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My own experience at 24.


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7 hours ago, Aidan Ap Word said:

Or 75k at the age of 24 ... which places this person way beyond the 1%. Given that the 1% eacr 75k on average (which is more likely to be closer to half way through their careers... not at 24).

Way beyond the 1%. 75k is still below what the average wage would be if wages had risen at the same rate as Housing.

https://www.thisismoney.co.uk/money/mortgageshome/article-2462753/How-items-cost-risen-line-house-prices.html

"According to our figures, if wages had risen at the same rate as house price inflation, the average wage would be £87,720"

Moving the homeless along from Windsor before Princess Eugenie's tax payer funded wedding epitomizes it for me.

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I don't think I can add much on top of what has been said but to be in your position at 24, asking these questions and making (what seems to be) the right lifestyle choices is quite impressive. Thinking back to when I was 24 I was in a low paid job, living with the parents and hanging round with my mates, mostly acting like a bunch of ****heads. I'm now much older, slightly better paid and a lot of the mates have moved on, some would say I'm still a ****head though!

Good luck with whatever you choose.

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On ‎03‎/‎10‎/‎2018 at 13:56, No One said:

Any advice?

 

How do I set up a SIPP?

Don't use an advisor read @wish I could afford one's book Best Investment book I have ever read and I have an MBA and have created two multi million pound businesses. 

Specifically re SIPP lots of lost cost advisors out there but Hargreaves Lansdown have a very good interface - will take you 15 mins to setup and tax relief at 20% will be in the account in 6 weeks. If you are a 40% payer you claim the rest through your tax return. 

Hargreaves lansdown

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I do agree the system is screwed and will have to change but all of my friends in their mid or late 20s have very well paid jobs - 45k being the lowest and about 200k the highest. The ones who want it have all got past the 100k mark Most of them are based outside of South East.

The main issue is that very few do a genuinely productive job (socially or economically). To get a worthwhile, well-paid job is a challenge.

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On 03/10/2018 at 15:28, The Spaniard said:

Sam is presumably putting £40,000 p.a. into a SIPP and £20,000 p.a. into an ISA (optimally £4,000 out of that into a LISA?), the latter from income taxed at 20%.

Assuming that his/her annual living expenses amount to at least the personal income tax allowance of £11,850, gross income must be at least £76,850 p.a. plus any NI contributions.

Impressive.

If I earnt 76k I doubt id put 40k if it into a pension which at the end of the day is subject to the mood of the politicians when and how much I get..... Id rather have it in my hand.... Tax now of tax later if you get to 65. The system  is certainly not in your favour.

Edited by GreenDevil
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9 hours ago, GreenDevil said:

If I earnt 76k I doubt id put 40k if it into a pension which at the end of the day is subject to the mood of the politicians when and how much I get..... Id rather have it in my hand.... Tax now of tax later if you get to 65. The system  is certainly not in your favour.

It's a risk that you take. For me, having 40% relief on what went in and a marginal rate of 20% what came out when I retired at 50 was very much worth it. I'd do it again, but you are right that you are rolling the dice with the politicians. 

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15 hours ago, GreenDevil said:

If I earnt 76k I doubt id put 40k if it into a pension which at the end of the day is subject to the mood of the politicians when and how much I get..... Id rather have it in my hand.... Tax now of tax later if you get to 65. The system  is certainly not in your favour.

Don't forget your income above £50K attracts 40% tax  - Any pension contributions is free of tax.  

Also, because of the way a pension pot usually grows, if you had £320K already amassed in a pension pot at 30 (paying £40K for 8 years from an age of 22) , you probably wouldn't need to contribute anymore for the rest of your life, and you'd still have a reasonable pension .

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2 minutes ago, rockerboy said:

Don't forget your income above £50K attracts 40% tax  - Any pension contributions is free of tax.  

Also, because of the way a pension pot usually grows, if you had £320K already amassed in a pension pot at 30 (paying £40K for 8 years from an age of 22) , you probably wouldn't need to contribute anymore for the rest of your life, and you'd still have a reasonable pension .

The pension is tax deferred, however it's a poor deal as the final value of the fund may be 10 times the amount invested, so final tax payable on the bigger amount. An ISA overtime will be a far better investment than a pension.

