Pension - do I increase it or invest elsewhere?

[stackpole]

Suppose I decided to invest a lump sum of about 18K for long term.

All other things being equal, do I increase my modest pension, increase my ISAs, knock it off the mortgage, or do something else with it? Purely on likely benefit after (say) 25 years.

I think I've made up my mind, but I was wondering what all you rich contractors would do.

[ancient]

I have paid in 20k each and every year for the last five years.

Need to have a fund of £450,000 to meet the same fund as a mid-level permy civil servant - say 20k per annum pension.

The permy has done a lot better than me over the years.

Contracting is jam today (just)

permy with a final salary scheme is on jam tomorrow, with little stress in the day job, retire at 60 etc.

You choose.

Meanwhile I still need to contribute a few hundred K to the pensions fund.

[AtW]

I have paid in 20k each and every year for the last five years.

Are you %%%%%%%%%%%ing crazy???

By the time you retire your money will be extra-taxed one way or another and used to cover huge deficit because it won't be fair that you retire on 20k pa, while others have to live on 5k!

[ancient]

Based on current legislation (which is perhaps about to change)

If your fund is less than £140k you will loose - greater you will win.

How much you win is dependent on how far past the £140k barrier you think you can get (you need more than £140k to get past the current means tested threshold).

Pensions is a turbulent space, and an exciting tax opportunity for high-earning contractors.

If the future involves a non-means tested old-age government pension + A-day rules (e.g. no limit to tax free contribution), then you would be silly not to contribute.

Perhaps try for 24k pension income taxed at 22% + cash stashed away in other vehicles e.g. cash, property & offshore funds.

May also depend on what age you want to retire and where you will retire too.

You might want also to ask, after all the trials and tribulations of contracting - do I really want to live at a subsistance level - surely one of the reasons for taking on all this stress and uncertainty was to achieve a better life?

With the new a-day rules (begining april 2006) high-earning contractors can stash easily £100k per annum, work five years, and then live the dream.

[DimPrawn]

Have to agree with AtW.

Your big pension fund is disgusting greed and a future disgusting greed tax on pensions will mean it will be handed to those who spent their time in the pub drinking instead of saving.

Wave goodbye to it when NL secure their next election win

[ancient]

What do you want (you decide) - a Villa or a Hostel?

[xoggoth]

Thirded

[AtW]

Based on current legislation (which is perhaps about to change)

If your fund is less than £140k you will loose - greater you will win.

How much you win is dependent on how far past the £140k barrier you think you can get (you need more than £140k to get past the current means tested threshold).

LOL dude, this is what they want to achieve - make you work your arse off trying to break 140k and in 15-20 years you can be sure they will change legislation since you have no written guarantee that no future pension laws would adversely affect your pension payments, good example is pension raid by GBrown.

I can understand rush for tax benefits of putting money into pension, but only if you are a big exec and beyond 50-100k pa that you put into pension, you also get 300-500k salary, in this situation it makes sense, but if that 20k you put every year actually is a big chunk of your overall earnings, then IMO you are doing what GBrown wants you to do - make sure you buy big jar of vaseline with whatever is left after you make you pension payments.

I am not negative - I am Russian

[Francko]

I am not negative - I am Russian

So, let's recap. You don't have a house and you are not going to have a pension. Any other sensible advice you want to release to future generations? Perhaps, you should mention how occasional unprotected sex doesn't need condoms at all, right? Or why do we need safety belts?

[milanbenes]

ahh pensions my pet subject

"Suppose I decided to invest a lump sum of about 18K for long term.",

that will not get you very far !


funny nobody here has mentioned the benefits of compounding interest...

surely x amount invested in a good interest account over a long period will bring an excellent return on the original amount invested when the interest compounding is taken into consideration

Milan.