Independent advice please on IFAs
Discussion
Hi all, my wife and I could probably use some financial advice as she's just had a surprise when filling out her tax return this year (hitting the 60% bracket).
We're a couple of years either side of 50, no kids, earning £90k & £120k, 5 years to go on small mortgage, no debt, smallish pension pots, no other investments.
Our main aim would be for us to avoid tax now by putting more into pension, possibly make use of an EV car scheme, and then work out how to retire and make the most of the assets we have.
Would talking to an IFA be worthwhile? I last spoke to one around 15 years ago and their advice was to invest everything and spend as little as possible which is the opposite of what I'd like to do now.
We're a couple of years either side of 50, no kids, earning £90k & £120k, 5 years to go on small mortgage, no debt, smallish pension pots, no other investments.
Our main aim would be for us to avoid tax now by putting more into pension, possibly make use of an EV car scheme, and then work out how to retire and make the most of the assets we have.
Would talking to an IFA be worthwhile? I last spoke to one around 15 years ago and their advice was to invest everything and spend as little as possible which is the opposite of what I'd like to do now.
IMHO, your situation and aims seem to be very simple end clear and as such not sure if you reallneed an IFA. Get a SIPP or put more onto workplace pension. As to what funds to choose for SIPP, there's plenty of advise on this forum and Internet... Look at sites like monevator if you need some basic information for funds..
toasty said:
Our main aim would be for us to avoid tax now by putting more into pension, possibly make use of an EV car scheme, and then work out how to retire and make the most of the assets we have.
Would talking to an IFA be worthwhile? I last spoke to one around 15 years ago and their advice was to invest everything and spend as little as possible which is the opposite of what I'd like to do now.
Sounds though as if you'd like to invest more (in a pension) to reduce the tax bills and that will put you in a position to retire and make the most of those invested assets? Sounds not that dissimilar from the IFA's advice?Would talking to an IFA be worthwhile? I last spoke to one around 15 years ago and their advice was to invest everything and spend as little as possible which is the opposite of what I'd like to do now.
The fact you're doing your 2022/23 tax returns in January 2024 suggests you're not really on top of things.
Rather than addressing a financial year many months after the event you might do well to set up a couple of simple spreadsheets and start forecasting your year end position (5 April 2024 is the next one) well before you get there. No, not in the middle of March because next thing you know you'll have run too tight to the deadline to get anything done. It would be a good idea to start in the next few weeks.
If you get right on top of a good 2023/24 year end forecast by, say, the end of February you've got a whole month to deal with things like finessing pension contributions to get your "adjusted net income" under £100k. (You can usefully be making sure your CGT position and ISA's are taken care of as well.)
Note HMRC's definition of adjusted net income,
https://www.gov.uk/guidance/adjusted-net-income
I suspect that if you get on top of things you won't need an IFA so long as you follow some of the broad approaches that come up regularly on this finance forum.
Rather than addressing a financial year many months after the event you might do well to set up a couple of simple spreadsheets and start forecasting your year end position (5 April 2024 is the next one) well before you get there. No, not in the middle of March because next thing you know you'll have run too tight to the deadline to get anything done. It would be a good idea to start in the next few weeks.
If you get right on top of a good 2023/24 year end forecast by, say, the end of February you've got a whole month to deal with things like finessing pension contributions to get your "adjusted net income" under £100k. (You can usefully be making sure your CGT position and ISA's are taken care of as well.)
Note HMRC's definition of adjusted net income,
https://www.gov.uk/guidance/adjusted-net-income
I suspect that if you get on top of things you won't need an IFA so long as you follow some of the broad approaches that come up regularly on this finance forum.
toasty said:
We're a couple of years either side of 50, no kids, earning £90k & £120k, 5 years to go on small mortgage, no debt, smallish pension pots, no other investments.
Our main aim would be for us to avoid tax now by putting more into pension, possibly make use of an EV car scheme, and then work out how to retire and make the most of the assets we have.
invest everything and spend as little as possible which is the opposite of what I'd like to do now.
You've got me confused. You say you have smallish pension pots, no other investments but want to live the life of a six figure income and retire on what you have...?!?Our main aim would be for us to avoid tax now by putting more into pension, possibly make use of an EV car scheme, and then work out how to retire and make the most of the assets we have.
invest everything and spend as little as possible which is the opposite of what I'd like to do now.