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15 minutes ago, rockerboy said:

Don't forget your income above £50K attracts 40% tax  - Any pension contributions is free of tax.  

Also, because of the way a pension pot usually grows, if you had £320K already amassed in a pension pot at 30 (paying £40K for 8 years from an age of 22) , you probably wouldn't need to contribute anymore for the rest of your life, and you'd still have a reasonable pension .

Also there is the child benefit loss.

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12 minutes ago, Fatmanfilms said:

The pension is tax deferred, however it's a poor deal as the final value of the fund may be 10 times the amount invested, so final tax payable on the bigger amount. An ISA overtime will be a far better investment than a pension.

Probably better of in another thread,   Please can you give some figures about what you mean about the taxes and where they apply?

I always thought that you can take out 25% out of your pension tax free when you retire (yes I know this could change).

Iy one used your case of "10X the amount invested", surely that would mean that 2.5 times the money you invested is money gained tax free? Not only that, because you oput it into a pension,  you didn't pay 40% haircut tax at the start (which is what happens if you put "after taxed" income into an ISA?)  

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22 hours ago, GregBowman said:

Don't use an advisor read @wish I could afford one's book Best Investment book I have ever read and I have an MBA and have created two multi million pound businesses. 

Specifically re SIPP lots of lost cost advisors out there but Hargreaves Lansdown have a very good interface - will take you 15 mins to setup and tax relief at 20% will be in the account in 6 weeks. If you are a 40% payer you claim the rest through your tax return. 

Hargreaves lansdown

I had a handful of pensions floating around and wanted to consolidate them into one place. Partly for ease of access and also that I knew most of them were taking quite high fees. I thought speaking to an advisor might have been the way to go but in the end sorted myself out with HL, splitting the total pot up into a number of funds split across a few regions and industries. It may work or it may not but at least now it is in my hands.

The reason(s) I didn't go with the advisor were:

  1. Charging a % fee of the overall pot rather than a set fee for advice.
  2. Suggested no way to monitor their performance over the old pension or in general.
  3. Continually pushed for annual reviews which, again, charge a fee.
  4. Continually brought up other areas such as life insurance, which I had never asked for.
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7 hours ago, rockerboy said:

Probably better of in another thread,   Please can you give some figures about what you mean about the taxes and where they apply?

I always thought that you can take out 25% out of your pension tax free when you retire (yes I know this could change).

Iy one used your case of "10X the amount invested", surely that would mean that 2.5 times the money you invested is money gained tax free? Not only that, because you oput it into a pension,  you didn't pay 40% haircut tax at the start (which is what happens if you put "after taxed" income into an ISA?)  

Taxman gives you 20% to add when you pay in. 

When you take it out you still pay 20% tax. But if the fund has risen to from 100k invested to 200k tax man is still getting 20% in a bigger amount. If you take 25k as an aannuity you are you a paying about 10% tax on 25k of you include you tax allowance. But in ££ taxman is getting 10%  of bigger amount instead of paying back 20% at source. 

Let's not even mention annuities to get 25k per annum you d probably need to have paid in 1mill....plus 

Pay your tax now and put it in your isa.

Edited by GreenDevil
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10 hours ago, GreenDevil said:

Taxman gives you 20% to add when you pay in. 

When you take it out you still pay 20% tax. But if the fund has risen to from 100k invested to 200k tax man is still getting 20% in a bigger amount. If you take 25k as an aannuity you are you a paying about 10% tax on 25k of you include you tax allowance. But in ££ taxman is getting 10%  of bigger amount instead of paying back 20% at source. 

Let's not even mention annuities to get 25k per annum you d probably need to have paid in 1mill....plus 

Pay your tax now and put it in your isa.

You may be right, but are you guessing or have you run the figures? I was getting 40% relief paying in and retired at 50 with 25% TFC and a 20K pa pension. Would I have been better off putting my money in an ISA? I'm guessing no, but I haven't run the figures.

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3 hours ago, micawber said:

You may be right, but are you guessing or have you run the figures? I was getting 40% relief paying in and retired at 50 with 25% TFC and a 20K pa pension. Would I have been better off putting my money in an ISA? I'm guessing no, but I haven't run the figures.

