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A few weeks ago when we were in the UK, we met up with fellow early retiree Barney. He writes a blog focused on early retirement in the UK called TheEscapeArtist. Both of us had the delightful pleasure of appearing together on TV show called “How To Retire at 40” on UK’s Channel 4. And then the subsequent equally delightful pleasure of getting attacked by the British media afterwards. Good times, good times.
Anyway, today Barney joins us here on Millennial Revolution to talk about how to retire early if you live in the UK. We’ve now covered retiring in Germany, the US, Canada, Australia, and Brazil, so if you’ve ever wanted to know whether you can still retire early if you aren’t Canadian or American, there’s you answer!
Barney, thanks for doing this. First of all, can you tell us a bit about yourself and how you were able to retire in an expensive place like the UK, at 43 with 3 kids?
I never inherited any money from my parents but I did inherit a fear of poverty. This spurred me on to get a job in finance which, back then, was the best paying work available to me. I trained as an accountant and then worked in corporate finance, specialising in valuing companies.
When I started earning good money, I always saved at least 50%. I was fortunate to get on the property ladder at a good time and I then paid off my mortgage in 3 years. Once the mortgage was gone, I put the surplus into shares and compound interest started to power my portfolio.
The hard bit was that, back then, I’d never even heard of the concept of financial independence. There were no blogs laying out the maths and the techniques like there are today. So I had to learn everything myself. If I knew then what I know now, I’d have got there quicker.
People say kids are expensive but my wife and I made our own…so that didn’t cost anything. And as long as you stay clear of private education, theme parks and air travel, kids aren’t that expensive.
Has retirement met up to your expectations? Have there be any unexpected surprises?
Yes, but I don’t think of it as retirement. I just think of it as being able to do what I want. And that is a BIG deal.
There have been many wonderful and unexpected surprises. Like getting paid to be on TV. Like teaching at The School of Life. Like my coaching. Like getting into weight training. But the blog has been the biggest surprise – I know it’s changed people’s lives because they’ve told me. I wasn’t expecting that.
Our first trip around the world showed us that UK is one of the most expensive places we’ve been to. How the hell do you retire there?
The tax system is actually pretty helpful in the UK…once you’ve got past the problem of higher incomes being taxed at an effective marginal rate of 47%. So yes, taxes are high in the accumulation phase, but that also covers your medical costs via the National Health Service so private health insurance is not necessary. And, contrary to popular myth, healthy food is cheap…as long as you prepare it at home.
One of the main things that makes FI difficult in the UK now is high property prices which have been inflated by low interest rates. So flat sharing with roomies and innovative ideas like property guardianship are even more powerful over here. Check out sites like www.spareroom.co.uk.
In some ways it’s easier in the UK than the USA. The pressure of consumerism is less over here than in America. British people have traditionally been pretty low key about money…and that reduces the social pressure to spend somewhat.
What do you invest in? Tell us about your portfolio.
It’s mainly equities (stocks or shares). I own Vanguard trackers (see The Simplicity Portfolio). I also invest in individual companies but that’s not necessary nor sensible for most people.
We own our house but don’t own any other property. Owning your own home plus investing in more houses via buy to let landlording strikes me as dangerous: you have too much risk concentrated in one asset class.
Shares have traditionally achieved the highest investment returns. Even better the tenants never bother you. Shares create value even when you are sleeping. Whilst you are pushing out zzzzzz’s, your companies are working the night shift and paying you dividends. What’s not to like?
The management fees for investments funds in Canada are some of the highest in the world, how are they in the UK? Do you have access to Vanguard?
Yes! Most people have no idea how much they are paying for investments…and fees are a killer. The good news is that there are plenty of good, low cost options available over here. Vanguard have a big UK presence and an excellent and low cost range product range. And no, I am not on commission nor paid by them in any way!
What are the tax sheltering and retirement vehicles available in the UK? Does it make sense for early retirees to max out these accounts when working, or are there limits on when you can withdraw?
Each year, a couple have 2 ISA (Individual Savings Account) allowances (2 x £20,000 each = £40,000) to invest completely free of taxes. Use it or lose it!