If you did nothing more than multiply your desired net annual expenditure by 25 how far away are you with the current pension pots? Sounds to me like you need to save more and spend less in order to be able to do so. It might not be what you want to do but it's what you need to do on the face of it.
Thanks all.
It was my wife’s first tax return and first time she’s earned more than £100 k in one year. Unfortunately, she’s just had another bonus this year taken as salary so will face another bill next year.
It’s this that has caused us to review finances. I’ve already asked to put any bonus into my pension.
As we’ve probably maxed out any potential in our house, we should look more to topping up pensions and your collective advice seems to support this.
As we’ve no one to leave any money to, it’d be good to understand how best we can live in relative comfort before we get too old to spend it.
Obviously we’ve no crystal ball and no way of knowing if we’re going to live 5 more years or 50.
I’ll read through the pensions threads to get a bit more clued up.
It was my wife’s first tax return and first time she’s earned more than £100 k in one year. Unfortunately, she’s just had another bonus this year taken as salary so will face another bill next year.
It’s this that has caused us to review finances. I’ve already asked to put any bonus into my pension.
As we’ve probably maxed out any potential in our house, we should look more to topping up pensions and your collective advice seems to support this.
As we’ve no one to leave any money to, it’d be good to understand how best we can live in relative comfort before we get too old to spend it.
Obviously we’ve no crystal ball and no way of knowing if we’re going to live 5 more years or 50.
I’ll read through the pensions threads to get a bit more clued up.
The key thing will be mapping out how long you intend to go until you retire vs what income you need when you retire.
Straight off the bat pensions relief on both your salaries will mean its beneficial to get some of that headed into a decent SIPP I would imagine. Maybe not all of it, if you have a while to go - and like others have mentioned get some going into a ISA (stocks shares etc).
The advantage of that is the cash is accessible and returns are tax free - the downsides are limitations on annual investment and its out of your bottom line salary.
Some good SIPPS out there with decent returns or use the employer AVCs - certainly if you can live off less and do AVCs then your pension pots could build up quickly.
Once you figure out a strategy its then mostly just looking at what organisations offer decent schemes if you have the time and inclination.
Straight off the bat pensions relief on both your salaries will mean its beneficial to get some of that headed into a decent SIPP I would imagine. Maybe not all of it, if you have a while to go - and like others have mentioned get some going into a ISA (stocks shares etc).
The advantage of that is the cash is accessible and returns are tax free - the downsides are limitations on annual investment and its out of your bottom line salary.
Some good SIPPS out there with decent returns or use the employer AVCs - certainly if you can live off less and do AVCs then your pension pots could build up quickly.
Once you figure out a strategy its then mostly just looking at what organisations offer decent schemes if you have the time and inclination.
toasty said:
Hi all, my wife and I could probably use some financial advice as she's just had a surprise when filling out her tax return this year (hitting the 60% bracket).
We're a couple of years either side of 50, no kids, earning £90k & £120k, 5 years to go on small mortgage, no debt, smallish pension pots, no other investments.
Our main aim would be for us to avoid tax now by putting more into pension, possibly make use of an EV car scheme, and then work out how to retire and make the most of the assets we have.
Would talking to an IFA be worthwhile? I last spoke to one around 15 years ago and their advice was to invest everything and spend as little as possible which is the opposite of what I'd like to do now.
In all honesty if things are as you say, then you have a problem & one that an IFA won't solve for you.We're a couple of years either side of 50, no kids, earning £90k & £120k, 5 years to go on small mortgage, no debt, smallish pension pots, no other investments.
Our main aim would be for us to avoid tax now by putting more into pension, possibly make use of an EV car scheme, and then work out how to retire and make the most of the assets we have.
Would talking to an IFA be worthwhile? I last spoke to one around 15 years ago and their advice was to invest everything and spend as little as possible which is the opposite of what I'd like to do now.
You currently have a combined income north of 200k, you appear to be saving little, have little put by. Without a serious cut in your spending now & diverting this to savings you have little hope of retiring at anywhere close to your current standard of living. Even with a serious cut in spending now you have a problem retiring in the short term. Given a 4-5% drawdown rate you need 4million in pension savings to replace your current income. Even cutting your current spend in half puts you at 2 milion.
