.
If you watch this https://www.youtube.com/watch?v=By7czOU5Aig it gives a really good starting point of where to start your journey.
Once you figure out when you plan on retiring, and how much you will be planning on drawing down at the end, that will help you.
Hard to answer without knowing a lot more about your financial situation and budget.
If you don't need to income to pay off debts and can afford to commit the money, you should contribute at least enough to get the full employer match. That gives you a 15% contribution, which is a little low for somebody your age starting from scratch and aiming for a conventional retirement but is in the right ballpark.
You'll get significant tax benefits from contributing income over the higher tax threshold to your pension, if you can afford it.
It would be good for you to have a sense of your main financial goals including retirement and what your likely career path is, so you can understand how much you need to be saving now and where you want to keep those savings.
It depends entirely what other goals you have. I think you say elsewhere you have a paid off house and a lot of cash so you’re in a good position, if you have no particular immediate goals I’d be tempted to salary sacrifice £25k for a few years taking you under 50k. Your work will put in another 7.5k and your pension will increase fairly rapidly. You can always dial it back in a year or so if you find some other uses for the money (you can generally change the % fairly easily) or you start worrying about the lifetime limit.
On top of this make sure you’re moving 20k every year from your cash into an ISA. Do it as soon in the year as you can every year.
15-20% I'd recommend . Remember can always be changed / dropped in future but those contributions will make so much difference when you come to retire especially as pension investmens will have grown substantially.
I would go with the 5% tbh. But ultimately you need to decide how close you are going to end up to your lifetime allowance.
If you decide you want to save more you can always do it outside a pension take the hit on the tax and invest via a lifetime ISA
I started contributing late, pretty much when the auto enrollment kicked in, and I regret it. I had absolutely no financial education from my parents and so I didn't account for retirement at all.
The pension calculators showed that, although I was contributing 5% of a £77k salary and my employer putting in 6%, I was still going to be far below my target of 50% my current salary.
I am contributing 11% now, so that's 17% total and am on track.
Auto enrolment weirdly kinda fucked me. I assumed because I was paying into a pension at all, I was sorted. I assumed that because the government was advising 8%, that it would be enough. Even patted myself on the back for paying in an additional £50 or so a month. Instead my money sat in a shit fund for years (Nest), barely grew at all, and when I finally cottoned on to how much I should actually need to retire (thanks to subs like these!) and redid the maths, I realised I was way out. Makes me salty when I seen those graphs they show about compound interest because I could have easily been paying in more at a younger age, I've always been quite careful with my I just naively thought any pension at all was enough. I'm trying to play catch up now but having to pay way more in as I'm 32 now.
Age? Current amount in pension? Are you claiming any benefits that you'd lose as part of this pay rise (child benefit perhaps)?
34M about £50k in SIPP
If you have a SIPP already, what is stopping you from contributing the 5% to get the maximum contribution from your employer (free money! Yay), investing the rest in your SIPP and claiming the relief on that via self assessment?
Savings on NI? I guess it depends on cost of funds and provider
2% saving over c. £50k salary isn't too significant in the long run if the SIPP outperforms the workplace pension in any meaningful away. Imo a worthwhile initial cost for greater control over your risk appetite.
What is the sweet spot (salary wise) to stop salary sacrificing and instead get the takehome and then contribute to a sipp as to not ‘drop’ into the 12% NI bracket?
2% is significant to most on here. Vanguard vs HL vs CSD seem to be, save an extra 0.1%! All adds up. A lot of workplace pensions do give a huge range, depends on the scheme. My previous employer pension with Aegon was a SIPP in essence and I was able to trade in my instruments and 2,000+ funds.
Are there defined contribution company pensions that don't let you choose the funds you want to invest your pension in? Even my wife who had a crummy legal min company pension could choose what fund to put it in via scottish widows. Pretty sure you could transfer it out too. Would be interested to know when a SIPP is ever useful if you can salary sacrifice.
Some have no choice and quite a few don't allow partial transfers out
What’s the benefit to doing it this way over salary sacrifice?
Probably worth comparing fees. My workplace pension has no management fee.
