Reply to: Getting wobbles at 45

[SueEllen]

Perhaps I can steer the discussion back towards the original question of age and demand for one's skills.

Over the last 15 years I've worked in 10 different IT departments across a huge variety of industry sectors and company sizes as well as the public and not for profit sectors. During this time, I could almost count on my fingers how many software engineers I've come across who were over 55. IT in general, is a younger person's game. At nearly all the organisations I mentioned above, maybe 2-3% max of IT staff were over 55. I've worked in one client recently where apart from two of the board directors, I was older than literally everyone else in the company by at least 10 years.

Knowing people in that age group including working with some - some of them end up in those roles by default. If you have a lot of experience and aren't a complete bellend so can communicate with people then you may be offered those roles anyway.

[edison]

Perhaps I can steer the discussion back towards the original question of age and demand for one's skills.

Over the last 15 years I've worked in 10 different IT departments across a huge variety of industry sectors and company sizes as well as the public and not for profit sectors. During this time, I could almost count on my fingers how many software engineers I've come across who were over 55. IT in general, is a younger person's game. At nearly all the organisations I mentioned above, maybe 2-3% max of IT staff were over 55. I've worked in one client recently where apart from two of the board directors, I was older than literally everyone else in the company by at least 10 years.

Public sector and not for profit organisations have generally older workforces so maybe that is one option to extend your longevity but they also offer lower day rates.

Most people in their mid 50s I come across in IT are either at a senior leadership level or some kind of external consultant in something other than development.

As per one suggestion earlier, you may need to consider branching out into other skillsets or consider moving sector.

Personally, I’m 54 and am planning to work till my late 60s but winding down to part time from around 60. I’ve purposefully been developing a portfolio of skills to improve my chances of doing that e.g. advisory, coaching, working with startups and hopefully non-executive directorships in future. But there’s no guarantee. One retired contractor I know told me she never had any specific plan to retire but at around 57-58, the gaps between contracts started getting longer and eventually approaching 60 work dried up so she was forced to retire.

[lukemg]

Seem to be a few angry people on here, or is it a healthy spirited debate ?
I am 55 and looking at the end game, if only the demand for work had not gone so crazy and I was less greedy.
My two pence:
- I would prefer never to pay my mortgage off but the bank has other ideas so I pay as little as I can. Reason is that I am getting 9.5% on my VWRL ETF in my pension over the last 12 years but the interest on my mortgage is 1.55. Yes, I know it's going to go up but it makes no sense currently. Yes, I know in peoples heads it feels different and they should probably pay it off but I personally would never do that, I see all the assets and debts as a complete picture and act accordingly. Also, I see no point in having a massive asset that I can't sell part of (equity release nightmare/downsizing not withstanding).
- Pension allowance is virtually the only lever left to pull if you score inside so that potential 40k/year is priceless I think to reduce the pain IF you have some leeway in expenses (poster probably does as he is pushing chunks at the mortgage)
- No reason to get clever, chuck pension in a low cost tracker (VWRL ETF mentioned, or vanguard lifestyle according to risk appetite) and hold tight
Cannot fully explain the fantastic feeling when I realised I was immune from having to work/putting up with bell-ends etc, I can recommend it highly. Of course, live a bit as you go along but if you can get some stashed you will thank yourself for it. No-one wants to be 'that guy', still dragging his carcase into work even though there is nothing left in the tank, make sure you've got enough before you've had enough...

[hugebrain]

Surely your client is paying you LTD company fees. And your LTD pays you a salary? You and your fellow directors can then have an annual mtg to agree how much you and the other paid directors can receive as pension and record this in the minutes.

If you're not a contractor, and paid that salary from your employer, then what you say is possible 'if' you have unused pension allowance from previous years else your max if £40k per year. BUT, and this is important, you also have to assume that the company pension scheme of your employer allows this too, which they may not. What you would want is salary sacrifice but if you're employed and they won't allow such large contributions you would I believe have to take it as salary, get taxed/NI'd, then make a personal contribution and make a claim via your tax return.

