Pensions.....Why bother?

[MarillionFan]

Ive looked into this recently - and whereas i am not a fan of pensions I have decided to take out one in addition to other investments.

I would recommend to all that a pension should be used in conjunction with a mixture of savings,premium bonds, buy to let property, shares and ISA's and that in the long-term you hope that only a couple of these get screwed up

[Tonecontrol]

As a variation on the theme, look at www.sippdeal.co.uk/
I haven't tried it yet, you can invest in shares, or anything, but inside a pension wrapper

[ContractorAlchemist]

John,
You mentioned annuity rates being low as a downside to funding for retirement via a pension- and are quite right- annuity rates are based primarily on long-dated gilt yields which have been steadily declining.
Consequently, the Life & Pensions industry has developed Income Drawdown and Phased retirement which allow you to defer an annuity purchase until age 75,
whilst drawing down an income from the fund between maximum and minimum Govt limits- re-assessed each year by the Government's Actuary Dept but based on
between 35% and 100% of equivalent benefits from an annuity.
Not all of your pension needs to go to purchase an annuity- with a Personal Pension or Self Invested Personal Pension, up to 25% of the fund can be paid out as a lump sum at retirement as Tax Free Cash. For an Executive Personal
Pension (EPP), the formula for max TFC is 3n/80ths x final salary (based on the best 3 consecutive years ending within the last 13) and where n is the number of years of service accrued with your Ltd Co.
Under certain conditions it is possible to fund an EPP for 100% TFC.
Alternatively, there are Funded Unapproved Retirement Benefits which can return the fund as 100% TFC- but there is no tax relief on contributions.

Hope this helps!

[ededdandeddie]

Thank you ContractorAlchemist - BTW, I feel that you should maybe declare the financial services company that you work for (especially in regard to your initiated posts) as the accountants do.

Re content, it is 3 or more consecutive years so long as at least 1 is within the 10 years prior to retirement.
Also there are major NI implications on FURBS contributions now.
Also don't forget the 2.25 x annuity alternative to the 3n/80ths if it produces a larger figure so long as the 1.5 x final remuneration is not breached.

Enjoy

[starchaser1234]

buy gold

Buy gold - its what the japanese are doing anyway.

And with the American financial markets looking like a increasingly like a house of cards post-Enron, it might be a safe , yet old-fashioned, bet.

The pensions crisis in the UK is frightening. I'm amazed that the government has virtually gotten away with it so far.

[Furbster]

I have been thinking about pensions recently (turned 30, and the clock is ticking!!)

Very Worried about annutity rates, and am keen to start a non-pension fund.

My idea is to save against my mortgage which is about to be with the woolwich (or similar to IF or Virgin), where savings are offset against the interest. This means that I get the equivalent of the 5% interest, but as it is tax free (and also yearly charge free) I can add 40% to this. In total then I get the equivalent of 7 to 8% growth.

Now that isn't bad rate, as well as being guaranteed. The other benifit is that if interest rates go, so does the return.

Can anyone see any problems with this?

Steve

[mikethebike]

There is no mention a SSAS here. I was told that investing using one of these, and then getting a loan against the money in the SSAS for a business property is where you really start ramping up your fund.
The rent you charge for the business property can be put straight back into the SSAS (minus the loan repayments of course). Have I been sold down the river here?

[JoelHarding]

Mortgage interest offset

Furbster

One of my clients uses an Open Plan Woolwich account to offset VAT, Corporation Tax, etc which is lying around in the company bank accounts.

The beauty of using the Woolwich is that they will offset the funds in an account under a different name (ie they will offset funds in the company's bank account against your personal mortgage). This means that the company never needs to transfer the cash into your personal name and therefore the director never has an overdrawn current account with the associated tax liabilities.

I don't know whether the Halifax or Virgin One would be prepared to do this.

[Karl1]

Re: Mortgage interest offset

Interesting....
My manager at barclays would n't offset the company accounts - I shall take it up with him.

[spevans]

Re: Mortgage interest offset

Hi Joel,

I rang the Woolwich to ask about this and they said they only offset against Woolwich personal accounts but suggested I ring their parent co Barclays.

Barclays say they are not allowed to offset a personal mortgage against one of their business accounts due to tax reasons.

So I'm wondering how one of your clients can manage what Woolwich and Barclays say is not possible - maybe they put the mortgage into the name of their Ltd company??

Just curious.

cheers,
Simon.