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    • garybarlowsbeard
    • By garybarlowsbeard 12th Sep 17, 11:21 AM
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    garybarlowsbeard
    Starting a pension in Ltd company
    • #1
    • 12th Sep 17, 11:21 AM
    Starting a pension in Ltd company 12th Sep 17 at 11:21 AM
    Hi

    Apologies if I'm doing the annoying thing of starting a new thread when not needed but the circumstances are fairly specific.

    I own 50% of am limited company and don't have any pension. My co-director and owner has a stakeholder pension with Aviva from a previous job.

    We want to start a pension and I believe the most tax-efficient way is for the company to make direct contributions. We would want to vary these but with around £100-£200pm each on average.

    We just want something with very low charges, that is flexible in terms of the amount and happy with relatively high risk as we are both (relatively!) young (38).

    He is happy to keep with his stakeholder plan but also happy not to if we both had to do the same thing.

    Any thoughts or comments appreciated. We are around the threshold of higher rate tax but suspect that will drop a little unfortunately in the coming years.

    Cheers,
    GBB
Page 1
    • dunstonh
    • By dunstonh 12th Sep 17, 11:35 AM
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    dunstonh
    • #2
    • 12th Sep 17, 11:35 AM
    • #2
    • 12th Sep 17, 11:35 AM
    Any individual personal pension will fit that objective.

    Your personal tax situation is irrelevant in your case as you do not get personal tax relief. The company gets the relief as the corporation tax bill is lowered as the pension is a business expense.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • xylophone
    • By xylophone 12th Sep 17, 11:41 AM
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    xylophone
    • #3
    • 12th Sep 17, 11:41 AM
    • #3
    • 12th Sep 17, 11:41 AM
    http://www.taxcafe.co.uk/pensionmagic.html

    might be worth a read.
    • Alexland
    • By Alexland 12th Sep 17, 12:29 PM
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    Alexland
    • #4
    • 12th Sep 17, 12:29 PM
    • #4
    • 12th Sep 17, 12:29 PM
    I have recently taken out an Aviva stakeholder for my wife (via Cavendish as you cannot buy direct) and am very happy so far.
    Last edited by Alexland; 13-09-2017 at 9:25 PM.
    • Clifford_Pope
    • By Clifford_Pope 12th Sep 17, 5:38 PM
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    Clifford_Pope
    • #5
    • 12th Sep 17, 5:38 PM
    • #5
    • 12th Sep 17, 5:38 PM
    Remember that company contributions are not limited by your salary, but only by the annual allowance plus any carry-forward. So the company could make a large lump-sum contribution, which would automatically be treated as a company revenue expense even if paid out of a capital reserve, or in specie property.
    Company tax relief is not limited to the actual tax paid in one year, but can be carried forward to offset future profits.
    • garybarlowsbeard
    • By garybarlowsbeard 13th Sep 17, 3:42 PM
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    garybarlowsbeard
    • #6
    • 13th Sep 17, 3:42 PM
    • #6
    • 13th Sep 17, 3:42 PM
    Originally posted by xylophone
    Might it be worth almost £30? Are you connected with it by any chance?
    • garybarlowsbeard
    • By garybarlowsbeard 13th Sep 17, 3:44 PM
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    garybarlowsbeard
    • #7
    • 13th Sep 17, 3:44 PM
    • #7
    • 13th Sep 17, 3:44 PM
    So would a stakeholder pension be a good choice? Seems like it to me. Also, in the event of my death, would me wife get the pension or the pot?

    Cheers again!
    • xylophone
    • By xylophone 13th Sep 17, 3:59 PM
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    xylophone
    • #8
    • 13th Sep 17, 3:59 PM
    • #8
    • 13th Sep 17, 3:59 PM
    Are you connected with it by any chance?
    No - but it would appear to answer your questions.

    Have a look at the contents page.

    http://www.taxcafe.co.uk/samples/magsample.pdf

    From a previous edition (but the information is not up to date)

    http://www.taxcafe.co.uk/resources/companyowners_pensioncontributions.html
    • dunstonh
    • By dunstonh 13th Sep 17, 4:03 PM
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    dunstonh
    • #9
    • 13th Sep 17, 4:03 PM
    • #9
    • 13th Sep 17, 4:03 PM
    So would a stakeholder pension be a good choice? Seems like it to me. Also, in the event of my death, would me wife get the pension or the pot?

