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    • Diddidi
    • By Diddidi 9th Jan 18, 4:32 PM
    • 31Posts
    • 17Thanks
    Diddidi
    Investments or pension?
    • #1
    • 9th Jan 18, 4:32 PM
    Investments or pension? 9th Jan 18 at 4:32 PM
    Apologies in advance if this is a really basic question. I see lots of people on this forum actively investing in various different areas and I think I am missing out! My FA has advised me to put everything I have into my pension to make the most of the tax situation (am 40% tax payer). I am also looking to potentially retire or cut back on work in the next year or so (almost 55). But I am wondering if I should be looking at setting up some kind of active investment now to go alongside my pension? A friend of mine recently retired and lives off the money he makes from his investments and this set me thinking that perhaps I need to diversify a little? Does it make any difference if my investments are in a pension wrapper?

    Thank you for your help.
Page 1
    • Prism
    • By Prism 9th Jan 18, 4:45 PM
    • 113 Posts
    • 79 Thanks
    Prism
    • #2
    • 9th Jan 18, 4:45 PM
    • #2
    • 9th Jan 18, 4:45 PM
    As long as you are still working and you can afford to live on less than the higher tax limit you should generally put the rest into a pension which effectively gives you that tax back. There are a few ways of doing this which depend on if you are employed, self employed or a director of your own limited company.

    You can currently pay in up to £40000 each year into pension but this will reduce to just £4000 if you decide to retire at 55 and take some or all of that pension back out.
    • ColdIron
    • By ColdIron 9th Jan 18, 4:48 PM
    • 3,729 Posts
    • 4,555 Thanks
    ColdIron
    • #3
    • 9th Jan 18, 4:48 PM
    • #3
    • 9th Jan 18, 4:48 PM
    Pensions are investments. If you are a higher rate tax payer and close to retirement this is good advice. Which situation would you prefer? a) HMRC get £400 of every £1,000 you earn or b) You keep all of the £1,000. I maxed out my pension contributions for my final 3 years and received tens of thousands of pounds of effectively free money. If you can do this via salary Sacrifice all the better as you get a break on NI contributions. If you are close to retirement it's not a if you have to lock it away for long
    • AnotherJoe
    • By AnotherJoe 9th Jan 18, 4:56 PM
    • 7,870 Posts
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    AnotherJoe
    • #4
    • 9th Jan 18, 4:56 PM
    • #4
    • 9th Jan 18, 4:56 PM
    Why not investments WITHIN your pension ?
    You’d be barking to throw away your last year or two of 40% tax relief. Do it inside your pension
    • cloud_dog
    • By cloud_dog 9th Jan 18, 6:35 PM
    • 3,332 Posts
    • 1,886 Thanks
    cloud_dog
    • #5
    • 9th Jan 18, 6:35 PM
    • #5
    • 9th Jan 18, 6:35 PM
    Why not investments WITHIN your pension ?
    You’d be barking to throw away your last year or two of 40% tax relief. Do it inside your pension
    Originally posted by AnotherJoe
    Unless that doesn't give you the flexibility (in retirement age) you may be looking for?

    EDIT: I'm ignoring setting up a separate SIPP / personal pension.
    Personal Responsibility - Sad but True

    Sometimes.... I am like a dog with a bone
    • BananaRepublic
    • By BananaRepublic 9th Jan 18, 10:44 PM
    • 1,041 Posts
    • 764 Thanks
    BananaRepublic
    • #6
    • 9th Jan 18, 10:44 PM
    • #6
    • 9th Jan 18, 10:44 PM
    You don’t say what sort of pension you have. Generally a SIPP would make most sense for current investments, whereby you choose the funds to invest in, and pay more modest fees than many personal pensions. The key reason to invest in an ISA would be the ability to take the money out before age 55. You are nearly 55 so the pension makes sense, you get tax relief now, but when you take it, 25% is tax free, the rest is taxed. But of course you have the personal allowance so the first
    ~£12,000 per year is tax free.

    As said, if your employer can make the pension payment, you avoid NI on the contributions. This is especially good for people who run their own company.

    In my view the generous pension tax rebates for relatively wealthy people are something the government should remove. But while they are here, make the most of them.
    • Diddidi
    • By Diddidi 10th Jan 18, 6:42 AM
    • 31 Posts
    • 17 Thanks
    Diddidi
    • #7
    • 10th Jan 18, 6:42 AM
    • #7
    • 10th Jan 18, 6:42 AM
    You donít say what sort of pension you have. Generally a SIPP would make most sense for current investments, whereby you choose the funds to invest in, and pay more modest fees than many personal pensions.
    Originally posted by BananaRepublic
    It's a personal pension....well, two. I have my employer's one so I can take advantage of salary sacrifice and their matching contribution and then I put about a third of my net salary into my main pension pot which is one combined pension pot from all the different personal pensions I have merged over the years.

    Thank you everyone for your comments....it sounds like am doing the right thing for now. I just wanted to make sure I hadn't missed something obvious!
    • atush
    • By atush 10th Jan 18, 10:27 AM
    • 16,455 Posts
    • 10,198 Thanks
    atush
    • #8
    • 10th Jan 18, 10:27 AM
    • #8
    • 10th Jan 18, 10:27 AM
    Missing a trick using a Sipp over a SS employers pension, can you pay mroe into that one? Will save you and extra 2% in tax. So 100 into a pension will cost you only 58.

    Otherwise, are you paying in the annual limit of 40K? Can you afford to save more? that is the money I would use for investments.
    • Diddidi
    • By Diddidi 10th Jan 18, 1:11 PM
    • 31 Posts
    • 17 Thanks
    Diddidi
    • #9
    • 10th Jan 18, 1:11 PM
    • #9
    • 10th Jan 18, 1:11 PM
    Missing a trick using a Sipp over a SS employers pension, can you pay mroe into that one? Will save you and extra 2% in tax. So 100 into a pension will cost you only 58.

    Otherwise, are you paying in the annual limit of 40K? Can you afford to save more? that is the money I would use for investments.
    Originally posted by atush
    I hadn't thought about it that way.....of course, it makes sense to do as much via SS as possible although that's a lifestyle fund and my SIPP is actively managed with help from my FA. I shall look into this and see if I can actively manage as well.

    Yes, I'll be at my £40k limit by the time the end of the tax year rolls around and good idea to only invest above that amount in something else.

    Thanks everyone for the great advice!
    • yorkiebar
    • By yorkiebar 10th Jan 18, 1:55 PM
    • 723 Posts
    • 231 Thanks
    yorkiebar
    You can invest more than £40K/yr into a pension if you've been a member of a pension scheme for the last 3 years (doesn't have to be the one you want to contribute to this year) and you didn't use the full allowance in any of those previous 3 years.

    So if you'd "only" received £20K/yr (includes employers contributions) into your pension for the last 3 years then you have £20K x 3 unused allowance which you could use in this tax year, so could contribute much more than £40K.
    Last edited by yorkiebar; 12-01-2018 at 6:20 PM.
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