Workplace Pension Contributions

[Ironduke12]

I'm not on here to brag, just to set out the scenario.

I'm in the current fortunate position to be able to save significantly from my monthly salary. I'm roughly able to max out the current ISA tax allowance of £20k (£4k LISA / £16k ISA) per year and have done for the last 4 years. ISA is £80k and goal is £100k.

I was late into pensions, enrolled 10 years ago via work and have £50k and contribute 11% (6% employee and 5 employer) in currently. I'm almost 44.

I have no mortgage which was paid off in 2022 but the house is not one that can be used for future downsizing use (low value / 2 beds).

No partner but have one teenager who I would like to able to help in future get set on track in life with advice and a small sum here and there.

The pension is growing nicely but looking a salary sacrifice calculator. If I pay in 25% (+ 5% employer) of my salary I would save approx £350 in income tax per month.

I would still be able to save a good amount in cash savings each month (just not as much) so would have access to readily available cash without touching ISA's.

I would like to retire at 60 (non extravagant lifestyle) currently based on how I feel but I'm at peak earnings no further progression desired (only mid level management) and no desire to earn more. I'm also struggling with the job/industry imo and would like to top the pension to at least £150k (+£150k ISA) before age 50 so if I drop to minimum wage by then growth can take over the ISA and pension pots as would be limited to what I can put in then.

I wouldn't need to take 25% so further benefitting any growth before retirement.

Are there any downsides to sacrificing that much?

Edited by Ironduke12 on Monday 18th May 14:58

[Hustle_]

You're gonna be long on ISA / LISA and short on Pension.

Make sure you know when you will be able to access your pension and LISA.

I agree that increasing the pension contribution is the right lever. 25% + 5% employer doesn't seem excessive in the circumstances.

[Ironduke12]

Many thanks, I acknowledge that, down to no appetite for risk. I've no desire to invest in the markets or even a S&S ISA.

I can tolerate it in a pension without watching it regularly like I would if invested else where.

The changes to the ISA next year sparked my decision to look further into pension.

My LISA is 60 for access and pension will be what it will be (currently 57 for me) and although I fix my ISA a yea at a time. I do have access to a 0% card at all times and have 2-3 months of essentials in premium bonds which I don't count in my calculations.

I also pay into an income protection policy due should I be unable to work due to illness or injury which covers an amount equal to my basic expenditure.

Edited by Ironduke12 on Monday 18th May 15:25

[okgo]

Just put the most in that you can afford surely? £60k is the annual limit but you probably have plenty of carryover, you haven’t said what your salary is but I’d be doing as much as you can do within those limits/what you can live on.

Whats the thinking on the large cash ISA given you don’t seem to want to retire early?

[butchstewie]

Biggest headache with pensions is just being comfortable it's locked away.

If you're comfortable with that and you're on salary sacrifice and you're comfortable you have sufficient emergency fund and other liquid investments it's a bit of a no-brainer IMO.

I do something very similar. Works fine.

[Ironduke12]

okgo said:

Just put the most in that you can afford surely? £60k is the annual limit but you probably have plenty of carryover, you haven t said what your salary is but I d be doing as much as you can do within those limits/what you can live on.

Whats the thinking on the large cash ISA given you don t seem to want to retire early?

Many thanks, its strange I see 60 as early retirement. Up to 30 I was poor with money, didn't earn much never hugely in debt but went in one month and out the same. Not even splurged on cars just women at the time, fags and beer. Life changed managed to scrape a deposit together buy my house, low interest rates, became a dad so stopped the boozing/smoking and managed to get lucky work wise with working hard, promotions, xmas bonus, buying reliable 2nd hand cars. Meant that I could devote to paying off the house ASAP, paid off in 10 years (£105k + 27k in interest). Once house goal completed, I wanted the same amount in savings as a new goal so so far managed that in 5 years (or will be) by next year.

Salary is £52k, I would be sacrificing £11k annually (+ employer 5%) into pension based on calculations

[Ironduke12]

Ironduke12 said:

Many thanks, its strange I see 60 as early retirement. Up to 30 I was poor with money, didn't earn much never hugely in debt but went in one month and out the same. Not even splurged on cars just women at the time, fags and beer. Life changed managed to scrape a deposit together buy my house, low interest rates, became a dad so stopped the boozing/smoking and managed to get lucky work wise with working hard, promotions, xmas bonus, buying reliable 2nd hand cars. Meant that I could devote to paying off the house ASAP, paid off in 10 years (£105k + 27k in interest). Once house goal completed, I wanted the same amount in savings as a new goal so so far managed that in 5 years (or will be) by next year.

Salary is £52k, I would be sacrificing £11k annually (+ employer 5%) into pension based on calculations

The large ISA balance is (was) a goal. I don't enjoy my job currently and while I will stick at it, until I'm booted out. I'm not on a huge wage but it is a big amount for me personally, as will never earn that level again outside of this job. That mindset may change and in the future and I do enjoy working in general but may have to be in a different career.

Edited by Ironduke12 on Monday 18th May 16:25

[AndyAudi]

okgo said:

Whats the thinking on the large cash ISA given you don t seem to want to retire early?

Not sure if op is in this category (but has mentioned being risk averse & not interested in S&S ISA), I’ve known folk who didn’t invest even in their works schemes because they’d known folk that had lost money investing in pensions. Lack of knowledge/understanding is a big reason some folks make decisions a lot of us don’t understand.

(Example I had an extended family member reach out to me over a retired pensioner who’s now found him himself having to do a tax return & probably a £10k tax bill, because he accumulated so much in his savings accounts, he says the bank did keep trying to get him to take out an ISA but he wanted to stick with what he knew, now stuffing £20k a year into cash ISA!)

[Ironduke12]

AndyAudi said:

Not sure if op is in this category (but has mentioned being risk averse & not interested in S&S ISA), I ve known folk who didn t invest even in their works schemes because they d known folk that had lost money investing in pensions. Lack of knowledge/understanding is a big reason some folks make decisions a lot of us don t understand.

(Example I had an extended family member reach out to me over a retired pensioner who s now found him himself having to do a tax return & probably a £10k tax bill, because he accumulated so much in his savings accounts, he says the bank did keep trying to get him to take out an ISA but he wanted to stick with what he knew, now stuffing £20k a year into cash ISA!)

No I'm just very tax efficient to a means, I'm just now looking to balance the level between the ISA and pensions.

[TwigtheWonderkid]

butchstewie said:

Biggest headache with pensions is just being comfortable it's locked away.

If you're comfortable with that and you're on salary sacrifice and you're comfortable you have sufficient emergency fund and other liquid investments it's a bit of a no-brainer IMO.

I do something very similar. Works fine.

Exactly this. So .long as the lack of access for years doesn't bother you, paying money to your future self instead of the govt is never a bad thing.

[ChrisNic]

There is already some good advice here so I’m not going to add much BUT…

Please don’t consider holding cash to be risk free. You run a very real risk of the value of that money not keeping pace with inflation and loosing its real value over time. e.g. if your earning less in interest than the rate of inflation then you won’t be able to buy the same amount of things with it in 20 years that you could now.

[Sir Keith Stormer]

Ironduke12 said:

I'm not on here to brag, just to set out the scenario.

I'm in the current fortunate position to be able to save significantly from my monthly salary. I'm roughly able to max out the current ISA tax allowance of £20k (£4k LISA / £16k ISA) per year and have done for the last 4 years. ISA is £80k and goal is £100k.

I was late into pensions, enrolled 10 years ago via work and have £50k and contribute 11% (6% employee and 5 employer) in currently. I'm almost 44.

I have no mortgage which was paid off in 2022 but the house is not one that can be used for future downsizing use (low value / 2 beds).

No partner but have one teenager who I would like to able to help in future get set on track in life with advice and a small sum here and there.

The pension is growing nicely but looking a salary sacrifice calculator. If I pay in 25% (+ 5% employer) of my salary I would save approx £350 in income tax per month.

I would still be able to save a good amount in cash savings each month (just not as much) so would have access to readily available cash without touching ISA's.

I would like to retire at 60 (non extravagant lifestyle) currently based on how I feel but I'm at peak earnings no further progression desired (only mid level management) and no desire to earn more. I'm also struggling with the job/industry imo and would like to top the pension to at least £150k (+£150k ISA) before age 50 so if I drop to minimum wage by then growth can take over the ISA and pension pots as would be limited to what I can put in then.

I wouldn't need to take 25% so further benefitting any growth before retirement.

Are there any downsides to sacrificing that much?

Edited by Ironduke12 on Monday 18th May 14:58

When I got into savings and investing in my early 30's I was told repeatedly that the first 100k is always the hardest, it gets easier after that, they (my brother is an accountant) we're right, you're still young enough to accumulate a substantial amount, just don't forget to live, it's all well and good having goals but you're on this earth once, don't let saving and investing become the be all and end all of your existence, nobody is guaranteed tomorrow never mind 20 years time.

[SJfW]

If you do decide to go down the path, sooner rather than later would be best to make the most of the NI savings on salary sacrifice before the chancellor decreases the exemption.

Not easy to commit to something so long term when the government bugger about moving the goalposts.