Pensions

[northernladuk]

Exact. I take it all out and pay off the mortgage as quick as possible. When I am completely debt free I might consider putting some money into a pension.

Each to their own I guess but in my mind this is pretty poor planning what with the furor that is going on about pensions which is only going to get worse as the population gets older. You effectively lose 40% or so to pay off something on a couple of percent interest when you are looking at a situation where there will be a third more people drawing from a pot thats buggered already.

And you don't lose the £59 at all. You squirrel it away to grow. That is totally different. I think you missed the sarcasm in Lumiere's post that the world is predicted to end on 21st December 2012 so he doesn't need a pension. Feel daft now huh!! LOL

[dynamicsaxcontractor]

Each to their own I guess but in my mind this is pretty poor planning what with the furor that is going on about pensions which is only going to get worse as the population gets older. You effectively lose 40% or so to pay off something on a couple of percent interest when you are looking at a situation where there will be a third more people drawing from a pot thats buggered already.

And you don't lose the £59 at all. You squirrel it away to grow. That is totally different. I think you missed the sarcasm in Lumiere's post that the world is predicted to end on 21st December 2012 so he doesn't need a pension. Feel daft now huh!! LOL

Didn't pay any attention to the date put in the post.

I do however disagree with you about where its best to place the money. On a mortgage for example, you pay back £1.50 - £2.50 per pound borrowed over the years. In this case, for every pound you pay off early you save £0.50 - £1.50. So instead of paying £100 to the pension, I get £59 out and pay it straight off the morgage saving myself £30 at the lower interest rates and a whopping £90 if the interest rates would skyrocket. In theory I have out of my £100 paid £41 in tax and got a refund of £90 from the bank. My £100 actually grow to £159 counting the money the bank never charge me!

[brocky]

I think you missed the sarcasm in Lumiere's post that the world is predicted to end on 21st December 2012 so he doesn't need a pension. Feel daft now huh!! LOL

...must say, I missed that too, assumed it was some political reference to 21st december 2012.

Can see both pros and cons both sides. Seems you need to be retired a numebr fo years to get good value from a pension pot....but if you live to 100 - happy days!! My query is really absed around the fatc that if my accountas doing a good job and I'm paying as little tax as I can, the tax relief I get on a pension should be minimal and as such, based on the fact its tied up and you can lose it (albeit by dying) are there other, better ways of saving for retuirement given our circumstances?

The paying off mortage bit is a good idea, and whilst I see where you're coming from NorthernLad, interest rates arent going to say this low forever so if you can pay more off now, repayments will be dermatically reduced come rate increase time!

[Random]

this depends on your view, for example I can use mine and my wifes allowance and then after that the money still in my acc I decide what to do with (currently that leaves me with 50% of my income left). I think paying into a pension to give a salary which will give you an income just under the higher rate band (sure this might change but for example) is the smartest way forward. Anything else you can take out when you are on the bench or liquidate your company and there are tax advantages of doing this.

Does depend on your earnings, relationship status and immediate need for the cash. I heard today there are corporation tax benefits of pension contributions - can anyone advise on this - is it because it is taken from gross?

[northernladuk]

I thought so

...however, whilst the pension will come out of my gross, as I pay myself a low wage, my gross is pretty low anyway and then I guess if I die after claiming my penison for a couepl of years say, the amount built up is efectively gone?

Would it not be better to save the money then its still with my estate should I die?

As may be apparent, I'm not very clued up on pensions! (...but yes, understand FA's take decent comisison.....though a good one shoudl save you more than enough to cover his fee I'd guess?)

I missed this. I had presumed that after contracting you had a LTD but that is common sense and I am thinking that assuming on this thread is a bad thing....

So are you LTD or brolly? Why do you think your pension comes out of your gross pay? Your pension comes off your gross of the company so what the company pays you isn't changed but your divis drop slightly.

Or did I read this wrong?

[brocky]

I missed this. I had presumed that after contracting you had a LTD but that is common sense and I am thinking that assuming on this thread is a bad thing....

So are you LTD or brolly? Why do you think your pension comes out of your gross pay? Your pension comes off your gross of the company so what the company pays you isn't changed but your divis drop slightly.

Or did I read this wrong?

No...you're spot on and I'm LTD. (took a while for the post to get passed moderation)

You make a point I didnt consider.......I was assuming the money paid into the pension would come purely be dervived form a portion of my income plus a portion of the income tax I pay but of course.....it could be treated as a business expense and reduce the corporation tax instead? ....if I've understood.

[Fred Bloggs]

No...you're spot on and I'm LTD. (took a while for the post to get passed moderation)

You make a point I didnt consider.......I was assuming the money paid into the pension would come purely be dervived form a portion of my income plus a portion of the income tax I pay but of course.....it could be treated as a business expense and reduce the corporation tax instead? ....if I've understood.

Correct.

[brocky]

Correct.

Great however......I'm still no closer to working out if its actually better to...

a) stick my cash in shares ISA's (given pension funds basically play the stock exchange) and bonds which by the time of retirement will be quite a decent pot (and of course gives me the flexibility to retire when I want......
b) start a full pension through my company, reducing coropration tax (11%?)
c) Bung cash into a buy to let giving a regular income whilst preserving capital (hopefully - well, most of the capital at least)
d) Combination of the above!
e) Just go with the flow and dont worry about it, maybe start playing the lottery.

...any more?

Decisions decisions!

Brocky

[pmeswani]

Great however......I'm still no closer to working out if its actually better to...

a) stick my cash in shares ISA's (given pension funds basically play the stock exchange) and bonds which by the time of retirement will be quite a decent pot (and of course gives me the flexibility to retire when I want......
b) start a full pension through my company, reducing coropration tax (11%?)
c) Bung cash into a buy to let giving a regular income whilst preserving capital (hopefully - well, most of the capital at least)
d) Combination of the above!
e) Just go with the flow and dont worry about it, maybe start playing the lottery.

...any more?

Decisions decisions!

Brocky

You could do a number of things with your pension such as making some company based contributions and save 20% on the corp tax and also put some personal contributions in and get 25% added to the pot.

If you put money into ISA's, you don't claim back the Tax you paid already, but only ringfence the money from further tax.

If you invest money into property, you could become liable for CGT.

The best option I see is a pension based contributions (both company and personal contributions) and any spare cash should be put into an ISA.

[Fred Bloggs]

Well, I'm probably not best placed to offer advice as I'm one of the old guys here, 53. I'm putting £1k a month into my SIPP and topping it up as much as I can. I should have put about £50k into it by April 2011 over the previous 12 months. I do this out of the Ltd Co account. Your approach will be different if you are younger. I wouldn't recommend BTL myself, that boat has long since sailed IMO. Interest rates are going up sooner or later and property remains grossly over valued. There will be no capital growth beyond inflation until salaries rise to bring the prices closer to the long term average versus wages. With all the uncertainties in the economy the best thing to do IMO is 1- Pay off loans credit card debts. 2- Pay of mortgages. 3- Build a war chest (cash ISA's). 4- Long term savings and pension. HTH.