Pensions

[brocky]

Morning, with retiremenst in the news today I've started thinking about my own situation regarding pensions.

I currently have around 8 years corporate pension from my permy days working for a 'big bank' so that was building up a decent pot, however since I've been contracting (last 3/ 4 years) I've not been paying anything into a pension, opting to put money into paying of debts and ISA's instead (...as well as nice gadgets, fancy car, new bathroom etc ) and such I was just wondering what other contractor were doing about sorting a pension? Are there efficient options out there for people in our situation or is it best just to keep putting money into savings? Not after detailed analysis, just basically wondering what the consensus is? (I could of course pay a finacial advisor for this type of info but I'm sure I'm get more honest, unbias responses on here!)

[northernladuk]

Morning, with retiremenst in the news today I've started thinking about my own situation regarding pensions.

I currently have around 8 years corporate pension from my permy days working for a 'big bank' so that was building up a decent pot, however since I've been contracting (last 3/ 4 years) I've not been paying anything into a pension, opting to put money into paying of debts and ISA's instead (...as well as nice gadgets, fancy car, new bathroom etc ) and such I was just wondering what other contractor were doing about sorting a pension? Are there efficient options out there for people in our situation or is it best just to keep putting money into savings? Not after detailed analysis, just basically wondering what the consensus is? (I could of course pay a finacial advisor for this type of info but I'm sure I'm get more honest, unqualified and highly irrelavant to my situation from total strangers responses on here!)

The fact a pension is tax free means you have missed a serious trick here. The amount will come of your gross so the tax man is actually paying in to your pension effectively. You don't have to pay a financial advisor, he gets the commision from you taking a product on (did you research this?) and he will suggest the best products for a private pension to suit your level of risk and expectations.

Congratulations in thinking we can give you better advice than a FA though. Nice move

Posting it the accounting section might have been even better lol

[brocky]

The fact a pension is tax free means you have missed a serious trick here. The amount will come of your gross so the tax man is actually paying in to your pension effectively. You don't have to pay a financial advisor, he gets the commision from you taking a product on (did you research this?) and he will suggest the best products for a private pension to suit your level of risk and expectations.

Congratulations in thinking we can give you better advice than a FA though. Nice move.

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?)

[SallyPlanIT]

The fact a pension is tax free means you have missed a serious trick here. The amount will come of your gross so the tax man is actually paying in to your pension effectively. You don't have to pay a financial advisor, he gets the commision from you taking a product on (did you research this?) and he will suggest the best products for a private pension to suit your level of risk and expectations.

Congratulations in thinking we can give you better advice than a FA though. Nice move

Posting it the accounting section might have been even better lol

Too true!
You're paying HMRC tax when they should be paying you into your pension fund.

[brocky]

Posting it the accounting section might have been even better lol

Sorry.....new here so missed that. Did scan the sections before posting but didnt see it as fitting under 'accounting and legal' until I read your note and read the 'small print'

I'll take more care next time.

[northernladuk]

Lifted from another site but some numbers to think about...

For a contractor outside IR35 earning £40 per hour, each £100 earned attracts £39 tax with only £61 ending up in their pocket.

Instead of drawing £100 as income the whole £100 could be contributed to a pension. This reduces net income by £61, but increases a pension by £100, attracting tax relief of 39%.

In the April 2010 Budget the new additional rate of income tax of 50% was introduced for those earning over £150,000. For those contractors earning more than £150,00 per year the tax relief is even higher. But for those earning just over £100,000 per year the effective tax rate is 60% due to the reduction in personal allowances introduced, resulting in tax relief even higher still. For high earners pensions are now an even more attractive option as a tax saving device for contractors than before.

For each £100 contributed, your take home pay only reduces by £59. The tax man pays the rest!

BOOM!

[Lumiere]

For each £100 contributed, your take home pay only reduces by £59. The tax man pays the rest!

BOOM!

But the bottom line is that you lose £59 which you could invest somewhere or spend on something nice before the December 21, 2012 comes.

[lje]

I put a large lump sum into pension every month. I also use my ISA allowance every year and put other savings aside. What's left I use for the boring things plus the fun toys etc. For me it's about having the 'save some and spend the rest' attitude.

[dynamicsaxcontractor]

But the bottom line is that you lose £59 which you could invest somewhere or spend on something nice before the December 21, 2012 comes.

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.

[DimPrawn]

Yes pay it into a pension.

And when you are 110 years old, the government then might let you get your hands on the money, if they haven't pinched it and given it to "hard working families" or used it to prop up Public Sector pensions under the banner of "fairness".

and if you become seriously ill or need the money for little Timmy's cancer treatment, you can't get your hands on the money. Tough.

and you might get tax relief on the way in, but you pay tax on the way out.

No thanks.