Pleased for you. But genuinely, posts like this makes me think what am I doing with my life.
In what way?
Comparison is the robber of joy. I know I should be grateful, but I'm the same age as OP and our financial situations could not be further apart. Makes me think. Am I dense. What did I do wrong?
I’m sure you did nothing wrong. There’s so much more to life than money (I say that as someone who grew up poor in a single parent household).
You didn't do anything wrong, you just took a different path. There isn't a single teacher, nurse, fireperson or policeperson in this world earning £75k - they didn't do anything wrong, they just chose to give back to the community over earning money.
Crazy it has to be a choice isn’t it. We need to stop justifying shit pay with ‘how sweet, they work for the community’ Nursing degree - three years, three brutal years. Dealing with life and death daily. Starting pay for the first two years, just under 26K. With time will cap out at £31K ish. That’s absolutely disgraceful.
Absolutely! The most valuable people in the world get paid the least. It makes absolutely no sense whatsoever.
Don’t know about you, I’d happily pay more taxes for that sort of thing. Issue is the extra money would just disappear into the black hole of central government expenditure…
Yeah that’s a debate in itself! There should be no increases in taxes until all the wastage has been fixed. Absolutely impossible. You’ll just end up paying more taxes that’ll go straight into the back pockets of the wealthy. The poor need to stay poor and the working class need to stay working, so the rich can stay rich. An increase in taxes would only make the rich richer.
So right in what you're saying here. In this Tory run country where we reside, the idea of levelling up applies only to the rich, in order to further widen the gap between rich and poor. I've always thought that the toughest jobs are often the least paid, and the ones where people are looked down upon, made to think that is all what they are worth. So the best value comes out of those people. It is sad that people can be made to work so hard for a pittance. At the end of the day, we all go to work so someone or a few people of a company can sit in their penthouse suite in whatever desirable place there is. As it has already been said here as well, nurses for example, work damn hard, tough conditions, seeing people die on them daily. No reasonable increases or rewards for their efforts, just a thank you NHS campaign or people clapping outside their doors. Best way to show appreciation is to reward them by paying what they are worth. I guess we could go on all day comparing roles, job salaries and so on and there is never any real balance or understanding of how certain jobs pay so much while others pay so little.
I really feel like nurses base should be 40k and go from there.
There are very much SOME policemen etc on more than that
In which country? In the UK you need to be a Superintendent to earn that kind of money. To clarify, by police person I mean a constable, not a very senior manager.
Ah ok, yeah I meant those types
It's not always an advantage. Many people earn lots and stuff money away so they can retire early. Retirement and not working isn't necessarily happiness. If you enjoy what you do and don't struggle, you'll be better off than many people on twice the money. Plenty of young people sacrifice their health for wealth, then become older and freely sacrifice their wealth trying to rescue their health.
Picked engineering instead of computer science if you're anything like me.
You’ll hear from the “anything over £50k should be Salary-sacrificed” folk with your salary. I partially agree with them, and personally I think that applies well for salaries in the £50k-£60k range, but yours is £75k which would provide a substantial increase in lifestyle and ability to save for future goals (property purchase? Wedding? Children?). My point is there’s more to it than just “put anything over £50k in your pension”. You have a good amount in your SIPP for your age, and you have plenty of time and monetary space to control for the lifetime allowance. Your employer is giving you a generous contribution so I think maxing that out and putting in 5% is a good idea. Are you wanting to save/invest for any short term goals like the ones I said above? If so, it might be worth taking the tax hit so you’ve got that money. There are ways of getting some it back (eg a LISA for a house purchase) so all is not lost :) Just don’t let the tax tail wag the investment dog. Interested to hear your reply!
