Personal Pension Help

Anniek1969

Looking for a bit of advice. My DH has just became self employed after working as a bus driver for the past 16 years. He was with the company pension scheme with his work and was paying around £120 per month into it with the company also paying towards it.

We would like to keep paying into a pension fund but don't really know where to start looking.

He is 40 and so still has a few years of work ahead of him and we would like to be able to secure some funds for his retirement.

Could anyone please advise as to the best type of pension for him and roughly what kind of monthly contributions we would be looking at?

Thanks in advance.

EdInvestor

As he's self employed your first step is to pay Voluntary class 11 NICS for the state pension @ just over 2 quid a week, what a bargain

Get your state pension forecast here:

https://www.thepensionservice.gov.uk

After that he would be better to start maxing out his investment ISA @4k or 7k a year - this will be invested in the same way as a pension would be, but is much more flexible, with access to both income and capital tax free. With a pension you lose control of the capital and income in retirement is taxed.

Speaking of which, tax planning for retirement to make sure that both partners' allowances are used and that income is split properly into taxable and tax free chunks is important.

Ideally, both people would have pension income (company private and state pensions) up to 10k max (this would then be almost tax free) and the rest of the income would be from ISAs, totally tax free.

You've no idea how annoyed people are when they get to retirement and realise they are paying thousands of pounds in unnecessary tax, due to having their savings in the wrong wrappers and age allowance wasted.

dunstonh

Could anyone please advise as to the best type of pension for him and roughly what kind of monthly contributions we would be looking at?

There is no one best option. Different providers offer different things which are suitable to one person but not another.

As for amount, he is self employed now so he isnt accruing any second state pension (what used to be called SERPS) and if he was in a final salary scheme before, he is unlikely to have accrued any there. So, that would give him an income in retirement of £4381 plus the old scheme pension (which after just 16 years is unlikely to be much - although we cant tell obviously without seeing the info).

Retirement planning, irrespective of tax wrapper used, should usually be a minimum of 10% of the income. However, it depends on what you want to get back in retirement. After all, the more you put in , the more you get back. The less you put in, the less you get back.

As for how and where, it depends on how you want to invest, where you want to invest it and what sort of control you want over it and any other options you need.

There is the simple, budget option which is designed for the person that doesnt really have a clue about retirement planning and wont seek advice. It is unlikely to be the best option but if you dont want the best then you should look at a stakeholder pension.

If you want better options, then you are looking at investment ISAs, personal pensions or SIPPs. You would also need to review your retirement planning and not just as retirement planning is a joint requirement. Not a single one.

Anniek1969

Thanks, we did wonder about ISA's and other types of investment rather than a pension so it might be a better option for us as it gives us some control over the finaces.

Is an ISA where you can pay so much in tax free every year and would we both be able to have one therefore maximising the tax benefit?

Thanks for your help, we really have no idea about pensions and investments as we've never had to deal with these things in the past.

dunstonh

ISAs have a £7k per person limit on contribution every tax year. So, between you, you can pay in £14k each and every year.

You dont get tax relief going in (which a pension does) but you dont pay tax on the income you take at the other end (which a pension does). Plus the lump sum is always yours but with a pension you can only access 25% of it.