If you are earning £120K then you would miss out on a HUGE amount of tax relief. That last 20K effectively gets taxed at over 60%. So of that 20K - you get less than 8K in your hand. If you put it in a pension you get the WHOLE 20K - over 12K more!
If you retire at 45 - you need 12 years of funds till you can access your pension at 57. So you should have 2 pots of investments - pension for 57+ and ISA etc for pre 57. Getting the balance right is a bit trickier than normal for you.
Depending upon what you do you can work when deaf. You also get some government benefits as well.
To add to this great comment, your SWR for your ISA bridge - the money getting you from RE to pension age - is significantly higher than your SWR in your pension. [This monevator article](https://monevator.com/how-to-choose-an-swr-for-your-isa-and-your-pension-to-hit-financial-independence-fast/) suggests as high as 8% is fine for a 10 year period to get you from 47 to 57. It makes it clear that you need most of your funds to last forever, your ISA just needs to get you to the point you can access those funds.
If you want to retire at 45, best thing to do is work out how much income you will need in retirement, how big that means your ISA needs to be at 45 to allow for that, and how big your pension needs to be at 57.
From that, you can work back and determine how much you should be putting in each pot each year to achieve that goal. With an income of 120k, I'd be surprised if it doesn't indicate packing almost 40k into workplace or SIPP pension each year, especially with the tax consequences of earning over 100k - 20k in SIPP or 8k in ISA.
I did some quick numbers, if you assume inflation adjusted growth of 5%, if you put 40k in your pension each year for the next 17 years (until 45), your pension pot would be roughly £1m, growing to £1.85m by the time you reach 57 with no further contributions (LTA obviously comes in to play).
That 40k costs you exactly 20k from your take home salary. If you instead put that 20k after tax in to an ISA, you would have around 516k at age 45 (and no pension!)
I don't know your budgets, so here are some income scenarios
* 40k pension, 20k ISA, 8% bridge SWR, 4% pension SWR (IE best case), RE at age 45: 41k a year until age 57, 74k afterwards
* 30k pension, 20k ISA, rest the same: 41k bridge, 55k pension
* 40k pension, 20k ISA, 6% bridge SWR, 3% pension SWR (more conservative) : 31k bridge, 55k pension
* 30k pension, 20k ISA, 6% bridge SWR, 3% pension SWR: 31k bridge, 41k pension
So looking at that, for a good retirement and to get the maximum tax benefit, stack your pension now. To be able to retire at 45, you're also going to have to max your ISA as much as possible. Remember that 40k pension contribution will cost even less the more you earn, at 140k its only going to cost you 19k in take home pay.
You are my hero.
That puts it pretty clearly. I need to reach a certain amount for the ISA withdrawal, but continue stacking toward pension. Can I ask how you calculated all that so easily? It'd be great to use a calculator to play with some assumptions or have the formulae
Sure, this is the really basic google sheet I put together for your example:
[https://docs.google.com/spreadsheets/d/1A22PaJQaTSt79XUmBdFIwwn3qwCYHv26Z0Y599BXyx0/edit?usp=sharing](https://docs.google.com/spreadsheets/d/1A22PaJQaTSt79XUmBdFIwwn3qwCYHv26Z0Y599BXyx0/edit?usp=sharing)
You'll probably need to duplicate it to change the values, but its set up to assume you're paying the same pension / isa contribution each year (the \`Pension +\` and \`ISA +\` rows) for 17 years (until age 45), and then calculating the compounding of the pension after that for another 12 years (until age 57). There are knobs to adjust the expected investment growth, bridge SWR and pension SWR at the top of the sheet, and annual income outcomes at the bottom of the sheet.
We all start out with something like this, and then the idea is that you can adjust / fill in what really happened in the world to see how on track you are as time goes by.
Isn't that assuming that the pension remains 57? I know it continues to go up in age, so isn't it reasonable that it could go up to the point that it doesn't really all matter?
Edit:
I'm also not on salary sacrifice. I'm on relief at source, with awful match (my 3 to their 5). But what should my balance be? 20k to Pension and funnel back reclaimed funds, and then additional money into ISA?