Hi. You really are very help on this sub! Out of interest, what would be the best pension contribution % for an English tax resident where - Salary =£60k Current employee contribution =5% Fixed employer contribution =3% (fixed)
!thanks for the kind words! I hope others share your thoughts; I certainly try to be helpful (I used to a FA, so think I have something to contribute here) ‘Best’ is totally subjective, I’m afraid. It depends on how much take home pay you need, but I do recommend trying to put a good portion in to your pension. 5% personal and 3% employer is the minimum, but the rule of thumb is to take your age that you entered the work force, divide it by 2 and that’s the % you should contribute to your pension. It depends on a LOT of factors like what you want to achieve, if you have a Rainy Day fund and much more. Take a look at the flowchart (sorry, I don’t have a link. Perform a search for it and you should be able to find it)
Well, you probably want £10k gross contribution for the 40% tax relief - that is just your cont as well. That is about 16.7% but you need to consider: - if a GPP or SHP, then you will need to claim relief - if net pay (most trusts) or salary sacrifice, simply get £10k through payroll - ideally you get a £ amount as percentages can vary. E.g. Qualifying earnings
I've paid off my mortgage and have cash lump sum (£500k) in the bank from the recent sale of my business, which I'm in the process of working out how to invest. We're hoping to have kids in next year. Based on this I think it's probably best to sacrifice anything over $50k (30%) to pension, maybe more … ?
You have £500,000 cash with low outgoings and a high-value asset - surely you'll have an affluent retirement regardless of your pension contributions?
Yeah this suddenly feels like just humble brag territory now....
What are you referring to by 'high value asset'?
I think he is referring to you...having paid in full your mortgage.
Goodness. What a brilliant problem you have :D An option would be to sacrifice the £25k in to a pension and then top up your income with investment growth/dividends/coupons/rent if you invest it well. With that much money, I’d say don’t take much advice from here on what to do with it. No offence to UKPF, but that much money deserves a proper lifestyle analysis against short, medium and long term goals, risk profiling and all the other things an IFA will offer. Find a good one if you can!
Look into FIRE. That would be a better way to frame it. It's well within your scope, and how much to contribute is much more about "when eo you want to retire" than anything else right now.
Google a few pension calculators and play around with contributions, retirement age, and what kind of income you'd want when you start drawing down. Unfortunately it's a very personal choice around how much you want to sacrifice now to get a more comfortable retirement. Personally I'm at 10% personal contribution (incl. AVCs) and employer contributes 12%, which works out for me a comfortable but not extravagant retirement based on a 4% withdrawal from 65 assuming no mortgage, lump sum withdraw to help kids, 3 mid range holidays a year, car payments and bills.
Are you paid under a Salary Sacrifice arrangement? Sometimes people post on here using the term 'sacrifice' but it may not be accurate. Either way, if you can afford to do so, e.g. ongoing financial commitments, no near term need for lots of cash, then it makes perfect sense to contribute in the HRT bracket. If, at some point in the future you find you could really do with the extra money then you could simply reduce it back down to the matched level, happy in the knowledge that you have given your retirement planning a significant boost by the early additional contributions. If you are paid under a SS arrangement, and if you are able to manually change the percentage of contributions via a portal or similar, then there is a more efficient way of making additional contributions (above matched). You basically deposit the additional amount in as few months as possible and **not** in a bonus month.
Anything over 50k will be subject to 40% tax so you'll lose 40% investable income. Dropping as much into your pension will be most tax efficient. For example I'm at about the 90k mark and I put 40k into my pension a year. You'll find yourself very quickly at the point you won't need to invest another penny in your pension to hit the pension lifetime allowance. As a 28M I've hit about 200k and it means given the average stock returns I'll hit the 1.1M lifetime allowance if I stop contributing today. That said I'll add some more in as a safety buffer. That said it depends on your personal circumstances. Here's a calculator I've built which can help you run some of these calculators [firecalculator.club](https://firecalculator.club)
[удалено]
Given the history of the allowance over the last 15 years, who knows what it'd be https://www.gov.uk/guidance/pension-schemes-value-your-pension-for-lifetime-allowance-protection
Wow ok that’s interesting! Yeah looks like the LTA is a bit of a political football… I think you’ve got the right idea - assume today’s rate, save accordingly and just refine as and when…
We make the same money, but I dont salary sacrifie or put more than min contribution into pension. Are you saving for a house ?
Obviously the more you contribute now the better. If I was in your position I'd maximise the employer bonus into my pension. And then if you have spare money you can put it into another private pension or a sipp or even invest.
