How big should my pension pot be?

[HenryJM]

GT03ROB said:

Performance can be up & down like a wes draws...take my last 10 years (all annual % Increments) .

2006 -0.2%
2007 10.2%
2008 -32.0%
2009 29.7%
2010 17.7%
2011 -17.6%
2012 15.0%
2013 24.7%
2014 10.5%
YTD 4.8%

Well you are talking about how you invested it, not the tax status. The tax status is ISA and there is no tax to pay on the gain made. That gain could be low risk, high risk or anything in between, depending on how you go about it.

So your root looks like a high risk investment that is, in the main, doing very well. But it doesn't need to be like that, all a matter of choice.

[Phooey]

Thanks for replies, and apologies to the OP for hijacking the thread



I have been maxing my ISA for the last 5or6 years in a 'Balanced risk' fund but now I'm starting to see the 'pot' grow i need to check the fees etc.... tempted to draw a chunk out and put it into a property (BTL)


Great thread btw

[HenryJM]

GT03ROB said:

HenryJM said:

GT03ROB said:

Performance can be up & down like a wes draws...take my last 10 years (all annual % Increments) .

2006 -0.2%
2007 10.2%
2008 -32.0%
2009 29.7%
2010 17.7%
2011 -17.6%
2012 15.0%
2013 24.7%
2014 10.5%
YTD 4.8%

Yes except in that the means of investment differs depending on what you go in for. There is high risk and low risk and everything in between, all a matter of approach/nerves/etc.

Agreed, however the larger spread of equities you head for the more you follow the overall trend of markets. What I mean is you are, irrespective of your style of equity investment, unlikley to make gains in a falling market or losses in a rising market. Less risky dealing will damp the ups & downs not eliminate them. More risk means more volatility & make timing far more important.

Well you can, for example, put money in an ISA into, for example, Virgin Fixed Rate Cash E-ISA Issue 104 and get 1.7% this time next year. So even in those circumstances you will make money, not much but some, regardless of what happens to the market. So the investment mechanism and the tax status really are different items.

[GT03ROB]

HenryJM said:

GT03ROB said:

HenryJM said:

GT03ROB said:

Performance can be up & down like a wes draws...take my last 10 years (all annual % Increments) .

2006 -0.2%
2007 10.2%
2008 -32.0%
2009 29.7%
2010 17.7%
2011 -17.6%
2012 15.0%
2013 24.7%
2014 10.5%
YTD 4.8%

Yes except in that the means of investment differs depending on what you go in for. There is high risk and low risk and everything in between, all a matter of approach/nerves/etc.

Agreed, however the larger spread of equities you head for the more you follow the overall trend of markets. What I mean is you are, irrespective of your style of equity investment, unlikley to make gains in a falling market or losses in a rising market. Less risky dealing will damp the ups & downs not eliminate them. More risk means more volatility & make timing far more important.

Well you can, for example, put money in an ISA into, for example, Virgin Fixed Rate Cash E-ISA Issue 104 and get 1.7% this time next year. So even in those circumstances you will make money, not much but some, regardless of what happens to the market. So the investment mechanism and the tax status really are different items.

Agreed. I was talking only in terms of equities.

[HenryJM]

GT03ROB said:

Agreed. I was talking only in terms of equities.

Yes, of course what people often do (and I am digressing) is to react to what has happened and not what might happen. What matters is not what has happened, seeing that the market has fallen and so you sell and put it somewhere safe is the double negative.

It happened a lot back in 1987, I remember people seeing the money coming out having lost a fortune and then not being still in there where the money goes back in again. It's one of those things that makes no sense, yesterday is history it's today/tomorrow that matters.

[GT03ROB]

HenryJM said:

GT03ROB said:

Agreed. I was talking only in terms of equities.

Yes, of course what people often do (and I am digressing) is to react to what has happened and not what might happen. What matters is not what has happened, seeing that the market has fallen and so you sell and put it somewhere safe is the double negative.

