Reply to: Saving for pension - any regrets?

[GitMaster69]

I'm very surprised that as contractors making £400+ a day that not manythe start of the thread are contributing much.

You could easily put £20k pa away at £400+pd.
At £600pd you could fill a pension allowance annually.
Also there's the conmpany just literally paying this for you, it's not even out of your pocket.
Also there's a reduction in corp tax.

£1m in retirement for you or your partner is pretty handy ~£30k+ a year plus a 25% lump sum for the 911.

and then there's people, like me, that don't trust government (and tax regime) that can tap into that money whenever they want

Whereas property ownership is (almost) human right

[Rabotnik]

Erm.. Explain please. All the income from your LTD eventually ends up in your pocket so how is it not coming out of your pocket?

I interpreted it as paying the money directly from the company account instead of taking it as dividends and then paying into the pension. I just pay it directly from the company like this so I don't have to worry about hitting the annual personal contribution limit.

[ladymuck]

I'm very surprised that as contractors making £400+ a day that not manythe start of the thread are contributing much.

You could easily put £20k pa away at £400+pd.
At £600pd you could fill a pension allowance annually.
Also there's the conmpany just literally paying this for you, it's not even out of your pocket.
Also there's a reduction in corp tax.

£1m in retirement for you or your partner is pretty handy ~£30k+ a year plus a 25% lump sum for the 911.

There's a myriad of reasons why people don't contribute to a pension. Some of it is basic human nature - a lot of people are no good at delayed gratification and saving now for something that is 50 years away just doesn't seem important. Usually the sense of mortality starts to kick in around the 40's and that's when they start playing catch up.

[northernladuk]

Also there's the conmpany just literally paying this for you, it's not even out of your pocket.

Erm.. Explain please. All the income from your LTD eventually ends up in your pocket so how is it not coming out of your pocket? You mean because we keep it in the business account as a warchest or accumulating it needlessly?

For me warchest and cashflow are paramount. As it's possible to pay three years back I'd rather keep it in the account until it either gets too much or starts pushing teh FCSA limits and then put a lump sum in as and when. It doesn't need to be done monthly or anually. Just because a contractor isn't contributing regurlarly it doesn't mean the pension will be used at some point.

[clembot]

I'm very surprised that as contractors making £400+ a day that not manythe start of the thread are contributing much.

You could easily put £20k pa away at £400+pd.
At £600pd you could fill a pension allowance annually.
Also there's the conmpany just literally paying this for you, it's not even out of your pocket.
Also there's a reduction in corp tax.

£1m in retirement for you or your partner is pretty handy ~£30k+ a year plus a 25% lump sum for the 911.

[PCTNN]

I'd say he doesn't have that option open right now. He takes this gig at 52 when he's paid his mortgage off and then goes perm he's going to take a marked drop in income for a start. Lets say he get's a 70k job. Even at 8% self and 10% employer that's only going to be £660 a month. For 10 years that's still only going to be 76K. Total pension would be just over 100k. That's a pension pot of about 4k a year.

Yes ok I see, with those numbers then no, it's not a good option. I was just thinking based on what I'm planning to do, which is finding a cushy job at the Scottish Government where the employer's contribution is 27%. But yeah, as you said at 10% it's just not feasible nor worth it.

[northernladuk]

Or you find a cushy permanent job for the last say 10 years of your career in a company that makes good employer contributions, especially if your mortgage is paid off and you don't have crazy expenses. This way you beef up your pensions and don't have to stay competitive.

I'd say he doesn't have that option open right now. He takes this gig at 52 when he's paid his mortgage off and then goes perm he's going to take a marked drop in income for a start. Lets say he get's a 70k job. Even at 8% self and 10% employer that's only going to be £660 a month. For 10 years that's still only going to be 76K. Total pension would be just over 100k. That's a pension pot of about 4k a year.

There is no option easy option for him despite the above and what NoBrain and Fraidy are trying to say. Pension investment is only going to be part of his income which is fixed so if he wants more pension he's gonna have to sacrifice something else. Putting the money he isn't paying as his mortgage is going to help for sure but he's got some serious thinking and life changes to make to catch up a lifetime of living beyond his means.

[PCTNN]

That’s the plan, I’m making up for lost time. Just have to stay marketable as I grow old.

Or you find a cushy permanent job for the last say 10 years of your career in a company that makes good employer contributions, especially if your mortgage is paid off and you don't have crazy expenses. This way you beef up your pensions and don't have to stay competitive.

[ChimpMaster]

That’s the plan, I’m making up for lost time. Just have to stay marketable as I grow old. I’m guessing the average contractor age is increasing so won’t be alone.

Trying to stay marketable as you grow old is like trying to compete at a beauty contest when you're old and haggard.

[northernladuk]

That’s the plan, I’m making up for lost time. Just have to stay marketable as I grow old. I’m guessing the average contractor age is increasing so won’t be alone.

That is a pretty wild guess and I'd disagree. Up to a point maybe but not beyond a certain threshold. It will go down markedly as people take their foot of the peddle and enjoy the money they've been working to earn.

[ladymuck]

also you may win the lottery, you never know

That's my plan!

[PCTNN]

also you may win the lottery, you never know

[coxy]

It is not all gloom and doom.

15 years from now, your house could easily be worth over 600K free and clear, and your pension pot could grow, if you keep adding 20K to it every year, to over 400K.

So you could easily retire at 60 with a net worth over £1 Million.

Make sure your wife continues to work as well, even minimum wage is 20K a year these days. With very little tax on that. That will be more than 250K of after tax income over the next 15 years. Probably more as the minimum wage tends go up nicely every year, pushing up all wages at the lower end. While IT rates often stay flat.

That’s the plan, I’m making up for lost time. Just have to stay marketable as I grow old. I’m guessing the average contractor age is increasing so won’t be alone.

[Fraidycat]

I’m 45 with a pathetic 32k pension in a SIPP currently. 7 years off paying off mortgage on a nice house (maybe worth ~£420k) Been contracting last 14 years with a mix of some good rates and some not great. My wife is a low earner so I have not really been in a situation to put much into a pension with 3 kids, basic holidays most years and no fancy cars. I’m now putting in £20k but know this isn’t enough but it’s all I can afford with helping my kids go through Uni and just basic living costs. I regret not starting much younger but don’t regret a reasonable lifestyle for the majority of my kids young lives. I’ll be working well into 60s which worries me in the competitive software market, but don’t really have any other choice. I made my bed….

It is not all gloom and doom.

15 years from now, your house could easily be worth over 600K free and clear, and your pension pot could grow, if you keep adding 20K to it every year, to over 400K.

So you could easily retire at 60 with a net worth over £1 Million.

Make sure your wife continues to work as well, even minimum wage is 20K a year these days. With very little tax on that. That will be more than 250K of after tax income over the next 15 years. Probably more as the minimum wage tends go up nicely every year, pushing up all wages at the lower end. While IT rates often stay flat.

[PCTNN]

Speaking of pensions and in particular pension pots consolidation, has any of you used Pension bee for consolidation purposes?