Plus both have the ability to pay into a pension. A 40% taxpayer puts in £60 and our generous government kindly makes that up to £100. Ker-ching!!! At age 57, they can then take out 25% of the pot tax free. Ker-ching!!! Then you have your tax free personal allowance. And the rest can get taken out and taxed at your marginal tax rate (usually lower in retirement than when earning).
Everyone needs to look at their pension and understand what the deal is. Are you taking full advantage of employer matching? Never leave free money on the table. What is the fund being invested in? If the answer is not a low cost global equities tracker fund then you’re probably doing it wrong.
When we met up recently, you mentioned re-estate is even more of a British dream than an American dream, because “an Englishman’s home is his castle”. That’s deliciously melodramatic. What is your advice to those who are debating between renting and buying in the UK?
Well, The Escape Artist is not above a bit of melodrama to make his point. But I didn’t make that phrase up….it’s been around since before maple syrup! My advice to those debating between renting and buying is 1) consider your time horizon…if you don’t see yourself in the same house in at least 5 years, why buy? And 2) don’t decide on gut instinct alone…run the numbers.
With the upcoming Brexit, do see that having any impacts on your portfolio or retirement? Do you plan to make any changes?
Brexit has, thus far, been a net positive for a UK investor with a sensible globally diversified portfolio. My overseas holdings are worth more in £ and inflation has not really taken off. The world is always uncertain. Anything could happen in the future, but right now it’s all good in the ‘hood.
Do you think financial independence is a reachable goal for people who live and work in the UK?
Yes! We all reach financial independence at some stage in our life…even if it’s right at the end. But, as you guys at Millennial Revolution know so well: the sooner you can do this, the better. Over time, small lifestyle changes add up to amazing results. I call this The Aggregation of Marginal Gains.
One of the more bizarre criticisms of financial independence is that it’s only relevant for high earners. Errr…hello???…if you’re not a high earner, it’s even more important not to waste your money buying the crap knick knacks and future landfill that people spend their money on. So yes the techniques of financial independence are for everyone. Even those on low incomes. Even those who like their job. Everyone.
What advice would you give UK readers looking to become Financially Independent?
Understand The 3 numbers That Can Make You A Millionaire. Learn from someone that has done it. Read Mr Money Mustache. Ride a bike. Stop thinking about what’s normal and start thinking about what’s possible. And, in the immortal words of JL Collins: “Toughen Up, Cupcake!”
Well said, Barney! If you’re a fan of FI blogs with spunky voices that tell it like it is, check out TheEscapeArtist! Start with the following best articles:
https://theescapeartist.me/2015/07/28/the-simplicity-portfolio/
https://theescapeartist.me/2015/03/02/the-aggregation-of-marginal-gains/
https://theescapeartist.me/2016/01/21/the-3-numbers-that-can-make-you-a-millionaire/
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Very cool interview. I’ve always thought the Brits had a sensible approach to money, especially frugality. As Barney noted, it seems consumerism isn’t as much of a hurdle in the UK as it is on this side of the pond.
Yeah, it seems like they aren’t bombarded was the consumerist mindset as our side of the pond. Maybe it’s because they have less space and less ability to store all that crap.
Hi there,
Fellow brit! I was so pleased to see this post today. I found upon your blog only over the weekend and have read many posts with immense interest.
I was going to send an email to you about how the UK differed on FI but there you go – beat me to it.
Your blog is excellent, I hope you continue it for some time.
Laura from Manchester, UK
Thanks, Laura! And hooray for international readers!
Great interview! During my travels (before kids) I was always struck by how expensive the UK was.
Food prices in particular were very surprising, but also the focus on luxury goods. There were a lot of “luxury items” for sale, but very few of the bargain variety. Quite the contrast to what I see in the States.
Cheers to Barney for reaching FIRE!
Surprisingly we were able to find lots of reasonable prices in UK grocery stores! The wine and cheap is definitely WAY cheaper than in Canada. Also lots of healthy (ish) pre-made stuff you could by for 2-3 pounds, which was shockingly good. Brussel sprouts were only 75 pence at Sainsbury’s(they cost $3.99 per bag at least in Canada). So you could actually find some good deals. The exchange rate makes me wince though.
British groceries are considerably cheaper than Canadian. Virtually every staple like bread, eggs, anything dairy, all meats and fruit/veg are at least 25-50% cheaper than Canadian equivalents. Canada has zero competition and producers are government protected, so they can charge a fortune compared the the Brits, who are competing with all of Europe.