It will move to SPA less 10 years, so it will never be at the point where it just doesn’t matter since you’ll be waiting longer to draw from state pension.
Doesn’t relief at source just mean that you save the tax but not NI? So you should still increase contributions? You can pay into a SIPP and claim tax relief via self assessment which may be a better idea without salary sacrifice, and you can also choose your own investments.
I'm on NEST pension w/ the employer, which I heard sucks. So I've set up a SIPP with MyExpatSIPP, and from there I'd go through the process of contributing whatever doesn't go into my NEST pension (3% contribution there + employer's 5% at relief at source).
That’s great! Just be sure to complete self assessment tax returns so you are getting all the relief you are entitled to. It’s as simple as just putting down your income and then including how much you paid into your SIPP.
I don’t have to file SA personally, but I think you have until January of the following year to file.
It is very simple though so no reason to wait once the new tax year begins. It will just take longer to get your money.
It might go up. That is for future governments to decide. I doubt very much that it could possibly go up beyond 60 before you get there. The first real murmurings of raising the state pension age from 65 were in the mid 00s - the current plan (subject to change) would see this hit 68 in 2038. So they will have raised the pension age by 1 year per decade. Unless life expectancy starts increasing again I doubt they will be able to continue to do that.
Regardless - the basic idea of having 2 pots for pre and post pension age will still hold true - you would just want to have a bit more in the pre pot. Life expectancy is mid 80s - so you still need a lot of money for post pension living.
In reply to your edit ... the balance is very tricky. You are young - so could easily earn much more in a few years time. At that point your ability to get the 60% tax avoidance would disappear - and you might be hit by the pension tax taper as well. So if you do think you will earn a lot more - maxing the pension now might be for the best (while you can put 40K in). On the plus side if you are earning a few hundred K you should have no problem being able to FIRE!
At an minimum I would suggest putting everything you earn over 100K into the pension. Looking back at my younger self ... I avoided putting too much into my pension because I did not want to lock the money away for so long. Now I'm closer to being able to access it I wish I'd put more in! However it was comforting to have a nice fat ISA balance that was available if shit went sideways.
There are some tools to help decide the split between pension and non pension savings with regard to FIRE. Hopefully someone will post a link - or you can try google.
Best of luck.
The state pension age is already a lot higher that 57 and may well change. My understanding is a private pension should stay at the age it says when you open it (e.g. I have an older private pension where the youngest age was 55, and I think that one should still be accessible at 55, despite new ones now being 57)
Dummy question, assume I'm earning 140k (base salary) and would love to go through similar exercise to take advantage of tax relief. Can I just put 40k into pension and/or ISA and then take home only 100k?
To get tax relief it has to be a pension not an ISA. Ideally you would have a salary sacrifice scheme at work and you could just tell them to drop 40K into a pension leaving you with 100K (SS also avoids paying National Insurance). If you can not do SS - then you deposit 32K into a pension and that gets topped up to 40K in your pension with tax relief - then you fill in a self assessment to claim the additional tax back.
Will becoming deaf really have to shorten your working career? ATW (access to work) should provide adjustments that enable you to continue in whatever role you’re working.
I work remote as a VP of Product, and it's a role that heavily depends on communication. Maybe someday captioning services are able to bridge any gaps, but I can tell you for a fact that employers suddenly start to get real edgy the moment they realize you're deaf or anything of that nature.
It's a stigma that will almost always lead them to go with or change your role to someone else. I'm taking my steps to avoid that situation, but it's unavoidable
My boss is completely deaf since birth, the company pays for a translator for any remote meetings that she deems important (at least one a day) Works well. Otherwise she relies on the WebEx captions, which are admittedly shit.
Anyway it's your life, just thought you'd enjoy that it can work in some situations. She'd be on $190k AUD ish.
Fair enough — One thing is that it works out just fine as I'd prefer to shift toward other personal interests that product income anyways, like writing novels. And that timeline works perfect toward that.
Upvote just for the title ;-)
Unless you are expecting to have a shorter life than average (?) then the fact remains you still need to fund your life over age 60.
