[Misc] Retirement

[raymondo]

Raymondo, throughout my working life, I always contributed to both my SIPP and Stocks and Shares ISAs. This was more from a 'don't have all your eggs in one basket' philosophy, rather than knowing which one was best; investing tax free on the way in (SIPP), or investing from your post-tax cash, and then enjoying all growth tax free on the way out (ISAs).

Here I am at 64, I've made most of my investing decisions, some good, some not so good, and I'm still not aware of any study on which is the more effective. I guess it depends on time horizon and growth rates.

Yes, very similar for me.
I'm glad I did, as my company pension entitlement was capped after being taken over by PPF! As you say...eggs in different baskets!
I also continue to slowly wind down stock market investments (I'm 69 now) because of volatility issues (geopolitical risks and all that jazz from the other thread).

 

[Sirnormangall]

Same here - deliberately stopped work early to make the most of whatever time, fitness and motivation we have to do 'stuff'. Already been to Qatar and Scotland this year, and have trips to Portugal, Croatia, 6 weeks in Singapore/Oz and Florida booked before year end. Last year was similar (Thailand, Hungary, a month in Canada and other assorted short breaks). I draw enough from pensions to cover basic living costs (keeps me within the basic rate tax threshold, and is essentially skimming of 'performance' rather than reducing capital), the rest is blown from savings (which I bumped up at 55 by taking the 25% tax free amounts from my pension funds). If/when that runs out - doing my best to make sure it does - we'll stop doing so much

I got similarly stung by HSBC pension (Willis Towers Watson) admin when I transferred my small fund away from them - because their procedures were so shite the transfer took ages, just at the time the bond market tumbled (thanks Nadine - suspect this is when yours was transacted as well ?). Ended up with 10%+ less than expected. Luckily global markets performance has been pretty good since.

I’ve done similar and plan to do as much travelling as possible over the next few years as I expect I’ll find it more difficult when I’m in my 70s. It would be easier to plan if we knew how long we were going to live, but I’d rather not know!

 

[Arkwright]

On average how much do you need to retire? I've read the average couple will be comfortable on £43k pa.
Got no mortgage which obviously helps.
I am planning to take out an Equity Release when my wife and my money runs out.

 

[dazzer6666]

On average how much do you need to retire? I've read the average couple will be comfortable on £43k pa.
Got no mortgage which obviously helps.
I am planning to take out an Equity Release when my wife and my money runs out.

Loads of ‘calculators’ and articles online but they’re all generalisations to a degree (like saying ‘average’ and ‘£43k’) and not overly helpful imo (for example many show a % of your salary which might be nonsense if you’re a high earner and been saving a decent part of your salary for years). Easier (and safer) to write down your expected budget (I split ours between ‘essentials’ and other more discretionary stuff) and work from that.

 

[thedonkeycentrehalf]

On average how much do you need to retire? I've read the average couple will be comfortable on £43k pa.
Got no mortgage which obviously helps.
I am planning to take out an Equity Release when my wife and my money runs out.

You're expecting your wife to run out?

 

[Seagull58]

On average how much do you need to retire? I've read the average couple will be comfortable on £43k pa.
Got no mortgage which obviously helps.
I am planning to take out an Equity Release when my wife and my money runs out.

You'd be living high on the hog with £43k p.a. unless you are still paying off a large mortgage, which you are not. Factors such as having a car, size of house (bills), number of holidays, number of restaurant visits etc. need to be considered.

 

[LamieRobertson]

You're expecting your wife to run out?

I’m thinking if she does maybe the money won’t run with her

 

[Weststander]

Which? recently surveyed 5,200 retirees and semi-retirees, the average spend results were as follows. Remember that tax is paid out of income above £12,570 per person and therefore on top of these spending numbers eg to give the £44k. The first table includes tax.

 

[Arkwright]

You're expecting your wife to run out?

She has got death in service..........

 

[happypig]

On average how much do you need to retire? I've read the average couple will be comfortable on £43k pa.
Got no mortgage which obviously helps.
I am planning to take out an Equity Release when my wife and my money runs out.

Wife and I have about £25k coming in (no mortgage) and we’re fine but we do dip into savings occasionally, max £3k(ish) a year, usually much less. We only run one normal car, have “modest” holidays (european package hols 2/3 times a year), go out for dinner or drinks about once a week.
When I retired I set aside £5k a year to “top-up” our regular income as needed until my state pension kicks in in 2030.

How much you actually need is hugely variable depending on personal circumstances.