If you just walk around a grocery store in the UK and look at the prices you’ll be amazed how cheap most things are. Oh, and don’t get me started on alcohol! Probably half the price of Canadian (another government protected product).
In fact, I think it’s a myth the the UK is expensive, largely because most people don’t leave London and judge it based on that. For the average person living outside of London, it’s far more affordable than Canada (plus they get 28 days vacation minimum!)
yeah, definitely don’t get me started on alcohol 🙂 We are WAY overpaying in Canada.
Furthermore, the link you included regarding the British media attacking the show. I read the article and didn’t see an attack at all, more tongue in cheek sarcasm. It made me lol at most bits. But hey, that’s just my interpretation. I’m sure there were other media out there that were less than favourable about it all but why cares.
Yeah, you’re probably right. 🙂 Attack or just tongue in cheek, either way, it’s amusing.
Great interview. Thanks for introducing us to The Escape Artist!
Highly recommend his blog! It’s so spunky and hilarious 🙂
I love The Escape Artist’s blog. I look forward to his posts, along with your own, of course. It makes sense that you would find him. Great post today. You are two of my favorite people.
Thanks, Paul! Your comment made our day 😀
I really like this series showing how people are accomplishing FI around the world. It clarifies that FI is not just something that is possible in North America. Indeed, taxes are lower in the U.S. which helps, but we have to deal with health insurance–which is a big issue if you are working towards FIRE. Cheers!
Healthcare is definitely the number 1 concern amongst American readers and I can see why. We bought expat insurance recently, and it’s SO much cheaper when you exclude the US. But as you said, you do have the advantage of higher earnings, lower taxes, and more choices for tax shelters. So it’s a balance. Good to see how FI works in different places around the world so we can all learn from each other!
I’ve been following The Escape Artist’s blog for a few months and it’s excellent.
He shows that FI can definitely be achieved in the UK by anyone who puts their mind to it.
Keep up the good work
Thanks, FMC! Meeting up with Barney was a highlight of our time in the UK and we are glad to see he’s as cool in person as he is on the blog!
“…Next, we meet Bryce and Kristy, who were both wealthy enough to retire at 31, but not wealthy enough to invest in some high definition video recording equipment, evidently”
This description of you two from the British media source you mentioned cracked me up lol. I so love British humor :’)
I know right? 🙂 I was thinking “hey, do you know how hard it is to get sand out of fancy camera equipment? Also, we spent all our money on tequila! Worth it :P”
It’s really cool to see how they do ER in the UK. The cost of living is very expensive, but the health care situation is much better than in the US. Very interesting.
True, US has the advance of higher salaries and lower taxes, but the trade off is healthcare. So head winds and tail winds for both countries.
cost of living is much cheaper in UK than here in western Canada
supermarkets have vastly superior food and yes about half price . and that was Tesco .. many cheaper like Aldi
houses in Vancouver area are insane only comparable to the commuter belt outside London
rest of UK is cheaper … and save tons on holidays . its so expensive here to get anywhere
phone plans much cheaper
so accomodation and food are cheaper … the biggest expenses
Petrol / Gas however is double and TV is expensive in UK …
it would be way cheaper for me to move back to UK > but will I ….. ???
“supermarkets have vastly superior food and yes about half price . and that was Tesco”
This is what we found too. Much cheaper for groceries (even though, they are sort of a frozen wasteland as well). Though, I’m pretty sure there are deals to be had in Western Canada, if you’re not in Vancouver specifically. Even in Vancouver, Bob from the Tawcan blog still managed to find deals, so there’s still hope 🙂
yes agreed it is cheaper outside of the main Lower Mainland zone
but then you are so remote and travel the world is costly from such a location ..
sigh .. no perfect place .. i love Canada and like everywhere its not perfect ..
Hi everyone… and thanks for the wonderful comments….I also enjoyed the British media article linked to above…just know that was some of the more positive coverage…elsewhere the trolls had a party!!!
And thank you to Firecracker and Wanderer who are a great example of what’s possible…and who are generously sharing their experience with a new generation.
Barney
Until next time, Barney! 😉 Had a blast with you in jolly old England.
