Financed lifestyles
Discussion
CaptainSlow said:
bogie said:
I thought like that until mid 30s then read some investment books, and started to think differently, particularly due to more tax efficient saving like ISA and SIPP. A "pension" is a product that is sold by financial services companies or provided by employers/government. What you have available these days with a SIPP account is really just a tax efficient savings account that you cannot access until 55 years old that you can use to purchase all kinds of different financial assets.
Say you earn £120k gross and dont bother with a pension at all you will take home £6178 a month
If you now save say 25% of gross pay (£2500 per month) into your pension you now take home £5012
Due to tax relief of £20k per year you now get £50,000 going into your pension for a net cost to you of £1166 a month or £13992 a year
Can you think of another way you can turn £13992 into £50k before you even invest it in other assets ?
This tax break may not be as generous forever, so I am trying to make the most of it whilst its there
Work it out for yourself with your own salary here https://www.moneysavingexpert.com/tax-calculator/
Seems like nobody has picked you up on this so I will.Say you earn £120k gross and dont bother with a pension at all you will take home £6178 a month
If you now save say 25% of gross pay (£2500 per month) into your pension you now take home £5012
Due to tax relief of £20k per year you now get £50,000 going into your pension for a net cost to you of £1166 a month or £13992 a year
Can you think of another way you can turn £13992 into £50k before you even invest it in other assets ?
This tax break may not be as generous forever, so I am trying to make the most of it whilst its there
Work it out for yourself with your own salary here https://www.moneysavingexpert.com/tax-calculator/
You don't gross up the gross contribution ie the £30k is the gross amount so that is what goes into the pension...not £50k.
Even if the £30k was the net contribution the amount going into the pension would be £37.5k....with a further £7.5k coming back to you via your tax return.
I agree with you on your point about the tax efficient nature of pensions though....especially if the 25% tax free element stays untouched.
Salary of £120k, puts £30k in a pension.
Basic relief at source so it has only cost £24k to put £30k in the pension.
£6k then claimed back from HMRC through self assessment, reducing the cost of the £30k pension pot to £18k.
Since personal allowance reduces by £1 every £2 earnt above £100k, by using the pension to reduce your income below £100k you will regain all your personal allowance, in this case an extra £10k. So that's a tax saving of £4k.
Therefore, earning £120k, putting £30k into a pension will actually only "cost" you £14k.
Groat said:
I've HEARD of it....
....that's the thing that struggles to compete with inflation, market forces, currency devaluation, and a whole host of other impacts on savings isn't it?
Remind me. What would £100 put in the average current account in 2009 be worth today? £105? £102? and in real terms, what? £95?
£90?
Compound schmompound.
Over the last 40 years the S&P500 achieved a CAGR of 11.5%, 8% ahead of inflation.....that's the thing that struggles to compete with inflation, market forces, currency devaluation, and a whole host of other impacts on savings isn't it?
Remind me. What would £100 put in the average current account in 2009 be worth today? £105? £102? and in real terms, what? £95?
£90?
Compound schmompound.
Pistonheads2019 said:
Groat said:
I've HEARD of it....
....that's the thing that struggles to compete with inflation, market forces, currency devaluation, and a whole host of other impacts on savings isn't it?
Remind me. What would £100 put in the average current account in 2009 be worth today? £105? £102? and in real terms, what? £95?
£90?
Compound schmompound.
Over the last 40 years the S&P500 achieved a CAGR of 11.5%, 8% ahead of inflation.....that's the thing that struggles to compete with inflation, market forces, currency devaluation, and a whole host of other impacts on savings isn't it?
Remind me. What would £100 put in the average current account in 2009 be worth today? £105? £102? and in real terms, what? £95?
£90?
Compound schmompound.
Groat said:
I've HEARD of it....
....that's the thing that struggles to compete with inflation, market forces, currency devaluation, and a whole host of other impacts on savings isn't it?
Remind me. What would £100 put in the average current account in 2009 be worth today? £105? £102? and in real terms, what? £95?
£90?
Compound schmompound.
Bless.......that's the thing that struggles to compete with inflation, market forces, currency devaluation, and a whole host of other impacts on savings isn't it?
Remind me. What would £100 put in the average current account in 2009 be worth today? £105? £102? and in real terms, what? £95?
£90?
Compound schmompound.
Testaburger said:
Of course you can see that. It doesn’t diminish its importance, though.
It’s a mindset. If you present it to a 20 year old as losing out for 30 years, it’s not going to be an easy sell.
If he believes he gets to ‘own’ his financial security, then he may be more interested.
After all, it’s incredibly cheap to do it for 40 years, and it gets exponentially more expensive as time drags by.
Using your finance example is slightly disingenuous (but I agree with the thrust of your point). A more correct credit analogy would be buying a car on finance now and getting to own it while you pay it up, or saving up to buy it outright down the line.
The catch is, if you finance it now, it’ll cost you four times as much.
They’re the roughly proportional numbers for starting at 20 vs 40.
Common sense should tell you that for almost everybody the point of a pension isn't to enhance a lifestyle, it's to maintain it.It’s a mindset. If you present it to a 20 year old as losing out for 30 years, it’s not going to be an easy sell.
If he believes he gets to ‘own’ his financial security, then he may be more interested.
After all, it’s incredibly cheap to do it for 40 years, and it gets exponentially more expensive as time drags by.
Using your finance example is slightly disingenuous (but I agree with the thrust of your point). A more correct credit analogy would be buying a car on finance now and getting to own it while you pay it up, or saving up to buy it outright down the line.
The catch is, if you finance it now, it’ll cost you four times as much.
They’re the roughly proportional numbers for starting at 20 vs 40.
And what is often overlooked is that the older you get the less you spend.
So picture this. If we had nothing but the clothes we stood up in, here's what it would be like:
1) free dwelling on Housing Benefit (worth up to £525 a month)
2) state pension plus wife's state pension £1460pcm
3) my disability benefit (£600pcm+/-)
4) host of free this that and the other
So a free gaff to stay in and over 2 grand a month to survive with.
Which, basically, maintains the lifestyle of a childless couple with a household income of about, what, £45k gross? Maybe 50?
WTF is the problem? Even free care home if we go doolally or spasmolysed to look forward to.....
Stop panicking about oap hardship. And that's even before considering all the other little streams like kind kids taking us on holiday or the odd win at the bookies or (ssssh) a day's casual here or there.....
Go and buy a subtitled DVD of Still Game. It's not in the slightest funny, but it's pretty damn close to portraying real life for the average working class oap.
Pistonheads2019 said:
Groat said:
hahahaha!!! Outed again Sid!! 
This thread has certainly ‘outed’ your ignorance of pensions and compound interest. As did the Vanguard thread that you also spoiled with your trolling.Oh Sid!!! You really are the gift that keeps on giving
But, sid regardless, back to the topic>>>>>>
Testaburger said:
Groat said:
I've HEARD of it....
....that's the thing that struggles to compete with inflation, market forces, currency devaluation, and a whole host of other impacts on savings isn't it?
Remind me. What would £100 put in the average current account in 2009 be worth today? £105? £102? and in real terms, what? £95?
£90?
Compound schmompound.
Bless.......that's the thing that struggles to compete with inflation, market forces, currency devaluation, and a whole host of other impacts on savings isn't it?
Remind me. What would £100 put in the average current account in 2009 be worth today? £105? £102? and in real terms, what? £95?
£90?
Compound schmompound.
....and on the other hand it's don't keep the means to use cash and no HP because where the cash gets kept is no good...
One can't really win can one?
Badda said:
Pistonheads2019 said:
Groat said:
hahahaha!!! Outed again Sid!!
This thread has certainly ‘outed’ your ignorance of pensions and compound interest. As did the Vanguard thread that you also spoiled with your trolling.(either that or he thinks it'll have a different outcome)
Anyway, I'm offski. Can't be arsed with it.
princeperch said:
I have worked as a civil servant in central government for 9.5 years now. I didn't have a pension before I joined. I got a statement through the other day saying I have used 26pc of the lifetime allowance In the 9.5 yrs I've been in the scheme. I am 34.
Every time I think about leaving and going to earn 15/20k more working elsewhere (which has been on my mind a bit lately) am going to pull that letter out and slap myself in the face with it.
I have a similar problem, so much so my “input amount” to the civil service scheme (the amount it grows by) is exceeding the 40k annual allowance even with me paying the minimum. That means I get taxed now on a pension I haven’t received yet. Same problem NHS consultants have experienced. Every time I think about leaving and going to earn 15/20k more working elsewhere (which has been on my mind a bit lately) am going to pull that letter out and slap myself in the face with it.
