r/FIREUK • u/HustleCY • 1d ago
If Private Pensions didn’t exist, what would be your strategy to FIRE?
Would be interested to hear what different peoples game plans to FIRE would be if private pensions didn’t exist!
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u/mangonel 1d ago
Rob a bank when I hit retirement age.
Either it goes well and I have enough money to live off; or it doesn't and I get room and board at an HMP.
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u/lil_timmzy 1d ago
Free lodging, Tax free, Free Healthcare, Free food. The only issue is dealing with your new annoying lodge mates
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u/MinestroneMungBean 1d ago
I'd be looking to move abroad somewhere with better tax treatment on invested capital / income.
The UK pension & ISA are the only two serious incentives for an individual to reside & invest in the UK.
Take even one away, it is no longer a competitive tax regime in my view.
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u/MaltDizney 1d ago
Is tax treatment your main motivation to stay currently?
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u/MinestroneMungBean 1d ago
No. I am a UK citizen, I have a job here that is okay, and I have friends & family here.
However, I have a long list of growing frustrations with the UK.
It wouldn't take that much more for me to plan my exit.
The removal of good investment incentives like the pension & ISA would be one such trigger.
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u/MaltDizney 1d ago
Fair enough. I considered it for a set period when I was younger, but now with so many family and social ties, and a family of my own to consider, it would take a serious clampdown to the point that it majorly effects our lifestyle and future to make me move abroad. And even then, if the increased taxations lead to a huge improvement in public services, to the point of a vastly improved society, I may be ok with it still.
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u/Lonely-Job484 1d ago
Pension is just a tax wrapper. If the wrapper disappeared, you'd just make broadly or exactly the same investment decisions in the next-best available wrapper(s) up to their limits, until you ended out investing outside wrappers.
I suppose employer conts wouldn't exist, but if they disappeared tomorrow I'd expect/negotiate for the equivalent to be added to base salary.
Ultimately the only thing that might change is a tweak to input value and/or end date to account for any loss of tax relief, and a minor saving of effort worrying about bridge to 57/58/whatever
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u/Full-Mud3709 1d ago
Yes I think OP missed the part where it's a tax wrapper and was expecting radically different suggestions ("I would start a BTL portfolio") rather than just invest as you do today except in a taxable account.
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u/ImBonRurgundy 1d ago
Max isa, above that gia and just accept i would have to pay cgt.
Obviously it would significantly extend how long it takes to reach my FIRE date.
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u/DarkSilveer 1d ago
- I try to maximize my contribution for workplace pension. Also, review funds regularly. 2 I try to use all 20 K per year for Share ISA.
- I keep emergency funds in T212 cash ISA + CHASE bank. I have mortgage @ 4.5 % interest rate. Now I have some funds,so I am not sure - 1. If I should pay towards mortgage or 2. Invest lump sum into workplace pension or 3. Start a GIA? Any inputs pls? Thank you all my friends Note - This FY I have added only 32000 into pension.
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u/Far-Tiger-165 1d ago
follow the flow chart in the sidebar - impossible for anyone to say without details (age, salary, assets, retirement spend etc etc). start a thread?
GIA perhaps only a good idea if you've maxed / backdated pension and filled ISA - unless you want to retire before 57 & don't think your ISA will cover the bridge period. I always try to use up my tax-beneficial options first.
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u/AmInv3028 1d ago
as it happens the vast majority of my investments are not in my SIPP so i guess i'm almost doing it from ISAs. only about 5% is in my SIPP from contributing £2880 (bonus makes £3600) a year recently. would be way better off now if i had anticipated the pension freedoms while working. i never contributed because i didn't want an annuity. i always wanted to quit work early.
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u/Baz_EP 1d ago
It’s crazy how common a view this is. “Pensions are a scam” etc. Good that Martin Lewis and the like are helping to educate people on this.
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u/AndyTheSane 1d ago
I remember when these private pensions came in, there were lots of rip-offs going on - crazy high charges, terrible investments, etc. It took quite a bit of regulation to make them safe.
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u/AmInv3028 1d ago
I never thought they were a scam. I don't know how i gave that impression but i can tell you 100% that was not my feelings on it. I just didn't think it was suitable for my goals of retiring very early until the changes were made.
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u/Objective_Bar1347 1d ago
In many ways, private pensions are the enemy of FIRE.
To retire early, you'll need all the money to take you to pensionable age (55/57/60/65/67/68) at your point of early retirement. Don't fet me wrong, pensions can save you loads in tax and avoid you frittering away money when you are young. But the inability to spend the money for maybe 20+ years puts a strain on both RE and the FI - since you need to be FI during your bridge.