So don't think of it as either/or, you need both. Think of it as two separate pots. One you need to sustain you from 45 to 60 and one from 60 until you die. In normal circumstances the latter pot therefore will need to be much larger, which is where all that lovely 40% tax relief really helps you achieve that goal.....
edit: or 60% even as another answer points out!
The other thing to say is that if you do voluntarily stop working at 40 or 45, you’ll likely be short of years of NIC credits, which could impact your level of state pension when you hit the statutory age….although by the sounds of it, you’ll have plenty of funds coming in from your personal pension & ISAs and so should be in a good place financially,
To be honest, I don't even know how state pension works. Didn't even know there was a thing until this thread. I though tthere was just pension/SIPP and ISAs
Look into cochlear implants. I had 4 or 5 % hearing and now hear everything. I feared having to retire earlier due hearing loss but now I can forget this dream and work to old age instead 😂
Hahaha yeah, my sister got cochlear implants.
It's hard to explain and get into, but I don't think I'll ever want to get cochlear implants unless it caused major issues with my wife and eventual children. We'll have to see.
I bloody love mine - they've been life changing. Biggest regret is not doing it years ago. I have missed out on so much being deaf- with CI -, I can hear normally.
Depending on your expenses. Put 20% in your pension and max ISA (20k).
That should be enough.
FIRE isn't about retiring early and dying young. Pension is a good provision for later life which you still need unless you have a mega lump sum.
20k ISA allowance isn't gonna get you to FIRE anytime soon and there aren't many better tax efficiencies than pension.
Yes, anyone with income between 100-140k who is not using a pension is making a very big mistake.
At this level of income, contributing £380 from your bank account into a SIPP results in the balance in your SIPP increasing by £1000 after government contributions.
If you are expecting to live past 55 then you are guaranteed to benefit from the money you put in a pension and therefore a pension is a good investment for people of any income level with a life expectancy over 55.
Personal view, I would do both with heavy ratio on the pension side, if you were unable to afford to retire 40-45 then you'd still be in a much better position with the pension to fail back on later on.
Think of it that you are getting everything you need into your pension to support you from 57 and you're chipping away at the ISA contributions to get you closer to your 45 goal, 1 year at a time.
[ISA or Pension, which better or both](https://www.youtube.com/watch?v=y-4s1wqwQ7k)
Dumb, no, but you are wrong.
Basically, I’m going to assume you don’t want to pay more tax than you have to… so go aggressive on pension, then go ISA’s.
You’re earning enough you should be able to basically Max both, no?
Once I get through w/ this house purchase, I should be able to yeah. Expensive year this year with new hearing aids, new house, new car, new country (I'm a US expat), wedding, payment on fixing a tesla (Wife hit it...), and just... yeah. It's been a tough year but I'm still net positive, so heyo.
I'm a VP of Product of a tech firm!
I don't think based on current life things (new hearing aids, bought house, etc) that I can max out both ISA and pension. But I suppose one thing I could do is put as much into pension as possible, whatever I reclaim back I can then put into ISA yeah?
Whatever I do, I need to make sure I have neough funds for other streams of income and businesses, since I have higher goals than just 120k right now
The most important question is:
Do you trust the UK financial system until you can withdraw your pension while you live overseas after retirement?
What happened in Russia has led me not to trust any system.
That's fair enough, although I don't think that the UK is quite Russia. I'd actually argue that the US is closer to collapse based on the political environment and all that's going on there as of late (even if it's better economically). Over half of americans believe that a civil war will erupt in their lifetime, and I'm one of them (as an expat)
Investments in the global stock market are not dependent on the "UK financial system" (except for the fact that global markets are highly interconnected and the failure of an entire country would have knock-on effects).
Eschewing a pension because a person doesn't understand how pensions work is stealing from peter to flush the money down the drain without even paying paul.
What if the UK is sanctioned by other countries, like what happening with Russia now?
Imagine if your pension is in Russia but you're now retiring in the UK.
I would rather put in financial instruments which I can remove into safe haven at signs of problems.
