Tax-free Pensions

999mph

Hi all
I've listening to a very interesting audiobook called the Automatic Millionaire by David Bach. Obviously it's American and it has some really cool tips on long term money saving ideas. One of the things David speaks on sharply about is putting aside a percentage of money on a tax-free pension scheme in a sort of a trust account so that it is not subject to tax to begin with. Upon withdrawal it is likely to be subject to tax. I am completely new to these things as I've never even thought about a pension plan until now. Can anyone shed some light on the matter?
Cheers.

dunstonh

One of the things David speaks on sharply about is putting aside a percentage of money on a tax-free pension scheme in a sort of a trust account so that it is not subject to tax to begin with.

American taxation, products and trust laws are very different ot the UK.

So, the book is totally pointless for looking at UK options. Even investment options in the US are different as they tax funds differently which gives a bias towards trackers whereas that bias doesnt exist in the UK.

999mph

Fair enough. But what similar options do we have in the UK? David Bach's books are very highly rated in the UK too (especially on Amazon.co.uk). So there must be somewhat similar options although not identical.

dunstonh

The UK has more tax wrappers than any other country (although pension simplification may have closed the gap a little). Some tax wrappers are easily eliminated. Some are for experienced investors (VCTs for example) and a smaller number are mainstream.

For retirement planning you would typically use stakeholder pensions, personal pensions, SIPPs and stocks and share ISAs. You may use unwrapped investments like unit trusts/oeics/sicavs and investment trusts as well if you exceed the tax wrapper amounts. Investment bonds may come into play as well (onshore or offshore).

You can keep it simple or you can go in depth. Simple is rarely the best but it is good enough for the average individual. So, it really depends on how deep you want to research and learn about it.

999mph

I have very little knowledge about these matters. My objective is to put aside some money on a monthly basis which grows with time and is subject to the least amount of tax; on deposit, throughout the saving period and finally upon withdrawal. I am looking at the final accumilated total that is accessible as a lump sum at the end and of course the security of my saving in the long run. I don't earn a great deal at the moment so the saving would be very little to begin with.
Also as I give a good deal to charity is there a possible way to make this amount tax free on my earnings?
Cheers.

purch

is putting aside a percentage of money on a tax-free pension scheme in a sort of a trust account so that it is not subject to tax to begin with. Upon withdrawal it is likely to be subject to tax.

Wow sounds like a great idea. :T

Maybe we should have something similar over here.........maybe call it a Pensonal Pension :eek: