First post - several Pension questions

dan_c_73

Hi all, first post – looking for some advice!

Background:

From late 1995 to 2002 I was on a final Salary scheme, from 2003 to 2007 a non contributory DC scheme. I have a pension statement that shows a balance of 24k however I am not sure if that is just the DC portion!

From 2007 to date – No pension

I am 38, and now run my own business; this is done via a ltd company where I am MD.

I have some bank shares (currently worthless) a 2011 share ISA (max allowance) in 2 funds, and about £5.5k of UK shares.

In 10 years time I aim to be mortgage free, and will look at investment properties.

I intend to retire at 60, and would like an income which is just below the upper tax limit.

I would like to set up a pension; however I do not have the time / skill set to manage a SIPP!!

I have the ability to either make the payment from my company, or draw out the money and set up a private pension

What are my options?
Can I take advantage of any tax releif’s?
Are there any high risk pensions that you would recommend?
Should I take the IFA route for this?

Lokolo

An IFA would be your best option. I would be surprised if you managed to get a pension which is just below the upper tax limit given what you have in pensions at the moment though, unless you really do shove a lot of money away for retirement.

gadgetmind

With a current pot of £44k (I added pensions to ISAs) you will need to put about £2400 gross per month into a pension. However, this doesn't include the final salary pension, doesn't allow for your 25% tax free lump sum, and much more!

Have a play with this pensions calculator.
http://www.hl.co.uk/pensions/interactive-calculators/pension-calculator

Note that the income sum is based on an annuity. The other option is drawdown, and this will let you take out about the same as a 0% spouse level annuity (rather than one that increases with inflation and covers wife if you die) and if you go this route, the per month sum falls to £1600. A drawdown at this level is high risk BUT you can reduce it once state pension kicks in.

Fir monthly contributions of anything like this level, go and see an IFA (fee basis!) and also speak to your accountant.

dan_c_73

Thanks for the replies. i have checked and I will have 12200 pa from the final salary section, so it now a case of how to getthe rest together!

gadgetmind

dan_c_73 wrote: »

Thanks for the replies. i have checked and I will have 12200 pa from the final salary section, so it now a case of how to getthe rest together!

Is that in today's terms or money terms? Inflation is *not* your friend.

dan_c_73

I think it is in today terms, as there is reference to it being linked to rpi with a ceiling of 5%

gadgetmind

dan_c_73 wrote: »

I think it is in today terms, as there is reference to it being linked to rpi with a ceiling of 5%

That's a very very sweet pension - play with the calculator to see what you'd have to save per month to afford that yourself!

There are two way to tackle this.
1) Use the HL calculator to see what annuity you can get and tune this to bridge the gap between state pension plus final salary and what you *need*.
2) Construct a spreadsheet with one column for every year from now to age 66, then do rows for pension savings, ISA savings, etc. Have another tow for "money adjust" and crank up this factor by RPI every year. You can then look at the effect of various levels of contribution, and investment growth, and also model your tax situation.

(2) will take quite a few hours of work, but will give you a *real* handle on the situation, particularly those difficult years between retirement and state pension kicking in. You'll have to make assumptions regards investment growth (I use 6% after fees) and CPI/RPI (I use 3.5% and 5%), but you also need to look at worst case.