    Cheers again!
    Originally posted by garybarlowsbeard
    We know nothing about you or how you want to exist or the amounts involved or how you want to buy it. So, you havent given much to narrow down the options. A stakeholder is one of those options. Stakeholders are rarely the best (typically only children pensions or very small contributions) but they are an option.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • garybarlowsbeard
    • By garybarlowsbeard 13th Sep 17, 4:08 PM
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    garybarlowsbeard
    Looking at this list:

    http://www.money.co.uk/pensions.htm

    Ones that list the fees as zero, what's that all about?!
    • garybarlowsbeard
    • By garybarlowsbeard 13th Sep 17, 4:10 PM
    • 360 Posts
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    garybarlowsbeard
    We know nothing about you or how you want to exist or the amounts involved or how you want to buy it. So, you havent given much to narrow down the options. A stakeholder is one of those options. Stakeholders are rarely the best (typically only children pensions or very small contributions) but they are an option.
    Originally posted by dunstonh
    I have mentioned some of that info I think.

    I'm 38, looking to invest around £200pm at the moment with some flexibility. Happy to have high risk at this stage (and I do understand risk - I think!). I will be buying it through a limited company.

    Thanks for your time and if there is anything else that will help you give me general advice let me know.

    Bob
    • garybarlowsbeard
    • By garybarlowsbeard 13th Sep 17, 4:18 PM
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    garybarlowsbeard
    Dunston H - thanks for the reply in the other thread. I'll stick to this now so as not to confuse matters.

    So the things I would need to choose are the type of pension, the provider and the funds (the latter depending on the first point and what is offered by the provider).

    At the moment I have some funds in an ISA in Vanguard LifeStrategy 100% Equity. My understanding of this is that this is a fairly well-balanced and diverse fund that is good for long-term investment with a degree of risk.

    As things stand, that is what I would want the pension to be in. I'm aware that Blackrock and a range of firms offer something similar.

    Does that seem reasonable?
    • dunstonh
    • By dunstonh 13th Sep 17, 4:26 PM
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    dunstonh
    At the moment I have some funds in an ISA in Vanguard LifeStrategy 100% Equity. My understanding of this is that this is a fairly well-balanced and diverse fund that is good for long-term investment with a degree of risk.
    I wouldnt say a degree of risk. It is very high risk. About 2-3 times the loss potential of the typical UK consumer.

    As things stand, that is what I would want the pension to be in.
    A global tracking inc UK would likely be a better option than that fund.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • garybarlowsbeard
    • By garybarlowsbeard 13th Sep 17, 4:31 PM
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    garybarlowsbeard
    But given I intend to keep the money in that for 25 years and it's only about 10% of my ISA high risk equates to a degree of risk overall?

    But OK, that would be too risk for my pension, even if waiting 30 years?

    At this stage, where I'm investing relatively little into the pension and effectively just want to get started, would any stakeholder pension (I just try and find one that offers the sort of fund you said) with the lowest fees do the job? Then, as and when I can incraase contributions it might be worth spending more time (and money) looking into it.

    Thanks again.
    • dunstonh
    • By dunstonh 13th Sep 17, 4:42 PM
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    dunstonh
    Risk is diluted by time but there is still behaviour risk. For example, you get your fund to £100k. Next statement comes in and its dropped to £50k (two events in the last 20 years would have seen that level of drop). Can you handle that level of loss.

    Now lets make that figure £200k. Your statement now shows £100k. Still no issues about it going down £100k?

    Risks exist and the risk events will likely happen sooner or later. Risk is not just about the event but how you behave with that event and when you hear on the news that there is global meltdown and everyone is losing money and its another armageddon (a bit like a typical Daily Express headline). Risk is also about can you afford to take risks. Lets say there is a Japan style event where markets drop but dont recover for over 20-30 years? Can you afford to risk you are taking.

    So, yes, the more risk you take, the better the returns will "expected" to be and time does help but its one thing saying you accept it and another actually accepting it when you see the balance drop.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • garybarlowsbeard
    • By garybarlowsbeard 13th Sep 17, 4:51 PM
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    garybarlowsbeard
    Yup, fair point. I'm a gambler though, don't have huge financial needs and have a wife with a decent pension!