In both cases the investment return is gross of tax and therefore a constant. Therefore the only difference between the two is the marginal tax rate at the point of application.

ISA = (1- I.t) * C * 1

Pension = 1 * C * (1- P.t)

If P.t < I.t then you win.

Given that for a higher rate tax payer on salary sacrifce I.t can be as high as 62% and P.t as low as 15% then pension contributions are a clear winner (assuming a constant rule set).  Why do you think the government wants to move everyone on to ISA’s...

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31 minutes ago, GARCH said:

In both cases the investment return is gross of tax and therefore a constant. Therefore the only difference between the two is the marginal tax rate at the point of application.

ISA = (1- I.t) * C * 1

Pension = 1 * C * (1- P.t)

If P.t < I.t then you win.

Given that for a higher rate tax payer on salary sacrifce I.t can be as high as 62% and P.t as low as 15% then pension contributions are a clear winner (assuming a constant rule set).  Why do you think the government wants to move everyone on to ISA’s...

The other blindingly obvious thing that the pension nay-sayers are missing is that you end up doubling your tax free allowances. First in each year you contribute, and then in each year you draw down. ISA is outside of that, but is invested on already taxed income. 

If you earn £60k and stick £10k into the pension each year the 'cost' to you is only £6k (let us ignore employer's contributions). Since you now ave sacrificed a good chunk of your income at the higher rate your average tax rate as fallen. 

Let us then say you do this for 25 years (you start at 30 years of age after living it up and scraping a house deposit [lol] together). With interest, dividends reinvested etc etc let us then say your pot is worth £400k. 

£100k comes out tax free (your PCLS)

£300k invested and drawn down at £20k per year would attract an average tax rate of 10%ish

You do ths for 15 years until you get the state pension and all the other bribes that may or may not be there and you drop your drawdown rate such that income is unchanged. 

Now, with the PCLS you could stick that into an ISA over 5 years (4 years really if you retire not at the end of the tax year) and end up with a decent pot in high yielding funds earning tax free income. 

ISAs are an important part of tax and retirement planning but pension terms are ring fenced with any changes to pension rules. (see pension A-day for an example in practice). ISAs though are accessible, so when you need that new car, boiler, extension etc.... easy to dip in. They also are considered for means testing so if you're ever unemployed or require state support (illness, disability etc) you may need to use these up first. 

In the long run we're all dead. ISAs are part of the estate for IHT purposes. DC pensions are not. 

As ever it's complicated and depends on an individuals requirements and life plan. 

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On 02/10/2018 at 00:22, sam1994 said:

About 90% of my revenue comes from outside the UK now. I just need a laptop to do most of my work; so I'm not tied to any fixed location which is very helpful. I've noticed a decline in our UK sales and increasing uptake internationally. I don't think we're failing in the UK, but disposable income seems to be tightening.

Funny you should say. Some years ago I said to myself "I don't want to rely on the UK economy". Interesting because I do this too. All of my products are marketed in English language and are in English language but 50% of my sales are in non-English speaking markets. My sector is growing and predicted to keep growing.

Without giving away too much info (if you don't want to), I'd be interested to know do you sell tangibles and or / non-tangibles? Doing business overseas obviously makes that logistically different if it's tangibles, particularly if you sell direct to customers. Are you B2B or B2C or both?

Do you use a distributor who buys from you wholesale to place onto consumer retail channels? and / or do you sell direct to consumers through your own channel / affiliate channels?

Have you needed to translate your product's descriptions / instructions for overseas markets? On the other hand perhaps you mean the US, AU, CA and NZ?

Apparently India has a larger English speaking market than the UK.

 

On 03/10/2018 at 19:39, sam1994 said:

Regulations are tricky. Things like GDPR haven't helped. 

Sounds like you're doing something of scale with data. I don't use any tracking on my website at all. Thankfully GDPR hasn't affected my GDPR compliant mailing list growth.

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21 hours ago, GreenDevil said:

Taxman gives you 20% to add when you pay in. 

