Pension MoneySaving: Buy a different way to boost returns Article Discussion Area

paulbrannan

Thanks for the advice, James- I was strugggling a bit here as it's a whole other language! I did as you suggested though and am going to contact a few IFAs from unbiased.

Cheers

larneylee

Hello All,

I am currently trying to find out information with regards to me setting up a pension plan and though I have read all your replys and the the sites advise I have actually become a little overwhelmed? I am a single, self employed 40 year old and I would greatly appreciate any advise or re-direction towards a pension fund etc.

I hope this is not intruding and your knowledge would be avantageous.

Kind regards,
Lee

stphnstevey

Comments on here suggest an ISA as a better route to saving for retirment as the tax free allowance would be eaten up by the state pension. However, I believe the Turner Report also suggests the following

gradual rise in the state pension age, to 66 by 2030, 67 by 2040, and 68 by 2050


If this is the case and personal pensions remain able to be taken at age 55, then this would leave at least 10yrs of tax free allowance to take personal pension contributions, would it not?


Martin advises not going through an adviser to save commision. However, all the pensions I have paid commision on have also obtained me a discount of upto 0.3% off annual management charges. Would I get this sort of discount with these other brokers?

stphnstevey

dunstonh wrote: »

...unless its for higher rate relief and/or childrens/working tax credit increases.

Could you explain this part dunstonh please?

yelf

yet another stupidly written ill informed article

stphnstevey

jamesd wrote: »

If you haven't discussed whether income drawdown or annuity purchase, or a combination of the two, is best for you you should also have that discussion. In theory the optimal time to buy an annuity is around age 75 for a person in average health, if you consider purely financial aspects, but the increased certainty of annuity income compared to income drawdown often makes buying an annuity with at least some of the pension pot attractive. For example, you might buy an annuity to cover only your minimum income needs and use drawdown for the remainder, so that the annuity provides a core of certainty while the investments in the drawdown portion provide the possibility of higher income.

Might have this completely wrong! but I read you HAD to take an annuity at 75??? Also Income Drawdown was limited to 5% of the fund???

dunstonh

Martin advises not going through an adviser to save commision.

Which is fine if you know what youa are doing. However, the cost of advice is not as expensive as people think and the cost of getting it wrong or not doing it the best can be a lot cheaper.

For example, Virgin Stakeholder is more expensive than an IFA doing a pension on maximum commission and it has an awful investment selection. It doesnt pay any commission to any adviser.

There is too much focus on what the adviser gets paid when it should be a focus on what you pay. Would you rather have a pension that costs more but pays no comission or one that costs less and pays a commission?

Better still, do it on agreed fee basis and use the pension to pay the fee (you get tax relief on the fee then).

However, all the pensions I have paid commision on have also obtained me a discount of upto 0.3% off annual management charges. Would I get this sort of discount with these other brokers?

The execution only IFAs that martin mentions in his articles only provide a limited range of mono charged personal pensions. They dont offer the multi-charge plans or some of the best personal pensions you can get. If you are young enough then a multi-charge pension on full commission (let alone discounted or fee basis) can beat a nil commission mono charged plan.

Could you explain this part dunstonh please?

Pension contributions reduce your income for tax credit purposes. ISA contributions do not. It is possible to get an effective tax relief up to 72% on pension contributions if you happen to qualify for tax credits.

Might have this completely wrong! but I read you HAD to take an annuity at 75??? Also Income Drawdown was limited to 5% of the fund???

It is currently 75 but income is not limited to 5%. It is a sensible figure to plan to be drawing but thats all.

gratefulone

Many years ago I took out a personal pension plan and contracted out of the state earnings related pension scheme. I have just received a letter from the pension company telling me that Government changes mean this will end shortly and the value of the plan will drastically reduce. I would be most grateful if anyone could suggest where I could find out more about the pros and cons of continuing with the plan or should I re-join the SERPS? Any help would be welcome.

Many thanks

stphnstevey

dunstonh wrote: »

Pension contributions reduce your income for tax credit purposes. ISA contributions do not. It is possible to get an effective tax relief up to 72% on pension contributions if you happen to qualify for tax credits.

Sorry dunstonh, this sounds very interesting. Can you expand it this, I don't quite understand?

Could pension contributions reduce your income for tax credits enough so that you are leigible for tax credits? I receive dividend income from my business and although on a minimal salary, would not be eleigible for working tax credits. Are you saying that I could increase my pension contributions and become eleigible for tax credits?

dunstonh

I have just recieved a letter from the pension company telling me that Government changes mean this will end shortly and the value of the plan will drastically reduce.

You have misread it or misunderstood. It will have no impact on your current values. It will however, mean it will not be added to each year and the projections given in the past assuming rebates continued would have been higher.

I would be most grateful if anyone could suggest where I could find out more about the pros and cons of continuing with the plan or should I re-join the SERPS?

The sticky thread at the top has the pros and cons mentioned on it a number of times. Work back from last page as the rules changed in 2006 and early posts may no longer be applicable.

Could pension contributions reduce your income for tax credits enough so that you are leigible for tax credits?

Yes. e.g. you currently earn £60k so over the limit. Pay £20k into the pension and as far as tax credits are concerned, you earned £40k and therefore get tax credits.

I receive dividend income from my business and although on a minimal salary, would not be eleigible for working tax credits. Are you saying that I could increase my pension contributions and become eleigible for tax credits?

You would need to liase between your IFA and accountant as to whether its best for you to get less dividends and more in salary to allow you to qualify for the tax credits. The IFA wont know your individual and company tax position and the accountant wont know much or anything about tax credits. Between the two of them they could find out if any change is to your benefit.