I haven't been following this thread completely but I'd imagine that reducing your salary to below £100k would be difficult if you are on PAYE and earning a sizeable amount more i.e. £120k? The only way I can think of reducing your salary is by increasing your pension contribution and taking salary sacrifice schemes if they are available?
What is a good salary in UK at present?
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It's the first time I didn't need to "worry" about money and try and find the cheapest <whatever>
It was a really really nice feeling, I remember it well!
Since then my salary has nearly doubled again, but we have tried to keep our operating costs similar to level they were when I was on 45k.
- No car
- Don't go out for any additional social events
- Kept our rent below a mythical 1500 Euro ceiling price
- Not upgraded Netflix/not bought Disney Plus/not bought bigger TV packages
Keeping the regular operating outgoings at the same kind of level as they were definitely means I "feel" a lot better off now. If we had let the bullet points above rise in line with my wages then I'm fairly sure I wouldn't have noticed those salary increases over the past 4 years or so.
It's not difficult, it is super easy - primarily by upping pension as you mention. At a certain point over 100k though, you are inevitably going to have to suck it up and pay the 60%.
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Man of Honour
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Yep I make a significant sacrifice to pension and do things like cycle to work scheme. It's not that it isn't easy on PAYE, it just requires a bit of admin. When I have had a bonus in previous years I asked them to pay it straight into my pension - but that's a ball ache. It's a bit of a balancing act, making sure that I'm not going to go over. However when you get significantly over 100k, it starts to become counter productive.
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It is easy but my point was more around those listed being the only ways to do so, and if you're being paid £100k and your salary goes up to £120k etc. how likely are you going to want to increase your pension by £20k a year if you're below 50 and if you want disposable income or additional savings for a holiday, new car etc.? Obviously it would be down to personal circumstances but I am extremely hesitant to put any additional cash into my pension as it's currently losing money. I try not to look at it too often but it's down 16% in 1 year.
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A lot of people do it, especially if they're only a little over at 120k. After 60% tax what you are missing out on isn't much and it buys you years earlier retirement. Perhaps some people would value a new car or a holiday over that, but many don't.
We're similar though not as strict as you as we have pretty much all the subscription services as we like the convenience they offer.
When we got together we earned ~£50k combined, now we earn over £100k combined and our day to day spending remains pretty much the same. Sure we now spend more on some stuff like holidays or buy the higher model TV, fridge or what not but only when absolutely necessary.
I don't doubt they do if it's not much over £100k but I wouldn't call £20k being a little over, and if you are a shrewd investor you can beat your current pension returns, which isn't difficult at the moment.
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It might not seem like a little over, but in many cases it really is. In tech industry if you get to that level you are probably still growing your career and likely to go higher. 3-4 years of moderate pay increases (5% a year or so) will get you over.
Very interested to know how shrewd investing can beat 8k after tax to play with vs 20k in your pension? How does that work?
You can usually select from a range of funds in the pension scheme yourself including index trackers if you choose to. This ranges from 10s to 100s of funds. Personally I just move the contributions from my company pension scheme to my SIPP about once every 6 months, so have complete control. I hope you aren't ignoring your company pension scheme!
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We're similar though not as strict as you as we have pretty much all the subscription services as we like the convenience they offer.
When we got together we earned ~£50k combined, now we earn over £100k combined and our day to day spending remains pretty much the same. Sure we now spend more on some stuff like holidays or buy the higher model TV, fridge or what not but only when absolutely necessary.
You hit the nail on the head of what these increases in salary tend to cover. It’s the more expensive washing machine, the slightly nicer hotel, the new shoes.
The meaningful difference in day to day life is quite slim once you get above £40k ish.
Obviously, with more money you can have a bigger house etc, which is probably the most major difference.
I’ll be very crude / loose with the maths here but it’s either:
- give £1 to your pension pot and pay a usually small % management.
- take £0.60 in cash and invest it yourself.
^ which needs you’ll need to make up +50% on your 60p to even get to where you would have started from by just putting it into your pension.
Agree with everything you said except we are talking about over 100k so it's actually take £0.40 in cash yourself
And its the poorest families who tend to have the most kids.
Only worry about AI if you are in an unskilled job and that wont be happening anytime soon either. AI wont have much of an impact on the higher skilled jobs.
We had the industrial revolution and the technological revolution. Overtime we had people loosing jobs but we also created new jobs which lead onto discovering new problems we need to solve.
I don't see AI taking over from finding cures for diseases such as cancer and other incurable health related problems. Then you have the environmental problems also.
Jobs will always be here and AI will probably force people to up-skill anyway, who would not have done so otherwise. Making society more productive on the whole.
That's just my opinion
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Agree with everything you said except we are talking about over 100k so it's actually take £0.40 in cash yourself
Yep, with that particularly aggressive 60% rate cooling slightly to 45% (and a take home of around £0.55 per £1) once you get over £125,141. But you’d have to just be sucking up the 60% rate to get to it!
For anyone else wondering what we’re talking about, the effective tax rate of 60% applies because your personal allowance gets eroded over £100k. More detail here:
What are the tax implications of earning over £100K? – TaxScouts
One of the major tax implications of earning over £100k is that you can get taxed 60%. Learn more about the implications to stay as tax-efficient as possible.
taxscouts.com
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Caporegime
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The biggest difference isn't so much on your day-to-day, but rather, you are, or should be, putting a MUCH larger amount into the pension pot vs someone under £40k, spread that over 30-40 years of working life, the difference in the end is massive.
10% of your salary into a pension for someone on £30k vs you on £100k, you are tripling his contribution, and if the employer matches that, the difference is greater still.
10% of your salary into a pension for someone on £30k vs you on £100k, you are tripling his contribution, and if the employer matches that, the difference is greater still.
Man of Honour
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IF you're on a 100k type of job, and have kids, you really don't have time to be doing investing if you have any semblance of a life. A pension for most people is far easier to work with. I'm sure you're right you could make it work for you, but over the last 8 years my pension plans have grown by around 4.6% so it's good enough for me. Perhaps it's not keeping up with inflation, but over an 8 year period I'm happy with that. That said I do tell my pension provider(s) my preferences of investment. However I have 1 call a year. I don't have time for much more micromanagement and don't know enough about the investment game. It's in their best interests to maximise your returns too.
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Soldato
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And fir the masses this will be the new scandal In years to come . Everyone will be funding retirement from equity in their houses since no one could afford to put into a retirement pot due to crippling house prices.
I'm not sure about this. IMO everyone should make time to know how their pensions are invested and ideally make that as efficient as possible too. We're talking about how potentially decades of your life are going to play out. Making sure investments are going into one of the cheapest global trackers for example and not into expensive managed funds is not hard work.
Yes.
If you're on a great wage (let's say over 100) you are obviously filling that pension so much quicker than someone on 50k.
So although your working life won't look too different, your retirement will come much earlier and be much much more comfortable
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