📝The Journey Begins

November 2019


Opting out of my Pension Scheme 🤯

This is the month I opted out of my defined benefits pension scheme. I have been a member since 1997 and have built up a retirement income worth around £25,000. £20,000 will be available at the age of 60 and the other £5,000 will be available at the age of 67. It’s considered a good scheme, but of course the money is not available until I reach the retirement age, not allowing me to retire early.

What made me really look at the pension scheme was being stung for pension tax. I crossed a pay threshold leading to a pay rise of £8,000. This re-valued my pensions and left me with a tax bill of £18,000

Taking a closer look at my pension, I calculated that a years membership would grow my pension by around £1,800 per annum or £150 per month. Could I do better?

By opting out of the pension scheme I would increase my gross salary by both my pension contributions of 13.5% and a large proportion of my employers 17.5% contribution. This would result in an increase in my net salary of around £1,200 per month. Invested wisely I should be able to generate £150 per month income by the end of a year.

Target

The target by November 2020 is to be generating £150 per month in passive income from my investments

This will more than match my pension which would have earned me £150 per month in 20 years time.

Strategy

  • Invest at least my pension contributions every month and preferably any other excess cash left over from my salary after expenses.
  • Most investments should be in income generating vehicles rather than growth vehicles.
  • All income generated will be reinvested to benefit from the compound interest effect.

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