Saving for pension - any regrets?

[ensignia]

So many bitter souls on here - it really is hilarious just how cynical and worm-like some of the regulars are.

I'm on £950 a day Inside, which isn't quite £2.5k p/w truth be told, but who doesn't round up a bit, eh?

[TheDude]

£2500 a week take home implies a day rate of £1000 or so.

Possible but rather unlikely given the type of person who commands that sort of rate.

What sort of person does command that sort of rate?


Day rates at some of the banks are creeping towards £850-900 a day for some technologies so £1000 a day is not beyond the realms of possibility.

[Smoggy]

I'm an actuary on £1000 inside. Seen a few roles advertised at this rate recently.

To bring it back on topic I contribute the max allowed my SIPP, seems crazy not to given how much tax I'd pay on that money otherwise. It's money I don't miss and if I keep it up it shouldn't be too many years until I'm worrying about the LTA. Combined with a state pension that will be my retirement sorted. Then just need to save outside the pension for early retirement.

[TheDude]

I'm an actuary

What are the chances of that?

[hugebrain]

Unfortunately, the £40K limit means unless your are some 10 years from retirement, it's probably too late to make it

Just leaving the money in the company is almost the same as putting it in a pension though. You pay a bit of corporation tax, but you can claim that back for a couple of years and then take the rest as Entrepreneurs relief. You can control the amounts to use up your tax allowances etc.

So, 40,000 in a pension, 100,000 in the company (less 19/20% tax) leaving you 50,000 to live on. You should easily be able to save a million in under ten years. (Might be more difficult for Permietractors)

Pensions are a bit of a scam. Government pretends they are giving you tax relief, while secretly hoping your money grows so they can charge you more tax than you would have paid in the first place.

[_V_]

Just leaving the money in the company is almost the same as putting it in a pension though. You pay a bit of corporation tax, but you can claim that back for a couple of years and then take the rest as Entrepreneurs relief. You can control the amounts to use up your tax allowances etc.

So, 40,000 in a pension, 100,000 in the company (less 19/20% tax) leaving you 50,000 to live on. You should easily be able to save a million in under ten years. (Might be more difficult for Permietractors)

Pensions are a bit of a scam. Government pretends they are giving you tax relief, while secretly hoping your money grows so they can charge you more tax than you would have paid in the first place.

Pension isn't about leaving money somewhere, it's about growing it on average 6 - 10% p.a. over a long term (10 - 40 yrs). That sort of compounding, tax free means hitting the £1.1m limit is almost a certainty.

[_V_]

Below is 20 years of investing into a global mix of stocks, bonds, REITS etc, assuming a very conservative 7% pa tax free increase in these assets in a SIPP.

Year Periodic Deposits Total Deposits Total Interest Balance

1	£40,000.00	£40,000.00	£2,800.00	£42,800.00
2	£40,000.00	£80,000.00	£8,596.00	£88,596.00
3	£40,000.00	£120,000.00	£17,597.72	£137,597.72
4	£40,000.00	£160,000.00	£30,029.56	£190,029.56
5	£40,000.00	£200,000.00	£46,131.63	£246,131.63
6	£40,000.00	£240,000.00	£66,160.84	£306,160.84
7	£40,000.00	£280,000.00	£90,392.10	£370,392.10
8	£40,000.00	£320,000.00	£119,119.55	£439,119.55
9	£40,000.00	£360,000.00	£152,657.92	£512,657.92
10	£40,000.00	£400,000.00	£191,343.97	£591,343.97
11	£40,000.00	£440,000.00	£235,538.05	£675,538.05
12	£40,000.00	£480,000.00	£285,625.71	£765,625.71
13	£40,000.00	£520,000.00	£342,019.51	£862,019.51
14	£40,000.00	£560,000.00	£405,160.88	£965,160.88
15	£40,000.00	£600,000.00	£475,522.14	£1,075,522.14
16	£40,000.00	£640,000.00	£553,608.69	£1,193,608.69
17	£40,000.00	£680,000.00	£639,961.30	£1,319,961.30
18	£40,000.00	£720,000.00	£735,158.59	£1,455,158.59
19	£40,000.00	£760,000.00	£839,819.69	£1,599,819.69
20	£40,000.00	£800,000.00	£954,607.07	£1,754,607.07

£1.7m, well over the limit. Just investing in the S&P 500 tracker would return over 10% for last 30 years as an average.


10.72%
Average Market Return for the Last 30 Years
Looking at the S&P 500 for the years 1991 to 2020, the average stock market return for the last 30 years is 10.72% (8.29% when adjusted for inflation).

[GitMaster69]

You would be saving 40k yearly 20 years ago ?

[TheDude]

You would be saving 40k yearly 20 years ago ?

I would have probably invested the money in Yahoo or MySpace shares.

[_V_]

You would be saving 40k yearly 20 years ago ?

No, but there is really no excuse why people like IT contractors are not saving the maximum possible over the next 10 or 20 years.

I invested heavily so that I and my wife am retired this July aged 55.