But as you're a contractor through a LTD this isn't an issue for you.

Oh .... and some of t he above may not be 100% accurate ... I'm going from memory, so don't quote me

Yes, I understand it as a contractor My company can put in 40k for me and this saves corporation tax and whatever dividend tax I would have paid taking the money out normally (the government stitch me up when I eventually draw the pension)

I’ve never experienced the horror of an inside ir35 contract, but I believe you are looking at taxes/NI in the 60-70% range. So it then becomes a bit more urgent to put as much as you can in the pension (you are tripling your money instead of getting an extra 40%) The employer would be some umbrella company so you could just pick one that allowed you to do lots of salary sacrifice.

[Whorty]

What does it mean by 100% of salary? If the client is paying 160,000 then can i pop that all in my pension, or does it mean they give me a salary of 80,000 and put in 80,000 into a pension (plus or minus a bit for taxes and NI)?

Surely your client is paying you LTD company fees. And your LTD pays you a salary? You and your fellow directors can then have an annual mtg to agree how much you and the other paid directors can receive as pension and record this in the minutes.

If you're not a contractor, and paid that salary from your employer, then what you say is possible 'if' you have unused pension allowance from previous years else your max if £40k per year. BUT, and this is important, you also have to assume that the company pension scheme of your employer allows this too, which they may not. What you would want is salary sacrifice but if you're employed and they won't allow such large contributions you would I believe have to take it as salary, get taxed/NI'd, then make a personal contribution and make a claim via your tax return.

But as you're a contractor through a LTD this isn't an issue for you.

Oh .... and some of t he above may not be 100% accurate ... I'm going from memory, so don't quote me

[Whorty]

Annual allowance is £40k up to 100% of salary I believe, but you can use up unused allowance from past 3 years so I suppose in principle it would be possible to make a single annual payment of £120k, maybe even more (160?). I keep meaning to do something like this myself but other commitments tend to get in the way. It certainly softens the blow of inside contracts if you can afford to do it and arguably you would be better off living off other (non tax pivileged) savings if you have them and dumping all of your earnings into a pension.

Don't help him ..... make him look it up himself as he thinks he can do £120k a year for 4 years

You are correct, you can use unused pension allowance from previous years 'if' you have been in a pension scheme during those years (we assume the OP was, but can't be 100% sure unless he says.

But he can only do that once, and he'd presumably be using all his company cash to fund that with not much left for 'income'.

Plus, I'm pretty sure there are tax implications of taking a salary, and divs, and a big pension contribution from the company .... I'm not a tax accountant but I don't think it's straight forward.

But let's say in Yr1 he could drop in a spare £160k. Yr2 £40k. etc ... it's still 7 years to get to the £400k pension pot (I'm ignoring tax relief so the pot would be higher than £400k). This after he's paid his mortgage off at 52, so he's 59 now and hopefully still in good health and picking up decent contracts.

I know pensions get back press but if everyone started young, small amounts each year, you don't have to put vast sums in for that pot to grow over 30 odd years of working.

[hugebrain]

Annual allowance is £40k up to 100% of salary I believe, but you can use up unused allowance from past 3 years so I suppose in principle it would be possible to make a single annual payment of £120k, maybe even more (160?). I keep meaning to do something like this myself but other commitments tend to get in the way. It certainly softens the blow of inside contracts if you can afford to do it and arguably you would be better off living off other (non tax pivileged) savings if you have them and dumping all of your earnings into a pension.

What does it mean by 100% of salary? If the client is paying 160,000 then can i pop that all in my pension, or does it mean they give me a salary of 80,000 and put in 80,000 into a pension (plus or minus a bit for taxes and NI)?