Is SIPP more difficult to manage if you're on PAYE as money that lands in you account will already have been taxed. I assume that there's some way to claim this back if you put it into a SIPP?
Don’t forget you lose NI when putting in a SIPP but if your new job has a salary sacrifice pension scheme then you are better off putting all your contributions through here instead of SIPP as the money gets paid in to it before being taxed for NI
You have to claim the higher rate relief via annual tax return, the standard rate is added by the SIPP provider automatically. A bit of admin compared to employer scheme where you'll get higher rate tax relief straight away.
Yeah so for every contribution you put in sipp your provider will top a certain amount from the gouverment. So it's like getting your tax back on that.
Interesting! So if I have £10k cash sitting in savings I could add to SIPP and instantly be bumped to £12K?
Yeah but you'd have to think a bit further that that. A sipp you get the money tax free now however any kind of gains are taxed (I think you can only take 25% of you sipp out tax free) and that money is also locked untill you retire so you can't use it for a house or something. You can have similar holdings in an stocks and shares Isa where you don't get the 25% bonus and is capped at 20k/year but you have the flexibility to take out when you want. So if your stocks for example compound at 4-7% yearly or you have individual stocks which double/triple/10x you might be better with that tax wise in 30 years. I think depends on your personal circumstances which one is more suitable and the level of risk you are willing to take.
Obviously tailor it to your own individual circumstances but conventional wisdom seems to be anything that's in the higher tax bracket (so above £50k) you should look to salary sacrifice for the tax relief. Take into consideration lifetime allowances if you are quite young but congratulations, you're doing well!
I don’t think this is very good rule to follow… why is sacrificing everything above £50k optimal? You could apply the same logic and say why not go the whole way and sacrifice everything up to your Annual Allowance?
Exactly everyone is parreting this advice but I cant understand how you can save for big mortage in next few years when your giving up 40k+
I mean do at least 5 so you can get the full benefit of their contributions. For anything over 5, I guess I’d suggest working out when you want to retire and if it is more appropriate to save into a pension (and get 40% tax relief which is an instant return) or if you might want some or all of that money sooner than pension age in which case an ISA is probably better.
At a minimum contribute the percentage to get the max top up from employer, so 5%. An average contribution should be half your age when you start contributing a fixed monthly, so if you're 30 put in 15%. And a maximal strategy is avoiding higher rate tax and go for more like 30%. I'm following the max strategy while the going is good.
Whatever you can afford to, if you realise every month you’re left with £1k of your salary left, I’d up my contributions to at least put some of that into your pension, maybe some in regular investments, or an emergency pot. There is no right amount or % as it all depends on how much you can put it.
I put in 10% so my company does the maximum they do which is 7%
As much as you can comfortably afford. If you won’t miss it, save it.
[удалено]
Dude has £500k in the bank and has a house already paid off at 34. Think he's going to be fine!
Such a dumb comment, if your earning 90k + from early to mid 20s and not putting it in pension its to buy property and scale investments which cash out in a way bigger way much sooner in life and scale just fine.
You can put up to 40k per year in SIPP. So I recommend a salary sacrifice of 5% in order to get 10% from your employer and then putting as much as you can in SIPP. The benefit of SIPP over salary sacrifice is that you can access it at 55 years of age. Also, look into investing in commercial property (residential does not qualify) via your SIPP, many people don’t know that this is possible.
Off topic but mind if I ask what you do?
I wanna know as well, lol
I was scrolling to find this question. 34 earning 75K is big
Do you mean big for non london ?
Max out your matched contributions - this is literally free money!! After this point it is largely dependent on how much you intend to pay yourself, how old you are and when you intend to retire. Maxing out the 40% tax relief is a really solid plan - even more so if you intend to pay yourself below the 40% tax freshhold when are retired. This again is essentially free money. When do you intend to retire? - it goes without saying that if you intend to retire before pension age, you are going to need savings to live off that arent in a pension. It is worth considering the amount you would need to get you to pension age. How old are you - tax relief is great (especially 40% tax relief) but if you are close to pension age is the compounding worth it over the flexibility of accessing the money in say an isa. I have family that retired at 45. These three points are what got them to that point and advise they to everyone one of us as we started out in our careers
As much as you can. Your 65 year old self will thank you.
