Advice required for brother in denial!

dunstonh

London_Town wrote: »

So could he secure an income of around £5000 to supplement his pension by paying approximately £275 a month? To get a pension like this, is it a case of finding an IFA, as I guess this example is of a private pension?

An IFA can tell him what he needs to pay as a formal recommendation, who to use and how to invest it. He can also DIY but given his track record getting an IFA may be the safer option to ensure he does it.

EdInvestor

But get him to check his state pension first, if he is getting the full whack of around 10k, that should all be tax free.He may thus prefer to make additional savings in ISAs, which will also be tax free, whereas additional pension savings won't be.

However if he is able to join a scheme with employer contributions he should do this as it overrides tax issues.

London_Town

EdInvestor - I don't understand your reference to 10k, I thought the state pension was around 4700?

dunstonh

London_Town wrote: »

EdInvestor - I don't understand your reference to 10k, I thought the state pension was around 4700?

The basic state pension is £5k.

The reference to 10k is because from age 65 you are able to earn more or less £10k without paying any income tax as the personal allowance is increased (its further increased at age 75).

An example (rounded figures for convenience).

basic state pension £5k. SERPS/second state pension £2k giving a 7k income. That leaves £3k available to earn via other means without paying tax.

In that case, for income provision, the pension would be the best option as you get tax relief on the contributions and when the income is paid out it isnt taxed on the first £3k.

If you are married, then careful retirement planning can see you earn £20k without paying tax if you utilise both of your allowances. Many people miss out on this due to poor planning by having all the retirement planning in just one name.

EdInvestor

London_Town wrote: »

EdInvestor - I don't understand your reference to 10k, I thought the state pension was around 4700?

There are two state pension - the basic, worth around 5k and the State Second pension (S2P) formerly SERPS. For a person on a reasonable salary who has not been contracted out and has a full employment record, the S2P can double the state pension, for a total of 10k.

This entire amount would be tax free as it comes within the old age allowance (as of next year).

Each person's S2P amount is different so you need to get an indovidual forecast.

dunstonh

For a person on a reasonable salary who has not been contracted out and has a full employment record, the S2P can double the state pension, for a total of 10k.

Whilst older people can get to 10k fro both, its not possible for someone starting out now. About £3300 second state pension is the theoretical maximum.

EdInvestor

dunstonh wrote: »

About £3300 second state pension is the theoretical maximum.

Do you have a link for the calculations on this? The top amount at present is more like 6k than 5k, and while the S2P is being rebalanced to benefit the less well paid, a drop in value by almost half seems unlikely..

The basic pension will of course be upgraded by earnings rather than inflation in future so it will occupy a bigger proportion of the total.

dunstonh

Do you have a link for the calculations on this?

Its published by tax facts who issue statistical data and information on a monthly basis. I dont think they make their data available free of charge.

I just looked it up and the actual figure for theoretical maximum pension based on 08/09 is £3528.

EdInvestor

It's really best for everyone to get their own pension forecast, as the amounts vary so enormously you cannot make generalisations.

London_Town

Thanks dunstonh, EdInvestor, a pension forecast is clearly now essential. I'll speak to my brother to ensure he requests one.