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

Aegis

Harry_Powell wrote: »

Quite, but anyone with that sort of invested wealth wouldn't be logging onto MSE for advice.

You'd be surprised... There are people with a lot of money invested who are still financially naive and interested in finding free information. They'd be better off with professional advice, but anyone who posts here for a while realises that there's quite a lot of bad press surrounding IFAs and wealth managers.

In order to be paying higher rate tax as a pensioner, you'd be earning over £40k on a pension. Given that the (quick) annuity calculation is £6k per year for every £100k invested, one would have to have £666,666.00 invested. With that sort of growth one would expect either the person to be pretty savvy or have a decent financial advisor to grow £200 per month into that sort of fortune.

It wouldn't necessarily have to have a lot of growth. Someone on a £200k salary depositing 20% of their salary (combination of employer contributions and their own) could be up to that level in well under 20 years using only the cash account of their pension (admittedly I've yet to encounter anyone THAT bad at investing...).

Trust me, there are some high flying executives who haven't got a clue what they've got or what they should be doing with it.


I'll grant you, it's very unlikely that we'd see someone like that posting on this forum, but it could happen... Like winning the top prize with Premium Bonds

stphnstevey

What those that have other income in retirement outside a pension. Could that then not push their pension income into the 40% bracket?

Aegis

stphnstevey wrote: »

What those that have other income in retirement outside a pension. Could that then not push their pension income into the 40% bracket?

Yep, it could. Though pension income is likely to be treated as the second in the list when it comes to income tax. I believe that state pension is treated for tax first, then other pension income and earned employment, followed at the end by savings and investments. This order is largely due to the 10% tax rate for people whose savings income is all that would normally push them into the basic rate band.

But yes, someone still working a job could end up paying 40% tax on some or all of their pension because of the earnings from that job.

etilico

Hi all,

I am an Italian citizen working in the UK. I live in the UK, I work on a UK contract and I pay UK taxes, so I am 100% UK resident.

I will probably continue to work in the UK for some more time (3 years? 6 years?) but at some point I might return to my country.

I would like to start a pension (maybe a SIPP) but the uncertainty about where I will be living/working in the coming years is holding me back.

If I decide to go back to Italy (or to move to another EU country for that matter...) will I be able to take the full amount I have put aside with me?
Or could I transfer it to some other financial institution in that country?

Thanks you all for your help. I'd like to start thinking about my future but it's difficult to plan ahead in my current situation...

Cheers

E

EdInvestor

etilico wrote: »

I would like to start a pension (maybe a SIPP) but the uncertainty about where I will be living/working in the coming years is holding me back.If I decide to go back to Italy (or to move to another EU country for that matter...) will I be able to take the full amount I have put aside with me?

Current rules would allow you to move it via the QROPS system (see Inland Revenue on Google) which would involve a transfer to a provider overseas.But this can be expensive if the amount is not high.

You might be bettter to open an ISA - same investment opportunities, tax free, much more flexible.

You are already contributing to a state pension via your NI contributions, which will eventuallly either pay uou a UK state pension or be counted as part of a pension you might get in your country of retirement residence.

etilico

Thanks Edinvestor!

EdInvestor wrote: »

You are already contributing to a state pension via your NI contributions, which will eventuallly either pay uou a UK state pension or be counted as part of a pension you might get in your country of retirement residence.

When you say "as part of a pension you might get in your country of retirement residence" you mean if I transfer it via the QROPS system?

Thx

E

EdInvestor

etilico wrote: »

When you say "as part of a pension you might get in your country of retirement residence" you mean if I transfer it via the QROPS system?


E

No this appplies to the state pension system (social security) and would be separate, organised between Governments.QROPS applies to private and company pensions.

etilico

EdInvestor wrote: »

No this appplies to the state pension system (social security) and would be separate, organised between Governments.QROPS applies to private and company pensions.

Are there any costs to transfer the state pension?
If cheaper than transferring a private pension, would it make sense to buy previous years' NI contributions as a start?

I guess at 60 I will need a mix of public and private pension anyway...

E

lily_of_the_valley

etilico wrote: »

Are there any costs to transfer the state pension?
If cheaper than transferring a private pension, would it make sense to buy previous years' NI contributions as a start?

I guess at 60 I will need a mix of public and private pension anyway...

E

Hi,

I am German and my situation is similar to yours. I have recently seen both state pension advisors for the German and UK system (event organised by the German embassy) and found out the following: in Europe, it is no problem to receive your state pension from another European country in whatever country you are living when you retire. There is no charge in involved in "tranferring", you just have to produce documentation (NI number, statements etc).

However, it is not added up into a single pension, but you will receive one Italian (or German in my case) state pension and one UK state pension. The UK state pension you will receive will depend on the number of years you paid in (e.g. if you need to pay contributions for 30 years in order to receive the full state pension and you paid contributions for 10 years, you will get one third of the full state pension). They also told me that you can actually continue to pay contributions to your UK state pension every year when you move back to Italy so that you can top it up to the full state pension amount. In my opinion this is definitely something to consider! I would try to get in touch with the UK state pension service and the Italian counter part to get more information about your particular situation.

Regarding the article: can someone clarify if someone starting to pay in at age 30 (30/2=15%) needs to pay 15 percent of his gross or net salary into retirement savings? Many thanks.

dunstonh

Regarding the article: can someone clarify if someone starting to pay in at age 30 (30/2=15%) needs to pay 15 percent of his gross or net salary into retirement savings? Many thanks.

Doesnt matter. Its not an accurate way to decide how much you should pay. So, I suppose if you dont want to do it right, use the higher figure to be on the safe side.