Considering the NHS’s abysmal standards for cancer care, long waiting lists, and severe understaffing, I would calculate the cost of private insurance or overseas care into my calculations.
My relatives have been treated at the NHS, and their care, while well-meaning, was abysmal. Even fatal in one case. And I say this as a physician.
Yikes! Sorry to hear that.
The Escape Artist also has a blog entry on retiring in Switzerland which is interesting … I myself like the idea of retiring … well at least part time 3 months of the year in Switzerland or perhaps Konstanz, Southern Germany or Bregenz, Austria … and the rest of the time back in Asia where I reside now … Lake Zurich, Geneva, Lucerne are amazing places to camp out and do day trips from also … http://www.escapeartist.com/blog/retiring-switzerland-wealthy-nation … England has its charms though ….
Glad to know retiring in Switzerland doesn’t mean immediately unretiring and going bankrupt 😛 Thanks for sharing!
Thanks for doing this interview! I used to read the blog and it’s nice to put a face to the person (finally).
Sorry for the length of this comment. It’s a topic close to my heart (and close to home), a few thoughts:
“How To Retire at 40” on UK’s Channel 4”. – If I’m honest, the show was a letdown. Barney and yourselves delivered sensible advice (e.g. 25 times earnings = entry level FI, avoid wildly overpriced housing, keep investing costs low…) but the show was too concerned with being ‘entertaining’ and mocking the whole idea of FI / early retirement that it wasn’t as persuasive as it could have been if they’d taken the topic seriously.
“I never inherited any money from my parents but I did inherit a fear of poverty. This spurred me on to get a job in finance” – A high salary is are a great way to reach FI. Part of the reason why this fact may upset many Brits is that average wages in the UK are low (at least relative to the cost of living in many parts of the country) as is wage growth.
“People say kids are expensive but my wife and I made our own…so that didn’t cost anything. And as long as you stay clear of private education, theme parks and air travel, kids aren’t that expensive.” – If there are good schools available avoiding private education is a good idea. If not, it’s a case of trying to move closer to a good school. I’ve often wondered how people find the money to put 2 or 3 kids through private school out of after tax income…No specific need for air travel. There are lots of nice holiday spots in the UK (if you can get to them!). Petrol and rail fares aren’t that cheap unfortunately but there are always good deals around if you plan the travel far enough in advance.
“We own our house but don’t own any other property. Owning your own home plus investing in more houses via buy to let landlording strikes me as dangerous: you have too much risk concentrated in one asset class.” – I think that the entire UK economy is too concentrated in real estate. The collateral that many of the banks hold is housing stock, if house prices collapse the banks will go down with them. As house prices have increased many homeowners remortgaged and used the funds to purchase consumer goods (consumer spending accounts for much of the growth of the UK economy in recent years). In many parts of the country house prices and rents are so expensive that the majority of people’s take home pay is sucked into housing costs (leaving them little disposable income to invest in other asset classes).
“re-estate is even more of a British dream than an American dream” – I’d say it probably sits close to the heart of the British dream. The problem in Britain is that sometimes it can feel as though if you don’t own you own home then you’re a third class citizen (and quite a few financial institutions will treat you like that’s the case also). In many respects the status element to home ownership can often be more important than the financials.
“Brexit has, thus far, been a net positive for a UK investor with a sensible globally diversified portfolio.” – Agree. Anyone who has looked at how the FTSE 100 has performed relative to other international indices (e.g. the S&P 500) should have diversified internationally a long time ago.
“One of the more bizarre criticisms of financial independence is that it’s only relevant for high earners. Errr…hello???…if you’re not a high earner, it’s even more important not to waste your money buying the crap knick knacks and future landfill that people spend their money on.” – Tough love but totally true.
HH
This was a great interview and introduction. While he’s right – when he was planning on retiring early there may not have been as many resources online – but even if there are a lot or a little we still have to come into contact with them. This was a great first step – especially as he’s based in the UK.
Hey Guys. Thanks for this. Currently I live in Vancouver Canada but am moving to UK. I was following the Investment Workshop to Invest my TFSA/RRSP account and was wondering about how can I do the same in UK. Your article was the first return on Google. Thanks for doing this article which I will use to guide my FI in the UK.