Now if your property is worth in the millions a downsize will contribute significantly.
toasty said:
It was my wife’s first tax return and first time she’s earned more than £100 k in one year. Unfortunately, she’s just had another bonus this year taken as salary so will face another bill next year.
Which year is "next year"?2022/23 is in the past tense so her tax will be what her tax will be. But 2023/24 is ongoing and if she's already taken a bonus as salary it's definitely not too late to do anything about it. Any exposure to the 60% band can probably be suppressed between now and 5 April simply by making pension contributions. Construct an accurate year end forecast and then do everything you can to get "adjusted net income" under £100k by the time 5 April arrives. Once you pass that date it's too late.
In other words, if she hasn't already got a SIPP just get one opened and dump the appropriate amount of cash into it. SIPP can happily exist at the same time as any workplace pension and be entirely separate from it.
You've got 3 weeks before the self assessment needs to be submitted.
Speak to an accountant asap - you basically need to dump £25k+ into a pension.
Assume the mortgage rate is good but don't understand why you have small pension pots with a household income of over £200k and no dependants (unless you have another form of retirement plan to the pension)
£500 tax free allowance on interest savings doesn't help either so any interest above this will also count as taxable income.
Speak to an accountant asap - you basically need to dump £25k+ into a pension.
Assume the mortgage rate is good but don't understand why you have small pension pots with a household income of over £200k and no dependants (unless you have another form of retirement plan to the pension)
£500 tax free allowance on interest savings doesn't help either so any interest above this will also count as taxable income.
GT03ROB said:
In all honesty if things are as you say, then you have a problem & one that an IFA won't solve for you.
You currently have a combined income north of 200k, you appear to be saving little, have little put by. Without a serious cut in your spending now & diverting this to savings you have little hope of retiring at anywhere close to your current standard of living. Even with a serious cut in spending now you have a problem retiring in the short term. Given a 4-5% drawdown rate you need 4million in pension savings to replace your current income. Even cutting your current spend in half puts you at 2 milion.
Now if your property is worth in the millions a downsize will contribute significantly.
Thanks, we certainly wouldn’t expect to have anything like 200k as a pension. 60 would be far more like it and I think we could be quite comfortable on that. We’ve been spending most of our money on the house in the form of extension, loft conversion, garden office etc. so it’s unlikely we’d get any large bills beyond maintenance. You currently have a combined income north of 200k, you appear to be saving little, have little put by. Without a serious cut in your spending now & diverting this to savings you have little hope of retiring at anywhere close to your current standard of living. Even with a serious cut in spending now you have a problem retiring in the short term. Given a 4-5% drawdown rate you need 4million in pension savings to replace your current income. Even cutting your current spend in half puts you at 2 milion.
Now if your property is worth in the millions a downsize will contribute significantly.
I’ll speak to my wife about increasing her pension contributions this year to somewhat mitigate the bonus already paid. She spoke to someone in her tax department today and he advised similar.
There is plenty of time left this year to mitigate your tax bill next year, it might be worth sacrificing the majority of Jan / Feb wages into a SIPP and get back down under the £100K as a first aim before year end (if you can afford to do that).
Then start April as you mean to go on and pay in smaller chunks as opposed to one hit to achieve the same outcome.
This is really useful to make some quick calculations if you dial in the information, if I were in your position, I’d want to be as far away via SIPP as possible from the punitive tax rates over £100K:
https://www.thesalarycalculator.co.uk/salary.php
Then start April as you mean to go on and pay in smaller chunks as opposed to one hit to achieve the same outcome.
This is really useful to make some quick calculations if you dial in the information, if I were in your position, I’d want to be as far away via SIPP as possible from the punitive tax rates over £100K:
https://www.thesalarycalculator.co.uk/salary.php
Edited by 996Type on Friday 5th January 18:04
Simpo Two said:
toasty said:
Would talking to an IFA be worthwhile?
Sounds more like a job for an accountant to me. I've had a few IFAs and none of them ever mentioned tax; they will of course sell you a new pension or take over the one you have for a percentage.OPs situation is a prime example of why some people need financial advice, getting money into pensions with 40% or even 60% (effective) tax relief seems like a no brainer yet it appears they have not really taken advantage of this for the past few years. A little bit of professional advice would probably clarify what their goals are and what they need to do to have a comfortable retirement, or, as others have said they could just pay some money into a pension (don't need any advice to do this) and they'll be fine, yea OK.
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