It happened a lot back in 1987, I remember people seeing the money coming out having lost a fortune and then not being still in there where the money goes back in again. It's one of those things that makes no sense, yesterday is history it's today/tomorrow that matters.

Yep. People think (panic)too much, buying as things are rising, selling when they are low. My personal take on pensions & using any asset class or equity. Is look for the long term trends & invest long term. eg: China & India WILL grow more than the UK & Europe over the next 30 years. Investing for this length of time in these type of economies, should do better than UK or Europe. Over 5 years probably not, but most amateur investors are nowhere near smart enough to call the highs & lows & switch at the right time.

[rotarymazda]

It is important to know what your Effective Marginal Tax Rate is. This includes income tax, NI (employer as well as employee), and any benefit withdrawal rate (e.g. child benefit from £50K-60K).

I found that in the range £50-60K (with 2 kids), the EMTR is ~65%.

So for every £35 in net income you give up via salary sacrifice (and getting employer NI savings), you get £100 into your pension.

At age 55, you withdraw £25 of that tax-free.

So a net loss of £10 gets you a pension of £75.

Then withdraw that at basic rate when you (early) retire, you get to keep £60 of it, more if some of it is in your tax-free band.

So overall, you have kept £85 out of the original £100 earnings => 15% effective tax rate.

The above ignores pension fees and investment returns.

[HenryJM]

rotarymazda said:

It is important to know what your Effective Marginal Tax Rate is. This includes income tax, NI (employer as well as employee), and any benefit withdrawal rate (e.g. child benefit from £50K-60K).

I found that in the range £50-60K (with 2 kids), the EMTR is ~65%.

So for every £35 in net income you give up via salary sacrifice (and getting employer NI savings), you get £100 into your pension.

At age 55, you withdraw £25 of that tax-free.

So a net loss of £10 gets you a pension of £75.

Then withdraw that at basic rate when you (early) retire, you get to keep £60 of it, more if some of it is in your tax-free band.

So overall, you have kept £85 out of the original £100 earnings => 15% effective tax rate.

The above ignores pension fees and investment returns.

Sure, all of which goes back to the fact that doing one thing is not usually wise. Having some ISA, some pension and so on has a significant advantage depending on the situation at the time.

[Phooey]

HenryJM said:

Roughly between £364k and £495k depending on the rate between 2 & 5%.

Thanks Henry

[Welshbeef]

Also you should consider endowments "with profits" these funds smooth the returns so that as joe Bloggs you don't have the issues of mega returns some years then terrible losses the other years. Plus you get a bonus at the end - plus its life insurance too and when you do the maths ie strip away the cost of life insurance alone then its actually a very good deal.

I took one out years ago - small thing.
£50pcm for 10 years so I paid in £6k and got a payout of £13k. If I had died on day 2 of the policy it would have paid out £10k (I had £3k of "bonus") to my estate or dependants.

[Riff Raff]

I just got a mail from Hargreaves Lansdown with a link in it to an article that pretty much sums up where we are now (or at least will be after April this year) on the pensions and ISA front.

It might be worth a read for those who've posted on this thread that they don't want a conventional pension fund because the money is lost when they shuffle off this mortal coil.

And it clears up something I wasn't totally sure about, which is whether or not you pension fund forms part of your estate and is therefore potentially subject to Inheritance Tax.

http://www.hl.co.uk/news/investment-times/2015/01/...

[Welshbeef]

Riff Raff said:

I just got a mail from Hargreaves Lansdown with a link in it to an article that pretty much sums up where we are now (or at least will be after April this year) on the pensions and ISA front.

It might be worth a read for those who've posted on this thread that they don't want a conventional pension fund because the money is lost when they shuffle off this mortal coil.

And it clears up something I wasn't totally sure about, which is whether or not you pension fund forms part of your estate and is therefore potentially subject to Inheritance Tax.

http://www.hl.co.uk/news/investment-times/2015/01/...

Interesting re non tax payers.
You pay in £2880 govt make it up to £3600 a 25% instant return... Ideal for "Homemakers"

Also worth doing to effectively reduce total couples tax burden.