24 months left in UK- Is a private pension worth it?

Oxtail69

Hi All

I'm emigrating in 2 years, and am currently working as a self employed contractor at the moment. I've 20 years company pension behind me already, but was wondering if it's worth starting a private pension plan now as I'd gain from 40% tax relief, but would only be contributing for 2 years, in the region of 10k p/a (before any tax concessions)?

I'm undeclded between contributing and gaining from tax advantages, but then having only 2 years and concerned that as the pot will then sit there for ages, it'll be eaten away with charges etc?

Any thoughts?

Loughton_Monkey

Oxtail69 wrote: »

I'm undeclded between contributing and gaining from tax advantages, but then having only 2 years and concerned that as the pot will then sit there for ages, it'll be eaten away with charges etc?

Any thoughts?

Personally, I think it extremely wise [subject to affordability] to invest before you go. At the very minimum put in enough to 'nullify' your 40% tax. More if you can.

These days, there would be no such thing as "eaten away with charges". This just doesn't happen on modern pensions. Charges come directly from the fund prices.

To put it another way, imagine you and I started the same pension with same funds at same time, both same age....

The only difference between you and me is that you go abroad (and stop contributing) while I stay here and continue contributing. In 20 years time, my pension fund would clearly be worth more than yours - but only because of the extra contributions. It would be possible to "audit trail" my fund values back to show just how much my first 2 years contributions contributed to the total. Yours would be exactly the same. To the penny.

So on the assumption that understand the 'normal' limitation on pensions as to the way you take them, then banging in as much money as you can at 40% tax relief is a real money spinner. Do it while you can!

bendix

I moved back to the UK in January 2009. One of the prime motivators was to take advantage of the tax efficient pensions saving. I had substantial savings overseas, but no pension pot as such.

Because of the entry requirements I had to wait until April 2009 before I could make my first contribution to my pension account.

23 months later, the pot is valued at around £113,000. I estimate that it has cost me only £35-38,000 in sacrificed net income to accumulate that money. The rest has been in tax breaks, employer contribution (which I would have foregone had I not opened the pension plan) and - of course - investment returns which have been kind to me.

I've saved around £85000 outside the pension too.

It is ALWAYS worth taking advantage of free money.

BarryWaring

First post. As has been said in the other 2 posts, taking advantage of the tax situation is obviously a very big reason that you would invest in a pension scheme and due to the fact you are moving to a new country and lose that benefit, one that should be taken up. You should really take full advantage of the maximum contribution that is allowable this tax year and next in my opinion.

Also as Loughton Monkey has said, generally charges are not going to eat away at your pension pot too much and if you have it set up on some sort of Lifestyle arrangement, you can ensure that the pot has time to grow.

Cook_County

I agree with the previous posts...but there are possible downsides for some people.

For example, if you are a US citizen you would have the ongoing filing requirements relating to foreign trusts plus possible tax liabilities. Many other countries would charge additional tax or add further reporting requirements once you have moved there. A UK pension plan is UK tax advantaged. If you are moving elsewhere you'll want to find out how the other country would tax the plan.