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[STEMO]

She's a 'transition member' so I think my first assumption was right.

She's 47 now, BTW.

[LC0112G]

SWMBO has her own company so not much advantage in stacking her pension. Instead we'll use that in our 50's to make sure we don't pay any (or much) tax on income in our later middle age.

See an accountant. Tomorrow. Or sooner if possible.

Pension contributions from a company are an allowable business expense. They come off the 'profit' before any corporation tax. You can dump up to £40K of profit into her pension plan per year tax free, and carry forward the past 3 years allowance too. So she could extract up to £160K of profit from the company into her pension scheme tax free. There is no cheaper way to extract money from the company, or fund her retirement.

[STEMO]

Tell me, Malcolm, should you stop contributing once you reach your LTA?

[STEMO]

Just been on the TP website and looked at the forecasts. No matter which way it goes, with no mortgage to pay and no more pension contributions to make, she will be 'ok' at 60 and fickin minted at 67. 
I'm obviously a bit out of my depth when trying to work out the in and outs, so the above statement is enough to be going on with.

[LC0112G]

Tell me, Malcolm, should you stop contributing once you reach your LTA?

Good question and one that you should seek professional (paid for) advice on.

My view is that if you've got a pension pot predicted to be greater than £1M then you probably should NOT contribute any more of your own money to it unless there is some sort of employer match of contributions - don't turn down free money. A £1M pot should produce a tax free lump sum of £250K and yearly income of at least £25K p/a, and possibly up to £40K p/a if well managed. Once you add in the state pension at SP age, you'll be getting quite close to the 40% tax band. Any excess above the LTA is 'taxed' at 25%, and then the remainder subject to income tax (so likely 40%) making the total tax rate 55% (1- (0.75 x 0.6)). There ain't no point in paying 55% tax on the way out unless you can save more than 55% on the way in.

If there is no employer match on contributions, then VCT's, Stocks and Shares ISA's, or even unwrapped investments would be my preferred options. Or you could live a little and buy an Omega to fettle - it might turn into a valuable investment (before it turns to rust)

[tunnie]

All this pension chat made me log into the towers watson company that Sky use, scary looking at their calculators, I think I will increase my contributions if I can afford to this year.

As only 'strong' investments will meet my target pension salary, need to increase contributions so only the 'average' investments meet the target.

[Mister Rog]

Arrghhhh . . . . . . Not read all of the post. I just saw the subject and realized that it would be a minefield, just like pensions themselves.

Best thing I ever did was stay in London starting with a crappy little flat when all my mates were getting nice 3 bed semis well out of London. And, then move back to Wales.

Even with money in sitting pension funds I can't figure out the best thing to do. Seem to get screwed regardless, tax, fees whatever.



 

[Viral_Jim]

SWMBO has her own company so not much advantage in stacking her pension. Instead we'll use that in our 50's to make sure we don't pay any (or much) tax on income in our later middle age.

See an accountant. Tomorrow. Or sooner if possible.

Pension contributions from a company are an allowable business expense. They come off the 'profit' before any corporation tax. You can dump up to £40K of profit into her pension plan per year tax free, and carry forward the past 3 years allowance too. So she could extract up to £160K of profit from the company into her pension scheme tax free. There is no cheaper way to extract money from the company, or fund her retirement.

To be fair, I wasn't aware of that, but while ever we aren't making my pension to £40k p.a. I think it would be better to add more to mine. My effective rate is 40%, plus some NI, hers rather less. SWMBO'S Company runs about £45k as PBT and sadly, we need all of it ATM.

I scraped my ACA tax exams, so as soon as we have any spare income, I can assure you I'll be seeking some good advice! 

[LC0112G]

Arrghhhh . . . . . . Not read all of the post. I just saw the subject and realized that it would be a minefield, just like pensions themselves.

So ask some questions and try to understand the answers. Burying your head in the sand could leave you at the mercy of the state, living on benefits in old age.

Even with money in sitting pension funds I can't figure out the best thing to do. Seem to get screwed regardless, tax, fees whatever.

There is no tax on monies you pay into a pension pot - in-fact the govt boosts it up by 25%. There is no tax on the assets/funds contained in the pension pot as it (hopefully) grows. Then when you come to draw it out again (at age 55 or older), 25% of your pot can be taken tax free, and the remainder taken as income, taxed at whatever your tax rate is.  You have a personal tax free allowance - currently £11850 - so you can draw out £11850 tax free between age 55 and 67. At 67 your state pension will start giving you an additional £8K+ income.  This means you can continue to draw an additional £3K ish from the private pension making a total of £11850 still - and still all tax free.

If you want to take more than £11850 total per annum, then you're going to be paying income tax (at 20%) on everything above the £11850.

There will be fees though - the pension companies have to be paid somehow. You do want to keep these as small as possible. It's possible to get fees down to less than 0.3% per year, though it does depend on what you invest in. You shouldn't be paying more than about 1% though unless you're investing in something very specialised.

Whatever size of 'pot' you build, it should be possible to take an income of somewhere between 3%-4% per annum from it without you risking it running out before you die. Therefore if you want to draw £20K per year in retirement (including £8K state pension), then you need to build a pot of around £400K-£500K. The sooner you start the sooner you'll get there. If you never start, then sooner or later you'll have to get used to living on the £8K state pension alone.