Groat said:
Testaburger said:
Groat said:
I've HEARD of it....
....that's the thing that struggles to compete with inflation, market forces, currency devaluation, and a whole host of other impacts on savings isn't it?
Remind me. What would £100 put in the average current account in 2009 be worth today? £105? £102? and in real terms, what? £95?
£90?
Compound schmompound.
Bless.......that's the thing that struggles to compete with inflation, market forces, currency devaluation, and a whole host of other impacts on savings isn't it?
Remind me. What would £100 put in the average current account in 2009 be worth today? £105? £102? and in real terms, what? £95?
£90?
Compound schmompound.
....and on the other hand it's don't keep the means to use cash and no HP because where the cash gets kept is no good...
One can't really win can one?
Groat said:
Common sense should tell you that for almost everybody the point of a pension isn't to enhance a lifestyle, it's to maintain it.
And what is often overlooked is that the older you get the less you spend.
So picture this. If we had nothing but the clothes we stood up in, here's what it would be like:
1) free dwelling on Housing Benefit (worth up to £525 a month)
2) state pension plus wife's state pension £1460pcm
3) my disability benefit (£600pcm+/-)
4) host of free this that and the other
So a free gaff to stay in and over 2 grand a month to survive with.
Which, basically, maintains the lifestyle of a childless couple with a household income of about, what, £45k gross? Maybe 50?
WTF is the problem? Even free care home if we go doolally or spasmolysed to look forward to.....
Stop panicking about oap hardship. And that's even before considering all the other little streams like kind kids taking us on holiday or the odd win at the bookies or (ssssh) a day's casual here or there.....
Go and buy a subtitled DVD of Still Game. It's not in the slightest funny, but it's pretty damn close to portraying real life for the average working class oap.
Your example works brilliantly if you want to live in a council house on state pension. And what is often overlooked is that the older you get the less you spend.
So picture this. If we had nothing but the clothes we stood up in, here's what it would be like:
1) free dwelling on Housing Benefit (worth up to £525 a month)
2) state pension plus wife's state pension £1460pcm
3) my disability benefit (£600pcm+/-)
4) host of free this that and the other
So a free gaff to stay in and over 2 grand a month to survive with.
Which, basically, maintains the lifestyle of a childless couple with a household income of about, what, £45k gross? Maybe 50?
WTF is the problem? Even free care home if we go doolally or spasmolysed to look forward to.....
Stop panicking about oap hardship. And that's even before considering all the other little streams like kind kids taking us on holiday or the odd win at the bookies or (ssssh) a day's casual here or there.....
Go and buy a subtitled DVD of Still Game. It's not in the slightest funny, but it's pretty damn close to portraying real life for the average working class oap.
Trust me, I’m not panicking.
Testaburger said:
It’s neither of those things. But not to worry.
So if it's no HP....and it's no using bank cash.....
what's left?
Liquidating assets that earn less than the HP costs?
But I thought compound interest had those earning moon-money?
Well? How are these toys to be obtained?
Edited by Groat on Monday 22 July 17:25
Testaburger said:
Your example works brilliantly if you want to live in a council house on state pension.
Yes why not? If you live a fairly ordinary and average life on a fairly ordinary or average wage. And, by the way, HB isn't just payable on council property. And, further, living in a council house on state pension by no means precludes anyone from having a good healthy lifestyle or being happy, which is probably which ALL pensioners would be content with. The point is to maintain in retirement, not improve. Am I wrong?
Edited by Groat on Monday 22 July 17:30
Groat said:
Need for humiliation? Some people actually pay to get spanked.
(either that or he thinks it'll have a different outcome)
Anyway, I'm offski. Can't be arsed with it.
The only one that has been humiliated in these threads is you, given you’ve confirmed your complete lack of understanding on the topics under discussion.(either that or he thinks it'll have a different outcome)
Anyway, I'm offski. Can't be arsed with it.
On the other thread you were asked to stop posting nonsense about BTL mortgages and still carried on with the same drivel.
Yet, once again, you’ll claim that it is other people causing the arguments.
You’re a compulsive liar who will claim black is white to try an incite argument, refusing to respond to posts that demonstrate you are wrong, and making false accusations with no evidence to support them (against people unable to defend themselves).
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