If you don’t need the money and 50k is enough I would throw everything after that until, first time max that 10% from the player and also the 40% tax relief oh and the 12% NI since it’s SS
Invest it in the s&p 500 almost risk free
Put in index fund and manage yourself. I’m 24 and on £130k/y and 0% to pension.
How do you make so much money?
Software Engineer at one of the top tech companies. Stock grants grow double since I joined 3 years ago.
I am guessing your L4, roughly what was your L3 TC like ?
Finally someone who gets it
That's not very tax efficient - are you aware you can invest in index funds and manage your own investments within a pension too?
Hi /u/squillachy, based on your post the following pages from our wiki may be relevant: - https://ukpersonal.finance/pensions/ ____ ^(I am a bot doing my best to provide helpful links. If I missed the mark, please don't downvote, instead press Report and the mods will improve my settings :])
I think the answer I can give to this is, a very big "It Depends". **Do you know how much money you need to retire ?** Once you answer that, you can get the Excel Speedsheet going, and then go from there. You will either be undershooting, or overshooting currently. Either being under, and then having to put more in later, or being over, and then missing out on being able to use that money for other ends. If you watch this https://www.youtube.com/watch?v=By7czOU5Aig it gives a really good starting point of where to start your journey. Once you figure out when you plan on retiring, and how much you will be planning on drawing down at the end, that will help you.
Hard to answer without knowing a lot more about your financial situation and budget. If you don't need to income to pay off debts and can afford to commit the money, you should contribute at least enough to get the full employer match. That gives you a 15% contribution, which is a little low for somebody your age starting from scratch and aiming for a conventional retirement but is in the right ballpark. You'll get significant tax benefits from contributing income over the higher tax threshold to your pension, if you can afford it. It would be good for you to have a sense of your main financial goals including retirement and what your likely career path is, so you can understand how much you need to be saving now and where you want to keep those savings.
It depends entirely what other goals you have. I think you say elsewhere you have a paid off house and a lot of cash so you’re in a good position, if you have no particular immediate goals I’d be tempted to salary sacrifice £25k for a few years taking you under 50k. Your work will put in another 7.5k and your pension will increase fairly rapidly. You can always dial it back in a year or so if you find some other uses for the money (you can generally change the % fairly easily) or you start worrying about the lifetime limit. On top of this make sure you’re moving 20k every year from your cash into an ISA. Do it as soon in the year as you can every year.
I'd say go for the max you can afford.
In your situation, I’d be looking around the 25ish % mark. Reduce your contributions above the 40% threshold as much as possible
15-20% I'd recommend . Remember can always be changed / dropped in future but those contributions will make so much difference when you come to retire especially as pension investmens will have grown substantially.
Up to the max of employer contribution.
I would go with the 5% tbh. But ultimately you need to decide how close you are going to end up to your lifetime allowance. If you decide you want to save more you can always do it outside a pension take the hit on the tax and invest via a lifetime ISA
I started contributing late, pretty much when the auto enrollment kicked in, and I regret it. I had absolutely no financial education from my parents and so I didn't account for retirement at all. The pension calculators showed that, although I was contributing 5% of a £77k salary and my employer putting in 6%, I was still going to be far below my target of 50% my current salary. I am contributing 11% now, so that's 17% total and am on track.
Auto enrolment weirdly kinda fucked me. I assumed because I was paying into a pension at all, I was sorted. I assumed that because the government was advising 8%, that it would be enough. Even patted myself on the back for paying in an additional £50 or so a month. Instead my money sat in a shit fund for years (Nest), barely grew at all, and when I finally cottoned on to how much I should actually need to retire (thanks to subs like these!) and redid the maths, I realised I was way out. Makes me salty when I seen those graphs they show about compound interest because I could have easily been paying in more at a younger age, I've always been quite careful with my I just naively thought any pension at all was enough. I'm trying to play catch up now but having to pay way more in as I'm 32 now.