Pensions numpty..advice needed please

Smoggy_2

Hi folks, being a total pensions knowledge blackhole, i need some advice from your collective please.

Im 34, and thanks to being a financial numpty, have no pension scheme in place. Ive recently cleared up a mountain of debt (see the DFW board), and im now in the position where i need to start making some contribution to my future. Im a HRT payer, and franklym, it kills me to see how much the Govt take off me...over £60k in income tax alone in the last 3 years, so i want to minimise how much i give the squandering !!!!!!s.

Am i correct in thinking that any money i pay into a scheme is taken out before tax, meaning it is non-taxable? Basically i intend to pay about 30% of my pre tax salary into a scheme - im lucky enough to earn £70-80k per year these days so i can afford to put plenty away. My employer will also pay 10% contributions as well - by my reckoning thats about £30k pa into the works approved pension fund (Pru i think). It should also mean that i wont pay HRT on the £22.5k that is coming straight out of my paypacket? According to Listentotaxman, HMRC will also contribute £14k into the fund as well - why would this be? Is it correct?

Whether i'll be able to maintain that kind of contribution until i retire in 30 years-or-so time i dont know...but if i do it'll give me a pot of approx £900k..any idea what sort of a pension that will provide me with?.

Any advice gratefully received...im new on this board so take it easy on me......

jem16

Smoggy wrote: »

My employer will also pay 10% contributions as well

It's always a good idea to take the free money from your employer.

It should also mean that i wont pay HRT on the £22.5k that is coming straight out of my paypacket? According to Listentotaxman, HMRC will also contribute £14k into the fund as well - why would this be? Is it correct?

If the money comes out of your gross pay before you are taxed then the whole £22.5k already has full tax relief. If the contribution came out after you were taxed then you would only pay in £18k, HMRC would then top it up to £22.5k and you would claim another £4.5k from your tax return. No idea where you got £14k from.

McKneff

In thirty years time, the retirement age will probably be 80 years of age.
:rotfl::rotfl:

Consumerist

Smoggy wrote: »

. . any idea what sort of a pension that will provide me with?.

Assuming current pension rules still apply when you need your pension, it will depend on the annuity rates available at the time. The annuity rate is effectively the conversion between the pot of money available and the annual income you get from it. Other variables like annual pension increases will also affect the income you'll get from the pot.

Have a look at current annuity rates to get a feel for the kind of income that a given pot will provide today, then allow for inflation between now and when you retire.

At best, this can only be a yardstick to what you might get in the future but it's about the most you can do so far in advance. You will need to monitor your pension fund and adjust your contributions as you go to maintain the pension you want.

Hope this is, at least, some help.
.

EdInvestor

See the pension annuity tables here:

https://www.fsa.gov.uk/tables

Pension income is taxed in retirement, but if you get HR tax relief going in and pay BR coming out, you will do well. Definitely worth taking up the employer's scheme and getting the free money as well.

Spend some time studying how to invest the money.