Pension Rule Change Next April

shockingmoment

I'm very fortunate in that I've just paid off my mortgage (redundancy), and with no debts, have some spare regular cash. Now self employed (with a secure-ish contract), I'm not contributing to a pension.

Does anyone with more financial knowledge than me (most people), have any investment advice?

I'm particularly interested in the rule changes next year with regard to IPPs - we are considering a property purchase with a view to long term letting.

Thanks everyone in advance.

Robert_Sterling_3

There is a ceiling to the amount you can put in.
It is round about £1,700,000.

There is a ceiling to the amount you can put in in any one financial year.
It is the amount you actually earn in that year.
For some people it will be expedient to restict the contribution to NOT MORE THAN the amount of their income on which they pay 40% Tax that year.

You can use the pension money to buy a property which you can let.
There is a ceiling to how much you can borrow to help buy the property.
I think that the ceiling is 50% of the price of the property.

All this and lots more comes into effect on A Day in April 2006.

I suggest you put A DAY into Google and spend some time reading about A DAY.


The message above is not financial or legal advice.
Do your own research.

isasmurf

I'm moving this thread to the Pensions board.

Martin’s asked me to post this in these circumstances: I’ve asked Board Guides to move threads if they’ll receive a better response elsewhere(please see this rule) so this post/thread has been moved to another board, where it should get more replies. If you have any questions about this policy please email [EMAIL=abuse@moneysavingexpert.com]!!!!!![/EMAIL].

EdInvestor

Robert_Sterling wrote:

I think that the ceiling is 50% of the price of the property.

No, it's 50% of the value of the SIPP fund.

shockingmoment

Thanks for the replies
Quote:
'I suggest you put A DAY into Google and spend some time reading about A DAY.'

The reason I posted here was to try and get some nbiased, concise, accurate and to the point information from people who do not have a vested interest.

"A Day" in Google provides quite the opposite - Vested Interest opinions from people who want to sell you something

So please keep the unbiased help and advice coming

Thanks

whiteflag_3

shockingmoment wrote:

Thanks for the replies
Quote:
'I suggest you put A DAY into Google and spend some time reading about A DAY.'

The reason I posted here was to try and get some nbiased, concise, accurate and to the point information from people who do not have a vested interest.

"A Day" in Google provides quite the opposite - Vested Interest opinions from people who want to sell you something

So please keep the unbiased help and advice coming

Thanks

For property purchase post A day you will need a personal pension fund at least big enough to fund 66% of the proerty value as you will only be allowed to borrow 50% of the fund value ie £100 k fund borrow another £50K Purchase prorety £150

Any contributions to a Sipp/ will be limited to £215,000 per annum or your total annual earnings, whichever is the lower.

If you buy a property in a Sipp it will be owned by the pension trustees, all the income will go into your pension and there will be other associated costs for property management etc.

Why are you thinking this is something worth looking at?

EdInvestor

Here's a useful explanantion of the new rules.

Nick_C_4

There is a ceiling to the amount you can put in. It is round about £1,700,000.

I assume this is the Single Lifetime Allowance you're talking about. It's a common misconception that the SLA is a limit on pension contributions. The SLA is actually a limit on how much you can take out. Assuming your pension fund is growing, it means the limit on what you can put in is much less than the SLA.

Pal

Nick_C wrote:

I assume this is the Single Lifetime Allowance you're talking about. It's a common misconception that the SLA is a limit on pension contributions. The SLA is actually a limit on how much you can take out. Assuming your pension fund is growing, it means the limit on what you can put in is much less than the SLA.

Technically this is wrong as well.

The Lifetime Allowance (£1.5m in 2006) is the maximum you can take out without incurring additional tax charges. Anything over the maximum can be taken out but is effectively taxed at 55%.

The annual allowance will start at £215,000, and is the maximum you can put into your pensions each year and receive tax relief on it. Contributions over this amount will not gain tax relief, so there is little point in paying them.

dunstonh

The lifetime allowance will also increase annually, subject to Budget announcements. Although in the early years, it has already been set what these increases will be. Although it probably isnt safe to rely on as they can be changed.

fagun

Also see the FSA consumer website http://www.fsa.gov.uk/consumer/06_PENSIONS/starting/sipps.html. There will be more on A Day on the website in the near future.