[LC0112G]

See an accountant. Tomorrow. Or sooner if possible.

Pension contributions from a company are an allowable business expense. They come off the 'profit' before any corporation tax. You can dump up to £40K of profit into her pension plan per year tax free, and carry forward the past 3 years allowance too. So she could extract up to £160K of profit from the company into her pension scheme tax free. There is no cheaper way to extract money from the company, or fund her retirement.

To be fair, I wasn't aware of that, but while ever we aren't making my pension to £40k p.a. I think it would be better to add more to mine. My effective rate is 40%, plus some NI, hers rather less. SWMBO'S Company runs about £45k as PBT and sadly, we need all of it ATM.

I scraped my ACA tax exams, so as soon as we have any spare income, I can assure you I'll be seeking some good advice! 

In simple terms. Suppose SWIMBO's company makes £1K gross profit. There are 3 (legal) ways of getting the money out of the company and into her 'pocket'.

1) Salary. Employers NI is 13.8%, Employees NI is 12% and Income tax is 20%. So once all that is paid, from the original £1000 she only gets about £620 in her pocket.

2) Dividends. Corporation tax is 20%, and personal dividend tax is 7.5%. Once that is paid, she gets £740 in her pocket.

3) Pension. No taxes - all £1000 can go straight into the pension.

It's a bit more complicated than that since NI, Income Tax and Dividend Tax have various allowances and limits, but that's the jist of it.

[jonathanh]

SWMBO has her own company so not much advantage in stacking her pension. Instead we'll use that in our 50's to make sure we don't pay any (or much) tax on income in our later middle age.

See an accountant. Tomorrow. Or sooner if possible.

Pension contributions from a company are an allowable business expense. They come off the 'profit' before any corporation tax. You can dump up to £40K of profit into her pension plan per year tax free, and carry forward the past 3 years allowance too. So she could extract up to £160K of profit from the company into her pension scheme tax free. There is no cheaper way to extract money from the company, or fund her retirement.

That assumes she is not subject to the money purchase annual allowance and does not and has not for the carry forward years had adjusted income above £150k else the reduced annual allowance applies

[jonathanh]

See an accountant. Tomorrow. Or sooner if possible.

Pension contributions from a company are an allowable business expense. They come off the 'profit' before any corporation tax. You can dump up to £40K of profit into her pension plan per year tax free, and carry forward the past 3 years allowance too. So she could extract up to £160K of profit from the company into her pension scheme tax free. There is no cheaper way to extract money from the company, or fund her retirement.

To be fair, I wasn't aware of that, but while ever we aren't making my pension to £40k p.a. I think it would be better to add more to mine. My effective rate is 40%, plus some NI, hers rather less. SWMBO'S Company runs about £45k as PBT and sadly, we need all of it ATM.

I scraped my ACA tax exams, so as soon as we have any spare income, I can assure you I'll be seeking some good advice! 

In simple terms. Suppose SWIMBO's company makes £1K gross profit. There are 3 (legal) ways of getting the money out of the company and into her 'pocket'.

1) Salary. Employers NI is 13.8%, Employees NI is 12% and Income tax is 20%. So once all that is paid, from the original £1000 she only gets about £620 in her pocket.

2) Dividends. Corporation tax is 20%, and personal dividend tax is 7.5%. Once that is paid, she gets £740 in her pocket.

3) Pension. No taxes - all £1000 can go straight into the pension.

It's a bit more complicated than that since NI, Income Tax and Dividend Tax have various allowances and limits, but that's the jist of it.

What about using an MVL and claiming entrepreneur allowance?

And 3 misses the point that normally 75% of the fund is drawn and taxed as income.  So taking that into account if you could use the MVL and entrepreneur allowance that might be better

[Migv6 le Frog Fan]

She's a 'transition member' so I think my first assumption was right.

She's 47 now, BTW.

Your wife is 20 years younger than you ? !! You old devil you. 

[aaronjb]

If you're saying what it sounds like you're saying (personal allowance reduction?) then you need (paid for) professional financial advice from an IFA, not the ramblings of some nutters on an obsolete car forum.

That is indeed what I'm saying (in fact, my allowance is now roughly negative £8000) - I went to see a local tax advisor whose advice was (in summary):

"You're a PAYE employee, so you're screwed. You could salary sacrifice, but you'll still take home less each month."

Thankfully he didn't charge me for that advice...


Still, I went to bed last night as my employer announced 230 redundancies (~5%) worldwide and, internally, sent an email that read (I'm paraphrasing): "We are making 230 people redundant across all departments, and closing our Lowell office. Those affected will find out soon, and those affected in EMEA will find out in the next few weeks"

Which I thought was a thoroughly shitty way to tell people!

So y'know. Maybe my salary will drop to 0 soon. Maybe it won't. I get to play a fun waiting game!

[Doctor Gollum]

If it makes you feel better, I may be taking my current (agency) employer to the Small Claims Court...

The long and the short of it being that they are meant to send a third party payroll company my gross income plus their liabilities. They have 'forgotten' to do this and expect me to pay Employer NI etc. Last two pay slips were £82 short each. Find out today if they have finally 'remembered'.

They also neglected to pay me for my Induction...

Am still waiting for the link to a feedback website for my leaving interview for my previous job. They obviously care just as much as I expected them to