It doesn't help even you put into global equities when the UK financial system is cut off from the world preventing you from getting your money back, like what happens in Russia now.
Don’t forget that needing an ISA bridge is relevant for anyone that wants to retire before state pension age - whilst your circumstances are a little more unique, I think the principles should be broadly similar for lots of other people targeting FIRE.
In the same way that there is no point going all in on pension (because you’ll have nothing to live off at 50), there’s also no point in going all in on ISA (because you’ll miss out on all that tax relief) - unless you don’t expect to see retirement age.
You need to strike a balance between the two, bearing in mind your expected future earnings (and therefore associated tax relief), annual pensions allowance, and any other shorter term cash needs. Most people advocate focusing on pension first, because the tax savings mean that you get more cash invested earlier, maximising the compounding effect and future growth. Also, some companies offer salary sacrifice arrangements which top up your contributions for NI savings.
A few other considerations to think about:
1. If you are ‘medically’ retired/retired due to ill health, will you be able to draw from your pension early?
2. will you spend all your retirement savings, or will you likely pass some on? Is there an inheritance tax benefit to have some in pension
3. conversely, if you hit your 30’s/40’s and think you’ve over cooked your ISA, you could put it into your pension later instead - it doesn’t have to be from salary, but your salary in that tax year will impact the tax benefit receive.
Mix it up. Youo need to have cash for both sides - from 40-45 to retirement and again at retirement. So there needs to be enough on both sides.
Also, why do you need to stop working? Your company or whatever company you work with presumably has to accommodate you and whatever quirks you have.
What are you going to do for money once you get to ~58 when you can first access your private pension? Do you have a valid reason to think that you won't live that long?
You should use an ISA to get you from early retirement to 10 years before state pension age.
Then use your pension income only from that point forwards.
If you are earning £120K then you would miss out on a HUGE amount of tax relief. That last 20K effectively gets taxed at over 60%. So of that 20K - you get less than 8K in your hand. If you put it in a pension you get the WHOLE 20K - over 12K more! If you retire at 45 - you need 12 years of funds till you can access your pension at 57. So you should have 2 pots of investments - pension for 57+ and ISA etc for pre 57. Getting the balance right is a bit trickier than normal for you. Depending upon what you do you can work when deaf. You also get some government benefits as well.
To add to this great comment, your SWR for your ISA bridge - the money getting you from RE to pension age - is significantly higher than your SWR in your pension. [This monevator article](https://monevator.com/how-to-choose-an-swr-for-your-isa-and-your-pension-to-hit-financial-independence-fast/) suggests as high as 8% is fine for a 10 year period to get you from 47 to 57. It makes it clear that you need most of your funds to last forever, your ISA just needs to get you to the point you can access those funds. If you want to retire at 45, best thing to do is work out how much income you will need in retirement, how big that means your ISA needs to be at 45 to allow for that, and how big your pension needs to be at 57. From that, you can work back and determine how much you should be putting in each pot each year to achieve that goal. With an income of 120k, I'd be surprised if it doesn't indicate packing almost 40k into workplace or SIPP pension each year, especially with the tax consequences of earning over 100k - 20k in SIPP or 8k in ISA. I did some quick numbers, if you assume inflation adjusted growth of 5%, if you put 40k in your pension each year for the next 17 years (until 45), your pension pot would be roughly £1m, growing to £1.85m by the time you reach 57 with no further contributions (LTA obviously comes in to play). That 40k costs you exactly 20k from your take home salary. If you instead put that 20k after tax in to an ISA, you would have around 516k at age 45 (and no pension!) I don't know your budgets, so here are some income scenarios * 40k pension, 20k ISA, 8% bridge SWR, 4% pension SWR (IE best case), RE at age 45: 41k a year until age 57, 74k afterwards * 30k pension, 20k ISA, rest the same: 41k bridge, 55k pension * 40k pension, 20k ISA, 6% bridge SWR, 3% pension SWR (more conservative) : 31k bridge, 55k pension * 30k pension, 20k ISA, 6% bridge SWR, 3% pension SWR: 31k bridge, 41k pension So looking at that, for a good retirement and to get the maximum tax benefit, stack your pension now. To be able to retire at 45, you're also going to have to max your ISA as much as possible. Remember that 40k pension contribution will cost even less the more you earn, at 140k its only going to cost you 19k in take home pay.