When you take it out you still pay 20% tax. But if the fund has risen to from 100k invested to 200k tax man is still getting 20% in a bigger amount. If you take 25k as an aannuity you are you a paying about 10% tax on 25k of you include you tax allowance. But in ££ taxman is getting 10%  of bigger amount instead of paying back 20% at source. 

Let's not even mention annuities to get 25k per annum you d probably need to have paid in 1mill....plus 

Pay your tax now and put it in your isa.

Or put it in a SIPP until there is enough to take £12k a year tax free + 25% tax free cash from 55 until 68.Iv made sure my SIPP investments will stay at around £170k and with some income in dividends between ages 55 and 68 i should get the lot out tax free.After 68 i only want £60 a week on top of the state pension so no tax.I have that coming in a final salary pension so everything else is in an ISA.SIPPs are great for people who have no other taxable income from 55 as you can take just under £15k a year from them tax free.

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On 05/10/2018 at 16:06, rockerboy said:

Probably better of in another thread,   Please can you give some figures about what you mean about the taxes and where they apply?

I always thought that you can take out 25% out of your pension tax free when you retire (yes I know this could change).

Iy one used your case of "10X the amount invested", surely that would mean that 2.5 times the money you invested is money gained tax free? Not only that, because you oput it into a pension,  you didn't pay 40% haircut tax at the start (which is what happens if you put "after taxed" income into an ISA?)  

Greatly depends on the flexibility of access to your cash, I was supposed to be able to take the pension from age 50, so be aware the rules can change. FWIW I retired at 52, I would have retired at 50 if I could have had access to py pension on the agreed date.

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On 02/10/2018 at 15:49, durhamborn said:

Move north Sam.Here around Durham you can buy some cracking places for £200k and some very nice 3 bed semis for around £120k.East coast mainline has you in London in 2 hrs 10 minutes from Darlington.Newcastle airport is very laid back and plenty of flights now,even the ferry to Europe from North Shields.The south will be terrible in the next cycle as its those very jobs that will see the most pain.

Some good economic reasons to move north. But for me Yorkshire dales need no economic reasons. Superb living yet I work for a national employer an effectively have a ‘London finance job’. Albeit no London allowance but also no London costs  

Good job re the SIPP and ISAs. I am 50 years old now so house prices for me were a different ball game but like you I was frugal and watched my environment. I bought when others sold and sold when others bought.....and I was lucky. I retire this year. 

Keep with the plan, stay frugal and rest assured when a crash comes (even a mini crash) a motivated seller in a dying market is a wonderful opportunity. A 118’er who is leveraged may have to take what they can get. Last time I bought I made the vendors eyes bleed. 

And definately read ‘I wish I could afford ones’ strategy.

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On 04/10/2018 at 22:46, GreenDevil said:

If I earnt 76k I doubt id put 40k if it into a pension which at the end of the day is subject to the mood of the politicians when and how much I get..... Id rather have it in my hand.... Tax now of tax later if you get to 65. The system  is certainly not in your favour.

I earn a fair bit over £76k; I'm not sure where that figure came from on this post; but would rather not go in to details. 

My ISA is maxed out every year. 

Putting £40K in to a SIPP works well for me as it reduces my CT bill. I expect to finish at about £250k at 27 and then with a 7% YoY return, I'll stay in line with life time allowance increases. If I do exceed this, there's not much harm as tax of 55% is applied post-crystallisation. 

After this, I plan to set up a separate company to invest to avoid a higher tax rate due to 'non core' activities . 

At my age, I have plenty of time to ride out market cycles and I believe passive investment would be a better option for the majority of my investments as I don't have a solid enough understanding of the markets. 

 

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9 hours ago, Arpeggio said:

Funny you should say. Some years ago I said to myself "I don't want to rely on the UK economy". Interesting because I do this too. All of my products are marketed in English language and are in English language but 50% of my sales are in non-English speaking markets. My sector is growing and predicted to keep growing.

Without giving away too much info (if you don't want to), I'd be interested to know do you sell tangibles and or / non-tangibles? Doing business overseas obviously makes that logistically different if it's tangibles, particularly if you sell direct to customers. Are you B2B or B2C or both?

