Stashing company money in mutual funds

[DimPrawn]

Who say's you have to take an annuity? Drawdown the income from high yielding shares and its perpetually self funding

Income Drawdown Plans - The Pensions Advisory Service (TPAS)


Changes Introduced From 6 April 2011

The maximum amount of income that may be drawn is reducing. The new maximum amount of income that may be drawn is 100% of the single life annuity that somebody of the same sex and age could purchase based on Government Actuary's Department rates. An individual's pension provider calculates the maximum income, using standard tables prepared by the Government Actuary's Department (GAD). Click here to view the GAD tables.

[SimonMac]

Income Drawdown Plans - The Pensions Advisory Service (TPAS)


Changes Introduced From 6 April 2011

The maximum amount of income that may be drawn is reducing. The new maximum amount of income that may be drawn is 100% of the single life annuity that somebody of the same sex and age could purchase based on Government Actuary's Department rates. An individual's pension provider calculates the maximum income, using standard tables prepared by the Government Actuary's Department (GAD). Click here to view the GAD tables.

Going on a very conservative estimate of my pension pot growing at 0.69% per month a £500k pension will allow a draw down of £21,500 a year (15 year UK gilt rate sitting at 2.31%), and at the time the pot will be increasing by about £31k a year by then will mean its more than self funding.

Given my investments are currently averaging about 1.9% per month I am doing OK, add in one BTL at the moment and the prospect of more I think retiring at 55 is achievable only because I started looking out for my interests very early.

(Yes I know YMMV and lots of things can go tits up between now and then but if all you do is worry you are only every gonna be screwed)

[DimPrawn]

Going on a very conservative estimate of my pension pot growing at 0.69% per month a £500k pension will allow a draw down of £21,500 a year (15 year UK gilt rate sitting at 2.31%), and at the time the pot will be increasing by about £31k a year by then will mean its more than self funding.

Given my investments are currently averaging about 1.9% per month I am doing OK, add in one BTL at the moment and the prospect of more I think retiring at 55 is achievable only because I started looking out for my interests very early.

(Yes I know YMMV and lots of things can go tits up between now and then but if all you do is worry you are only every gonna be screwed)

All very good and I wish you well with it.

However, the rules change every year, the limits go down, the retirement age goes up and the tax benefits are reduced. Add in the inflexible nature of a pension, the temptation for HM govt to take the pot at whim and I think the tax benefits do not outway the risks.

If you have an employer/public sector funded final salary gold plated pension, then yep, brilliant you cannot lose. Otherwise, no thankyou, not with 20 years of deficit to pay off and all those pension pots sitting there waiting to be raided.

[SimonMac]

All very good and I wish you well with it.

However, the rules change every year, the limits go down, the retirement age goes up and the tax benefits are reduced. Add in the inflexible nature of a pension, the temptation for HM govt to take the pot at whim and I think the tax benefits do not outway the risks.

If you have an employer/public sector funded final salary gold plated pension, then yep, brilliant you cannot lose. Otherwise, no thankyou, not with 20 years of deficit to pay off and all those pension pots sitting there waiting to be raided.

I actually cashed in my CS pension and transfered it to my SIPP, they are gonna screw you no matter what happens, if I have control of my pension I stand a better chance than those who don't

[pjclarke]

Going on a very conservative estimate of my pension pot growing at 0.69% per month a £500k pension will allow a draw down of £21,500 a year (15 year UK gilt rate sitting at 2.31%), and at the time the pot will be increasing by about £31k a year by then will mean its more than self funding.

Given my investments are currently averaging about 1.9% per month I am doing OK, add in one BTL at the moment and the prospect of more I think retiring at 55 is achievable only because I started looking out for my interests very early.

Starting early is indeed key. Assuming a 35 year career (start at age 20) and the 'conservative' rate of 0.69% / month (about 8.6% annualised) you'd need to contribute just over £200 / month to get to a £500K pot in 35 years. But that 'conservative' rate is more than twice the current average yield of the stock market and higher than the highest rate now used by the FSA for projected returns, on advice from PWC.

1.9% / month annualises to 25%. Given that the average BTL yield is around 7% I'd love to know where I could get returns like that without a huge amnount of risk....

[SimonMac]

Starting early is indeed key. Assuming a 35 year career (start at age 20) and the 'conservative' rate of 0.69% / month (about 8.6% annualised) you'd need to contribute just over £200 / month to get to a £500K pot in 35 years. But that 'conservative' rate is more than twice the current average yield of the stock market and higher than the highest rate now used by the FSA for projected returns, on advice from PWC.

1.9% / month annualises to 25%. Given that the average BTL yield is around 7% I'd love to know where I could get returns like that without a huge amnount of risk....

I never said there wasn't any risk, at the moment I have heavily invested in LLOY which is showing a 40% increase in the last 4 months, I know this will not continue but making hay while the sun shines and all that

[d000hg]

At 55. No hang on 60. No 65. Oh now it's 70.

The latest plan to raid your pension - MoneyWeek

Good luck!

Personally I'd be buying property after property to let out.

Numpty Question - if I've already got a private pension can they change the year it 'matures' (I forget the word), or is it only public pensions that do this since they work differently?

[pjclarke]

I never said there wasn't any risk, at the moment I have heavily invested in LLOY which is showing a 40% increase in the last 4 months, I know this will not continue but making hay while the sun shines and all that

Me Too! It's gone from 30p to 46p in about 6 months , which does equate to about 25%/ year. But as you say it cannot continue indefinitely ....

[ChimpMaster]

I personally would only advocate pensions as a small percentage of your investment/retirement portfolio.

From your example, you have to work 35 years and hope to achieve 8.6% annual return to eventually get a retirement income of £21,500 (I hope you mean in today's money)

That's a long time, and a lot of risk that is out of your control - such as market turbulence, pension law changes, not being able to work due to illness etc.

I have a very small pension, and I haven't put any money into a pension fund for the past 10 years. I just don't see the point of putting away a few thousand £ each year only to have it grow at a tiny rate (or dwindle away) for the next 35 years before I can get it back.

I would much rather invest my money in BTLs or other asset classes over which I have immediate, continuous control and generate free cash flow for me to re-invest. For example, have tenants pay off your BTL mortgage over 20 years. If you can, start investing early and build up a portfolio of properties. You could have 4 or 5 paid off by the time you're 40, or 50, or whatever age depending on your income/investing/requirements. No need to wait until 60 or 70 or whatever the Pension age is these days. Yes it's a little more hassle but the rewards are so much greater.

And at the end of it all when you meet your maker, your portfolio is passed down the generations, the way it should be.

[d000hg]

I always took the view that if you plan to be successful financially, a pension is pretty pointless... outside plum public sector jobs, pensions are for wage slaves who need that source of income when they retire.