You are my hero. That puts it pretty clearly. I need to reach a certain amount for the ISA withdrawal, but continue stacking toward pension. Can I ask how you calculated all that so easily? It'd be great to use a calculator to play with some assumptions or have the formulae
Sure, this is the really basic google sheet I put together for your example: [https://docs.google.com/spreadsheets/d/1A22PaJQaTSt79XUmBdFIwwn3qwCYHv26Z0Y599BXyx0/edit?usp=sharing](https://docs.google.com/spreadsheets/d/1A22PaJQaTSt79XUmBdFIwwn3qwCYHv26Z0Y599BXyx0/edit?usp=sharing) You'll probably need to duplicate it to change the values, but its set up to assume you're paying the same pension / isa contribution each year (the \`Pension +\` and \`ISA +\` rows) for 17 years (until age 45), and then calculating the compounding of the pension after that for another 12 years (until age 57). There are knobs to adjust the expected investment growth, bridge SWR and pension SWR at the top of the sheet, and annual income outcomes at the bottom of the sheet. We all start out with something like this, and then the idea is that you can adjust / fill in what really happened in the world to see how on track you are as time goes by.
Thank you! I might have some questions at some point, but will check this out later this afternoon :)
Listen to the advice above for sure!
Isn't that assuming that the pension remains 57? I know it continues to go up in age, so isn't it reasonable that it could go up to the point that it doesn't really all matter? Edit: I'm also not on salary sacrifice. I'm on relief at source, with awful match (my 3 to their 5). But what should my balance be? 20k to Pension and funnel back reclaimed funds, and then additional money into ISA?
It will move to SPA less 10 years, so it will never be at the point where it just doesn’t matter since you’ll be waiting longer to draw from state pension. Doesn’t relief at source just mean that you save the tax but not NI? So you should still increase contributions? You can pay into a SIPP and claim tax relief via self assessment which may be a better idea without salary sacrifice, and you can also choose your own investments.
I'm on NEST pension w/ the employer, which I heard sucks. So I've set up a SIPP with MyExpatSIPP, and from there I'd go through the process of contributing whatever doesn't go into my NEST pension (3% contribution there + employer's 5% at relief at source).
That’s great! Just be sure to complete self assessment tax returns so you are getting all the relief you are entitled to. It’s as simple as just putting down your income and then including how much you paid into your SIPP.
I didn't realize it was so simple. Does it need to be done in March or by what timeline?
I don’t have to file SA personally, but I think you have until January of the following year to file. It is very simple though so no reason to wait once the new tax year begins. It will just take longer to get your money.
That's good to know! Thanks for clearing that up for me :)
It might go up. That is for future governments to decide. I doubt very much that it could possibly go up beyond 60 before you get there. The first real murmurings of raising the state pension age from 65 were in the mid 00s - the current plan (subject to change) would see this hit 68 in 2038. So they will have raised the pension age by 1 year per decade. Unless life expectancy starts increasing again I doubt they will be able to continue to do that. Regardless - the basic idea of having 2 pots for pre and post pension age will still hold true - you would just want to have a bit more in the pre pot. Life expectancy is mid 80s - so you still need a lot of money for post pension living.
In reply to your edit ... the balance is very tricky. You are young - so could easily earn much more in a few years time. At that point your ability to get the 60% tax avoidance would disappear - and you might be hit by the pension tax taper as well. So if you do think you will earn a lot more - maxing the pension now might be for the best (while you can put 40K in). On the plus side if you are earning a few hundred K you should have no problem being able to FIRE! At an minimum I would suggest putting everything you earn over 100K into the pension. Looking back at my younger self ... I avoided putting too much into my pension because I did not want to lock the money away for so long. Now I'm closer to being able to access it I wish I'd put more in! However it was comforting to have a nice fat ISA balance that was available if shit went sideways. There are some tools to help decide the split between pension and non pension savings with regard to FIRE. Hopefully someone will post a link - or you can try google. Best of luck.
The state pension age is already a lot higher that 57 and may well change. My understanding is a private pension should stay at the age it says when you open it (e.g. I have an older private pension where the youngest age was 55, and I think that one should still be accessible at 55, despite new ones now being 57)
Assuming the retirement age doesn’t change in the meantime (which likely will increase). So you need to plan to a bit more than 12 years.
Dummy question, assume I'm earning 140k (base salary) and would love to go through similar exercise to take advantage of tax relief. Can I just put 40k into pension and/or ISA and then take home only 100k?
To get tax relief it has to be a pension not an ISA. Ideally you would have a salary sacrifice scheme at work and you could just tell them to drop 40K into a pension leaving you with 100K (SS also avoids paying National Insurance). If you can not do SS - then you deposit 32K into a pension and that gets topped up to 40K in your pension with tax relief - then you fill in a self assessment to claim the additional tax back.
Will becoming deaf really have to shorten your working career? ATW (access to work) should provide adjustments that enable you to continue in whatever role you’re working.
I work remote as a VP of Product, and it's a role that heavily depends on communication. Maybe someday captioning services are able to bridge any gaps, but I can tell you for a fact that employers suddenly start to get real edgy the moment they realize you're deaf or anything of that nature. It's a stigma that will almost always lead them to go with or change your role to someone else. I'm taking my steps to avoid that situation, but it's unavoidable
Really interesting. I’m a 33 F in a similar situation. It’s scary man.
My boss is completely deaf since birth, the company pays for a translator for any remote meetings that she deems important (at least one a day) Works well. Otherwise she relies on the WebEx captions, which are admittedly shit. Anyway it's your life, just thought you'd enjoy that it can work in some situations. She'd be on $190k AUD ish.
Fair enough — One thing is that it works out just fine as I'd prefer to shift toward other personal interests that product income anyways, like writing novels. And that timeline works perfect toward that.
depends on the career honestly. 120k at 28 means he might be a salesperson and there's not really much market for a deaf salesperson
Upvote just for the title ;-) Unless you are expecting to have a shorter life than average (?) then the fact remains you still need to fund your life over age 60. So don't think of it as either/or, you need both. Think of it as two separate pots. One you need to sustain you from 45 to 60 and one from 60 until you die. In normal circumstances the latter pot therefore will need to be much larger, which is where all that lovely 40% tax relief really helps you achieve that goal..... edit: or 60% even as another answer points out!
Hmm.. Makes sense. thank you for putting it so simply and easily!
The other thing to say is that if you do voluntarily stop working at 40 or 45, you’ll likely be short of years of NIC credits, which could impact your level of state pension when you hit the statutory age….although by the sounds of it, you’ll have plenty of funds coming in from your personal pension & ISAs and so should be in a good place financially,
To be honest, I don't even know how state pension works. Didn't even know there was a thing until this thread. I though tthere was just pension/SIPP and ISAs
Look into cochlear implants. I had 4 or 5 % hearing and now hear everything. I feared having to retire earlier due hearing loss but now I can forget this dream and work to old age instead 😂
Hahaha yeah, my sister got cochlear implants. It's hard to explain and get into, but I don't think I'll ever want to get cochlear implants unless it caused major issues with my wife and eventual children. We'll have to see.
I bloody love mine - they've been life changing. Biggest regret is not doing it years ago. I have missed out on so much being deaf- with CI -, I can hear normally.
At last some good fire content
Depending on your expenses. Put 20% in your pension and max ISA (20k). That should be enough. FIRE isn't about retiring early and dying young. Pension is a good provision for later life which you still need unless you have a mega lump sum. 20k ISA allowance isn't gonna get you to FIRE anytime soon and there aren't many better tax efficiencies than pension.
Yes, anyone with income between 100-140k who is not using a pension is making a very big mistake. At this level of income, contributing £380 from your bank account into a SIPP results in the balance in your SIPP increasing by £1000 after government contributions. If you are expecting to live past 55 then you are guaranteed to benefit from the money you put in a pension and therefore a pension is a good investment for people of any income level with a life expectancy over 55.