Do you use a distributor who buys from you wholesale to place onto consumer retail channels? and / or do you sell direct to consumers through your own channel / affiliate channels?

Have you needed to translate your product's descriptions / instructions for overseas markets? On the other hand perhaps you mean the US, AU, CA and NZ?

Apparently India has a larger English speaking market than the UK.

 

Sounds like you're doing something of scale with data. I don't use any tracking on my website at all. Thankfully GDPR hasn't affected my GDPR compliant mailing list growth.

I sell physical goods. We do HW + SW.

We don't data harvest but we have a lot of users. Things like mailing lists and telemetry for things like bug reports were hassle for me to get right legally. 

SW is delayed because of VATMOSS. The EU has chosen to fight tax evasion. This means that if you sell a single eBook online, you would need to fill out a VATMOSS return or submit a VAT return in the country of the customer you sold to. To prove you sold to the customer in their country. at the correct VAT rate, you need to collect several pieces of non-contradictory data. All hassle. I think this is the side of the EU that a lot of people don't know about. It definitely stifles innovation. A competitor in the US beat us to market because of this; simply because of a lack of regulation here. 

We'll work it out. 

Almost all B2C; but we get B2B applications from the reliability of our B2C products. We also do some B2B based on reselling.

All manufacturing and shipping from UK. People will pay for quality and I don't bother with the lower pricing. Better to have 10-20k customers annually that value service; that you can respond to adequately because you have resources than 10x at the same profit margin who receive a more rushed, impersonal service.

I don't translate my product data yet beyond compliance statements; but that will change in the next year or so. We have good markets in Scandinavia and Germany. They seem to have a good level of disposable income. 

Cheers,

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Unfortunately this forum doesn't seem to allow me to edit my post. My reply was submitted prematurely.

* EU chose to fight tax evasion; knowing that the only people who could comply with schemes like VATMOSS would be the big boys like Amazon with entire floors dedicated to mitigating tax.

* Paid SW is delayed: running any SaaS platform in the EU is a nightmare. So for now we just have extended 'beta testing'. It's a bad sign when it takes longer to develop tax collection methods than a software product. 

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12 hours ago, durhamborn said:

Or put it in a SIPP until there is enough to take £12k a year tax free + 25% tax free cash from 55 until 68.Iv made sure my SIPP investments will stay at around £170k and with some income in dividends between ages 55 and 68 i should get the lot out tax free.After 68 i only want £60 a week on top of the state pension so no tax.I have that coming in a final salary pension so everything else is in an ISA.SIPPs are great for people who have no other taxable income from 55 as you can take just under £15k a year from them tax free.

I built my FIRE fund pretty quickly so I've ended up with 44% in SIPP's, 15% in ISA's, 9% in NS&I but 32% in non-tax sheltered investments.  With us soon leaving the UK that won't be  problem either as we'll be non-domicile in our new country with dividends/interest not being taxed for the first 17 years.  By then the non-tax sheltered (which includes the ISA's/NS&I one you emigrate) funds should be gone and I'll be into the pension.  No problem there either - the first EUR19k will be tax free or you can choose a tax scheme were you are taxed at a flat 5%.

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5 hours ago, sam1994 said:

I earn a fair bit over £76k; I'm not sure where that figure came from on this post; but would rather not go in to details. 

My ISA is maxed out every year. 

Putting £40K in to a SIPP works well for me as it reduces my CT bill. I expect to finish at about £250k at 27 and then with a 7% YoY return, I'll stay in line with life time allowance increases. If I do exceed this, there's not much harm as tax of 55% is applied post-crystallisation. 

After this, I plan to set up a separate company to invest to avoid a higher tax rate due to 'non core' activities . 

At my age, I have plenty of time to ride out market cycles and I believe passive investment would be a better option for the majority of my investments as I don't have a solid enough understanding of the markets. 

 

Not sure what a fair bit over £76k means but it might be worth a quick Google for tapering of pension annual allowance.  Depending on what your adjusted income and threshold income is you may not be able to stash £40k annually.  

Also don't forget Carry Forward which might help you even be able to exceed £40k (or help with the tapering problem if you're affected) for a while.

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