The Fearful Fifties

I chanced across a TV documentary last night about retirement entitled “Work ‘Til You Drop” which, unsurprisingly, piqued my interest. I’d admit, I’m pretty bored with my own views on the subject and often think I’m stuck in a privileged bubble where my biggest worry is protecting my wealth instead of accumulating more. I’m well aware that not everyone is in such a position and that within the FIRE community we’re all at least looking at the same hymn sheet if not actually singing from it.

The programme covered quite a bit of ground, I felt, and tried to give a positive spin on some alternatives to hanging up your boots and trying to live on the State pension. There was an old bloke still working in Asda at the rather incredible age of 92 – an outlier for the majority of human beings, I’d have thought, and not too relevant to the lives of most pensioners. The cynic in me thought that Asda probably role him out as their flag waver every time they’re asked about their policy toward employing older workers while conveniently not mentioning that he’s given the responsible job of collecting trolleys and stacking shelves. When I saw a similar clip of B&Q I did ask myself if this is the best we can do with the aged – checkout person or shelf-stacker?  

The programme showed two other notable alternatives – a female entrepreneur who’d started a cosmetic business at 65 and an unemployed hairdresser in her fifties who just couldn’t get back into the workplace and was living on £73 a week social security. My sympathy sat firmly with the latter – this, I felt, was an absolute reality for the majority of people. Yes, yes, yes, I know we’re all movers and shakers in the FIRE community, all self-starters and self-sufficient, but unemployment in your fifties without a means of income is a terrifying and almost hopeless prospect for most unskilled or semi-skilled people. Even for skilled people, losing your job in your fifties is a different world from experiencing the same in your forties. Anyone who isn’t worried about this prospect is either in denial that it will happen to them or is luxuriating in the knowledge that they’re financially cushioned if it does.

Clearly the best course is to prepare for the troublesome employment years that begin at fifty and ends, potentially, when the State pension kicks in. Writing that, it strikes me that not a lot is written on that subject when it’s such a scary reality for so many people. Thinking about it, it happened to both my parents, but they both had workplace pensions that they were able to draw upon at 60, and thus only had about five years to cover with the “pin money” jobs they managed to find. (Plus they picked up their state pensions many years before today’s trigger point of 67 years.) I can only guess that most people have to assume that somehow they’ll survive if they lose their job in their fifties and can’t find another – worse things happen at sea and life goes on. Yes, it does and it does, but is that the best you can hope for?

I used to worry about losing my job in my fifties quite a bit, and it was quite a driver behind the saving and investing that I did in my thirties and forties. In my line of work – sales and marketing – being over fifty isn’t a massive selling point and I was well aware of it. When it actually happened to me I was financially prepared for it, and I cannot imagine the horror of the situation if I’d not been.

I also thought I’d be prepared in other ways to get back into the workplace – my skills, experience, attitude and application – but it just wasn’t that easy, which is why I sympathised with the unemployed hairdresser in the programme more than the entrepreneur. In my experience, behind many entrepreneurs there often sits a boatload of cash that can cushion the early days and be put at risk. I certainly thought of risking some of my retirement pot to start out on my own, but ye Gods, it seemed a much bigger risk in reality than it did when it sat in my dreams! In the end, I never had to test myself on whether or not I really did have that entrepreneurial streak that I always imagined was there and, on the whole, I think I’m quite glad about that.

I really hope, as the programme inferred, that the workplace is changing when it comes to employing more elderly people and, if I’m honest, I hope I continue to be one of them! One thing does seem to be certain though, there’s going to be plenty of applicants for those jobs if and when they come around.

When It Comes to the Numbers

Here I am, fifty four years on the planet, over fifteen of them studying, over thirty of them working in corporate business and I still can’t work out my tax code’s relation to my pay. I can get it close but, for some reason, when I apply my code to my gross salary, I can’t get it exactly match what I see as my net pay in my pay packet. This drives me rather bonkers. Is it me or is it them, the tax boffins, and how we calculate percentages? Or is it because they’ve made it so complicated to someone who, I admit, has been intimidated by numbers since Primary Six in school, when I was aged about ten years old, and a male teacher went ballistic at me for failing to grasp the “simple” arithmetic involved with fractions?

I mean, if my gross salary is £50,000 and my tax code is 1,300L (say), then – simply – I should be taxed on £37,000, shouldn’t I? As I understand it, my tax code of 1,300 equates to a sum of £13,000 that I can earn tax free. Ah, but I take a company car allowance, plus the company private health scheme. And I also contribute to a company pension. Oh, and I shouldn’t forget my National Insurance contribution either.

Of course, the pension contribution is on the positive side because that’s a taxable allowance. I get tax relief on that. Just don’t ask me where.

I was chatting to one of the finance guys at work the other day on company cars – because I was thinking of taking one with all my petrol paid – and was trying to work out what was the better deal in my wage packet, after tax. As stated above, I currently use my own car and am paid an allowance (taxable) for that.

“Oh by the way”, he said, “Are you claiming the difference between your business mileage contribution paid by the company (13p a mile) and what the taxman allows?”

“What?” I asked, perplexed.

“HMRC allows you 45p a mile for miles done on company business. So the difference, 32p, multiplied by your annual mileage – you’ll get tax relief on that.”

Really? That’s nice of the taxman to tell me, which he didn’t. This is similar to pension relief if you are a higher rate taxpayer. You’re entitled to it, but the government isn’t shouting about it. For years I failed to claim that additional twenty percent through simple ignorance. It literally cost me thousands and today, according to my mate who’s an IFA, this nets the government millions. There are plenty of people making the same mistake as I did, not claiming their full tax relief on their pension contributions. Although it’s not a “mistake” as such, just a massive and costly gap in your knowledge

What else am I missing here? What other gaps do I have? What about charity donations? I donate to charities by direct debit every month and suspect I might be due tax relief on this, but I’ve never bothered to look into it. So I can add “laziness” to “ignorance”. At least I suppose this is a “known unknown”, but what about my “unknown unknowns”!

Never look a gift horse in the mouth though, unless it’s the taxman giving you the horse – in that case, check the numbers! I am good at submitting monthly expenses backed by receipts, so my annual mileage was easy to calculate. Next I logged on to my self-assessment account, made the relevant entry (not easy to find) and entered the cost differential on my calculated business mileage. Nice one!

To be fair to HMRC, the tax rebate was in my bank account less than a week later, along with the e-mail telling me my tax code had changed as a result of my efforts. Which leads me back to the start of this blog post – my code had changed, so what would my next net wage packet be?

Needless to say, until it turns up, I’ve nothing but a rough idea, give or take fifty quid. Which, I tell myself for the thousandth time, just isn’t good enough! And, thinking about it, that was what the teacher in Primary Six used to shout at me when I couldn’t calculate four fifths of eighty three. From today’s perspective, I think I blame him more than I blame the taxman when it comes to the numbers.