    I hadn't thought about/am not aware of the Japanese situation. But I guess even then unless such a prolonged downturn was global I'd be protected with only limited exposure to each geographic area.

    I know things can go bad though. I find it amusing that friends are marveling at how their pensions and investment are doing right now as if it's down to them. I'm feeling quite smug myself but yes, I know that the value of my ISA and subsequently pension could drop markedly in the next 6 months, year or 2 years.

    I feel that at this age maybe starting very high risk is wise though? And then perhaps lowering the level of risk every year (I don't know, every 2 years, 5 years?). I'm aware that within 5 or maybe even 10 years of retirement it's common to change the shape of the portfolio dramatically.

    But aside from the risk issue, how about a stakeholder pension?
    • Alexland
    • By Alexland 13th Sep 17, 9:19 PM
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    Alexland
    For low regular amounts the Aviva stakeholder via Cavendish is a very good option. The 0.55pc fee (reducing with size) covers both their platform and default fund costs and unlike DIY platforms there is no need to maintain a cash balance to pay custody or trading fees.

    Have a look at the PDF application form on the Cavendish website and you can see how your company can make contributions.

    Their default lifestyle strategy will automatically reduce the risk as your target retirement age approaches. By default they will lifestyle target an annuity situation (where you would want to withdraw everything at retirement) but you can tell them you anticipate going into drawdown (where you could still take some risk even beyond your retirement).

    https://www.cavendishonline.co.uk/pensions/stakeholder-and-personal-pensions/aviva/

    https://www.aviva.co.uk/stakeholder-pension/

    Also worth playing with the Vanguard Asset Mixer and you will see that over most multi year time periods a portfolio with 20pc to 30pc cash or bonds will outperform a 100pc equity allocation due to the benefits of rebalancing. So taking max risk might generate less than max return.

    https://www.vanguardinvestor.co.uk/investing-explained/tools/asset-mixer

    Vanguard are launching a SIPP at the end of 2018 which if it is priced as low as their ISA would only be 0.37pc inc VLS (and unlike DIY platforms they are not fussy in requiring a cash balance or charging trading fees) but frankly it's not worth waiting to start investing in your pension and Ryan who runs Vanguard UK wouldn't be drawn into revealing their SIPP pricing before launch. Generally pensions cost at least as much as ISAs from the same provider and often more.
    Last edited by Alexland; 14-09-2017 at 7:35 PM.
    • garybarlowsbeard
    • By garybarlowsbeard 14th Sep 17, 8:50 AM
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    garybarlowsbeard
    Great, that's pretty much just what I'm after (in terms of being told what to do!)

    At this stage it's a relatively small investment so happy just to get started with something that at the very least isn't totally inappropriate. As it happens I'm pretty sure the product you recommend is what my business partner already has so that keeps things neat.

    Cheers.
    • garybarlowsbeard
    • By garybarlowsbeard 14th Sep 17, 10:48 AM
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    garybarlowsbeard
    A while ago I was advised the following in terms of the best way to fund it. Is this still true/accurate (I expect some of the exact figures may have changed but it's the theory I'm questioning)?

    Assume that you want £1,000 in your pensions

    You would need to pay yourselves an increased amount of money either
    as an additional dividend, salary or direct form the company

    Salary option

    Salary of £1,176

    Employer NI at 13.8% =£162

    Employee NI at 12% = £141

    Employee tax at 20% = £235

    Net pay = £800

    Paid into pension with additional tax reclaim added by pension
    provider = £1,000

    TOTAL COST TO COMPANY = £1,338

    Dividend option

    Use Profits to pay addition £800 dividend

    Profits subject to corporation tax at 20%

    Amount received by you =£800

    Paid into pension with additional tax reclaim added by pension
    provider = £1,000

    TOTAL COST £1,000

    Direct payment by company

    £1,000 paid into your pension as a business expense

    Reduces taxable profit by £1,000

    Saving corporation tax of 20% = £200

    COST TO THE COMPANY IS £800
    • dunstonh
    • By dunstonh 14th Sep 17, 11:46 AM
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    dunstonh
    Company directors should nearly always pay the contribution as an employers contribution. It is the most tax efficient way and it also avoids any issues with annual allowance (shareholding directors/controlling directors can go to £40k a year without a second look from HMRC). You cannot do that with personal contributions as you wont have the income.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
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