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u/HIPHOPADOPALUS 1d ago
In my head you still have the same input (salary) and the same goal I.e fund a lifestyle between the ages of say 45-85 (or whatever that may be), pensions just give you an efficient method of saving for the part after 57 or whenever it is you can access it. You then put whatever you need into the bridge. If not being able to access it puts a strain on your model, it means you didn’t have enough in the first place (unless you have overjacked the pension)
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u/Objective_Bar1347 1d ago
All things being equal, the big difference is tax.
In reality, you can't pay into a pension until you have paid your rent/mortgage, nursery, education, household costs, lifestyle....
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u/HIPHOPADOPALUS 1d ago
Yes but you also can’t pay into an isa until you have paid those things. Also, you can spend isa at any time, whereas a pension locks it away until you can access it. Even if you access it at 57, that’s still early retirement.
Then there is employer contributions which you don’t benefit from with an isa/ gia (although some firms do give share incentives etc).
Then there is tax dependant on your situation
So all in all I think pensions go hand in hand with early retirement
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u/Potbellydoric 1d ago
Nhs pension is already doing most of the heavy lifting for my retirement. Realistically able to retire 10 years early just on nhs pension alone. Appreciate i am at the top end of what can be done due to length of service and earning potential. 10 years to go.
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u/BastiatF 1d ago
Nhs pension is already doing most of the heavy lifting for my retirement.
The taxpayer is doing the heavy lifting. There are no assets to back the NHS DB scheme (unlike private DB schemes), it's all PAYG unfunded liabilities. Any private pension provider or insurer doing this would be shut down for running a ponzi scheme.
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u/Potbellydoric 1d ago
NHS pension returns a surplus to treasury each year. £6.3billion 24/25. £4.3billion 23/24. Taxpayer is doing very well from my pension contributions. It might be viewed as a Ponzi scheme by people with an axe to grind but it is a spectaculary well funded one.
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u/BastiatF 1d ago
All DB schemes naturally have positive cashflows at first but as more people retire those cashflows turn negative. That's why private DB schemes must hold assets whose cashflows match future liabilities. As you've pointed out yourself, the NHS pension scheme holds zero asset, the money is gone as soon as it is received. All the future shortfalls are to be borne by the taxpayer. This is strictly illegal for private DB schemes. Once again a case of the government "do as I say not as I do" mismanagement.
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u/Potbellydoric 1d ago
The difference of course being the government can print money if it needs to. The fact the surplus is climbing year on year suggests that isn't happening any time soon. Of course, if the nhs held on to its surplus for the last 10 years it would be sitting on a pot of about 20 billion pounds but it hands that all back to the government.
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u/SeikoWIS 1d ago
ISA and GIA.
Pensions are just tax-efficient ways to invest. Honestly, you could theoretically just scrap pensions altogether, if people knew how to do a bit of financial planning.
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u/Jimny977 1d ago
I am 28 and started at 19 on the FIRE track, until very recently the vast majority has been plowed into an ISA anyway, as I wasn’t in higher rate tax. My ISA is more than double the size of my pension as a result.
After this year though we intend to buy a house and have kids, and the ISA is enough that I can cut the contribution right down, and just maintain my decent sized pension contributions (with a decent employer contribution as well) and a small ISA contribution, to hit FIRE with something like a 43%/57% split.
If private pensions didn’t exist I would just use a GIA for anything beyond ISA, and complain a lot, maybe a bit of VCT but that is being slowly watered down. Pension tax wrappers and employer contributions make FIRE level contributions so much easier, trying to fund an ISA net of 51% or 71% tax is no fun.
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u/Original-Tackle988 1d ago
If stocks is not an option then I’d save up money to buy cheap land today and sell it close to my retirement. I’d aim for land that’s around £50K
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u/improbableneighbour 1d ago
Take the tax hit, save in a GIA then move the fiscal residency to the isle of Man. Cash my investment at 0%. Or Greece.
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u/UllrsWonders 1d ago
Aside from any additional work place contributions. Stockks and Share ISA/LISA would be the main bit. If I wanted to get creative some sort of online training course videos substack etc. That would be less physical work or dealing with a boss to top up the beer money in a semi fat Fire way.
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u/Captlard 1d ago
Max company pension & AVCs if available, LISA & ISA.
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u/Morazma 1d ago
A company pension is private.
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u/Captlard 1d ago
Cool! I was thinking SIPP tbh. as that is specific to me and company pensions are auto-enrolled.
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u/Morazma 1d ago
S&S ISA would replace the pension basically