 

[Paulie Gualtieri]

Loads of ‘calculators’ and articles online but they’re all generalisations to a degree (like saying ‘average’ and ‘£43k’) and not overly helpful imo (for example many show a % of your salary which might be nonsense if you’re a high earner and been saving a decent part of your salary for years). Easier (and safer) to write down your expected budget (I split ours between ‘essentials’ and other more discretionary stuff) and work from that.

Is the ST in the essential column?

 

[Shropshire Seagull]

Raymondo, throughout my working life, I always contributed to both my SIPP and Stocks and Shares ISAs. This was more from a 'don't have all your eggs in one basket' philosophy, rather than knowing which one was best; investing tax free on the way in (SIPP), or investing from your post-tax cash, and then enjoying all growth tax free on the way out (ISAs).

Here I am at 64, I've made most of my investing decisions, some good, some not so good, and I'm still not aware of any study on which is the more effective. I guess it depends on time horizon and growth rates.

My IFA told me that the SIPP was more tax efficient overall than the ISA but once you start drawdown MPAA limits [currently £3,800 pa] new money going into the SIPP so the ISA becomes 2nd best [20k limit pa].

As said by other posters, it all depends on individual circumstances and getting professional advice can pay back handsomely. My IFA has charged me several £k over the last 5 years, but I've defo saved me a lot more ...

 

[dazzer6666]

Is the ST in the essential column?

Obviously….

 

[dazzer6666]

Which? recently surveyed 5,200 retirees and semi-retirees, the average spend results were as follows. Remember that tax is paid out of income above £12,570 per person and therefore on top of these spending numbers eg to give the £44k. The first table includes tax.

View attachment 180349

View attachment 180350

An average is pretty useless……..people need to do their own budget.

 

[Weststander]

You escaped the Rat Race young!

 

[Eric the meek]

My IFA told me that the SIPP was more tax efficient overall than the ISA but once you start drawdown MPAA limits [currently £3,800 pa] new money going into the SIPP so the ISA becomes 2nd best [20k limit pa].

As said by other posters, it all depends on individual circumstances and getting professional advice can pay back handsomely. My IFA has charged me several £k over the last 5 years, but I've defo saved me a lot more ...

We are indeed all different. For my part, I would not have accepted what the IFA told me, without evidence to back it up. I would have still wanted to see the numbers in various scenarios, especially my own scenario. I'm not talking about the advantages and disadvantages of SIPPs (20% tax relief upfront, only available after 55, taxed on way out) vs. ISAs (20k limit, no tax relief on way in, but no tax taken on way out). I'm talking about the relative capital growth over different periods and different growth rates, and different marginal rates of income tax.

In short, does the 20% effective hike in money going into a SIPP at basic rate tax, outweigh the tax payable on money you take out, years or decades later, when your circumstances, and possibly your marginal rate of income tax, will have changed?

 

[Mancgull]

An average is pretty useless……..people need to do their own budget.

Agreed. It all depends on your household costs. We all have different utility and council tax costs.
What people often overlook is adhoc costs such as replacing a car or general maintenance costs for their house.

 

[Weststander]

An average is pretty useless……..people need to do their own budget.

I found the composition of interest, because for a while the £43k has been banded about by the media and on phone ins. Headlines of £43k required to retire in dignity.

 

[Triggaaar]

Fixtures

 

[Doonhamer7]

I’ve now got my money sorted for retirement, 55 next month! After being a meaningful amateur for a couple of years by reading articles, books, watching YouTube etc. I decided I needed advice as I didn’t have the time to sort it all out myself or chose investments. I ended up withdrawing (99.99%) of my DC pension out of my employers Willis Tower Watson account into a SIPP after seeking advice (after finding out all the pension savvy friends at work had done the same). Kept WTW pension open to get company contribution. Backfilled into the SIPP the last 3 years of unused pension allowance (used my cash savings not in ISA), now filling in ISAs each year. Opened premium bond two weeks ago as interest rates means I’ll probably get taxed on my savings account. I wish I’d have done all of this 5 years ago.

Might not work for everyone but worth thinking about is that I opened both a Freetrade and a Trading212 account (share purchase apps) an couple of years ago and drop small amounts of money in regularly (£20-50 mostly) and it really starts to grow. if say we decide not to go out for a curry - I’ll put the £50 we’d have spent into one of the accounts instead. So the money has left the current account and I’ve saved it away. sad as it may sound I’ve also started to get excited by the dividends as they appear - even if it is just small amounts (I’m talking even the £0.15p I once got). Have to admit my morals in these accounts are low - cigarettes, oil and big pharma are my go too - maybe need defence contractors next!