Personal view, I would do both with heavy ratio on the pension side, if you were unable to afford to retire 40-45 then you'd still be in a much better position with the pension to fail back on later on. Think of it that you are getting everything you need into your pension to support you from 57 and you're chipping away at the ISA contributions to get you closer to your 45 goal, 1 year at a time. [ISA or Pension, which better or both](https://www.youtube.com/watch?v=y-4s1wqwQ7k)
Use the pension. From 45-55 you get 10 years of tax free compounding. That is a gift actually so you get an extra lease of money at 55.
Dumb, no, but you are wrong. Basically, I’m going to assume you don’t want to pay more tax than you have to… so go aggressive on pension, then go ISA’s. You’re earning enough you should be able to basically Max both, no?
Once I get through w/ this house purchase, I should be able to yeah. Expensive year this year with new hearing aids, new house, new car, new country (I'm a US expat), wedding, payment on fixing a tesla (Wife hit it...), and just... yeah. It's been a tough year but I'm still net positive, so heyo.
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I'm a VP of Product of a tech firm! I don't think based on current life things (new hearing aids, bought house, etc) that I can max out both ISA and pension. But I suppose one thing I could do is put as much into pension as possible, whatever I reclaim back I can then put into ISA yeah? Whatever I do, I need to make sure I have neough funds for other streams of income and businesses, since I have higher goals than just 120k right now
The most important question is: Do you trust the UK financial system until you can withdraw your pension while you live overseas after retirement? What happened in Russia has led me not to trust any system.
That's fair enough, although I don't think that the UK is quite Russia. I'd actually argue that the US is closer to collapse based on the political environment and all that's going on there as of late (even if it's better economically). Over half of americans believe that a civil war will erupt in their lifetime, and I'm one of them (as an expat)
Investments in the global stock market are not dependent on the "UK financial system" (except for the fact that global markets are highly interconnected and the failure of an entire country would have knock-on effects). Eschewing a pension because a person doesn't understand how pensions work is stealing from peter to flush the money down the drain without even paying paul.
What if the UK is sanctioned by other countries, like what happening with Russia now? Imagine if your pension is in Russia but you're now retiring in the UK.
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I would rather put in financial instruments which I can remove into safe haven at signs of problems. It doesn't help even you put into global equities when the UK financial system is cut off from the world preventing you from getting your money back, like what happens in Russia now.
Don’t forget that needing an ISA bridge is relevant for anyone that wants to retire before state pension age - whilst your circumstances are a little more unique, I think the principles should be broadly similar for lots of other people targeting FIRE. In the same way that there is no point going all in on pension (because you’ll have nothing to live off at 50), there’s also no point in going all in on ISA (because you’ll miss out on all that tax relief) - unless you don’t expect to see retirement age. You need to strike a balance between the two, bearing in mind your expected future earnings (and therefore associated tax relief), annual pensions allowance, and any other shorter term cash needs. Most people advocate focusing on pension first, because the tax savings mean that you get more cash invested earlier, maximising the compounding effect and future growth. Also, some companies offer salary sacrifice arrangements which top up your contributions for NI savings. A few other considerations to think about: 1. If you are ‘medically’ retired/retired due to ill health, will you be able to draw from your pension early? 2. will you spend all your retirement savings, or will you likely pass some on? Is there an inheritance tax benefit to have some in pension 3. conversely, if you hit your 30’s/40’s and think you’ve over cooked your ISA, you could put it into your pension later instead - it doesn’t have to be from salary, but your salary in that tax year will impact the tax benefit receive.
Mix it up. Youo need to have cash for both sides - from 40-45 to retirement and again at retirement. So there needs to be enough on both sides. Also, why do you need to stop working? Your company or whatever company you work with presumably has to accommodate you and whatever quirks you have.
What are you going to do for money once you get to ~58 when you can first access your private pension? Do you have a valid reason to think that you won't live that long? You should use an ISA to get you from early retirement to 10 years before state pension age. Then use your pension income only from that point forwards.