[mattster]

Use Google. It's very clear what the annual allowance is. Clue, it's nowhere near 120k

Annual allowance is £40k up to 100% of salary I believe, but you can use up unused allowance from past 3 years so I suppose in principle it would be possible to make a single annual payment of £120k, maybe even more (160?). I keep meaning to do something like this myself but other commitments tend to get in the way. It certainly softens the blow of inside contracts if you can afford to do it and arguably you would be better off living off other (non tax pivileged) savings if you have them and dumping all of your earnings into a pension.

[Whorty]

Is it to wait until you are forced into an “inside” / permie job and then pile whatever you’re allowed into your pension via salary sacrifice - stopping when it looks like you will hit the lifetime limit?

Not clear if you can get tax relief on your whole salary, on half of it, or 120,000. One of you geniuses can no doubt enlighten me.

Use Google. It's very clear what the annual allowance is. Clue, it's nowhere near 120k

[Whorty]

.. just if he screws up and has to take an inside IR35 contract for a while.

Why is an inside contract necessarily a screw up? Without knowing the rates we can't make that judgement

He’s already said he’s getting higher rates and has spare money.

Isn't everyone getting higher rates? Is his rate increase higher than inflation?

How much spare money does he have? £10 a week? £1000 a week?

This will tide him over while he’s forced to slap some money in his pension to stop the public sector scummers from stealing it.

Dropping money into the pension pot is always a good idea. You get free money off the government. Up to 40% free money. Everyone really should be doing this from the first job until the last. Unless you don't like free money?

He’s on a good rate and making extra money from the negative real interest rate he’s paying on his mortgage.

You don't know this. You have no idea what his day rate is. You have no idea what his monthly spend commitments are. You don't know the size of his mortgage. You don't know the type of mortgage he has or the interest rates he is paying.

At the moment yes, his mortgage interest is lower than inflation, but if he's not doing anything productive with that extra cash (if he has much, we don't know) then the cash will just be losing value sitting in the bank.

No problems at all.

I think I've highlighted your problems above fella. Lack of thinking.

[Whorty]

The point is that "higher rates" and "a good rate" are subjective. E.g. if you're currently on £200/day, going up to £400/day would be amazing. If you're currently on £800/day, going down to £400/day would be disappointing.

Don't confuse him ... he thinks everyone is on £2000 a day, just like he is

[hobnob]

The point is that "higher rates" and "a good rate" are subjective. E.g. if you're currently on £200/day, going up to £400/day would be amazing. If you're currently on £800/day, going down to £400/day would be disappointing.

[hugebrain]

If you don't now what you're talking about, why are you trying to advise someone with total rubbish?

We don't even know the day rate the OP is on, so why do you keep saying to drop 120k into a pension each year? You're somehow thinking he has this 'spare' after all his normal spending (and tax etc) when clearly he spends to his limit already.

Or are you just being an idiot on purpose?

Not each year, just if he screws up and has to take an inside IR35 contract for a while. He’s already said he’s getting higher rates and has spare money. This will tide him over while he’s forced to slap some money in his pension to stop the public sector scummers from stealing it.

He’s on a good rate and making extra money from the negative real interest rate he’s paying on his mortgage.

No problems at all.

[Whorty]

Is it to wait until you are forced into an “inside” / permie job and then pile whatever you’re allowed into your pension via salary sacrifice - stopping when it looks like you will hit the lifetime limit?

Not clear if you can get tax relief on your whole salary, on half of it, or 120,000. One of you geniuses can no doubt enlighten me.

If you don't now what you're talking about, why are you trying to advise someone with total rubbish?

We don't even know the day rate the OP is on, so why do you keep saying to drop 120k into a pension each year? You're somehow thinking he has this 'spare' after all his normal spending (and tax etc) when clearly he spends to his limit already.

Or are you just being an idiot on purpose?

[hugebrain]

To even write that you either know nothing about saving for your retirement the most tax efficient way

Is it to wait until you are forced into an “inside” / permie job and then pile whatever you’re allowed into your pension via salary sacrifice - stopping when it looks like you will hit the lifetime limit?

Not clear if you can get tax relief on your whole salary, on half of it, or 120,000. One of you geniuses can no doubt enlighten me.