Should I have a pension

smo

Hi,

It struck me earlier that I have ZERO pension, I have no private scheme and I doubt I will get any form of public pension (if there even is one by then!)

I'm 30, company director and reasonably comfortable money-wise.

So should I have a pension, if so where am I meant to start???

dunstonh

So should I have a pension

Dont think of it as a pension. You are looking at product without looking at a need. It could be like asking if you need a car without knowing if you have a driving licence.

Basic state pension is £5200 a year. Do you want more than that from age 68? If yes, what you have got in place to pay you more than that?

smo

£5200.....cant see that going very far! So yes I want (need) more than that.

I have savings and an ISA but with us moving up the housing ladder that will be plowed into our next house. This only leaves my business as anything of notable value (other than vehicles but they dont count).

atush

A company director and you have no pensions???? Do you not a have a business accountant?? Who should tell you that paying yourselves pensions out of the company profits lowers their taxes and yours?? you have been paying too much tax as both a company and a person (I am assuming higher rate tax).


Crikey. You need both a pension ASAP and a new accnt.

Loughton_Monkey

smo wrote: »

Hi,

It struck me earlier that I have ZERO pension, I have no private scheme and I doubt I will get any form of public pension (if there even is one by then!)

I'm 30, company director and reasonably comfortable money-wise.

So should I have a pension, if so where am I meant to start???

Phew!

Surely it's obvious that investing for retirement is essential? To get anything decent, you will have had to have roughly 20% to 25% of working lifetime earnings invested. If you haven't started yet, then you are coming from behind.

To answer your question literally (where to start), I would suggest some 'hard mathematics' in which you write down your current, and future earnings, and project when you might retire and what sort of money you might want to live on [over and above £6K or so state pension at age 67].

Only when you have fully convinced yourself of the need, and the amount, should you physically 'invest'. Without going into detail, it doesn't have to be pension. Some people prefer the more flexible Stocks & Shares ISA route [debated ad-infinitum on these boards], preferring flexibility over and above the tax relief.

If you are (or become) a higher rate tax payer, then a pension is a brainlessly obvious solution to all (or more likely part) of your retirement planning.

If your calculations show a 'decent' amount to be invested, then dig out a good local IFA who works on a fee basis.

smo

I draw dividends so I dont really pay tax!

How can anyone predict how much money they will need in 30 years time, we have no idea whata loaf of bread will cost, let alone something like diesel (except it will be even wore than now!).

I could pluck a figure out of the air and say I'd like say 30K a year to live on, but really I have no idea how far that will go or if its enough or "too much".

smo

atush wrote: »

A company director and you have no pensions???? Do you not a have a business accountant?? Who should tell you that paying yourselves pensions out of the company profits lowers their taxes and yours?? you have been paying too much tax as both a company and a person (I am assuming higher rate tax).


Crikey. You need both a pension ASAP and a new accnt.

Being a director and having a pension doesnt go hand in hand. I'm also the majority shareholder but that doesnt go hand in hand with pensions, income or directorship either.

I have a good accountant, I barely pay any tax.

Prior to this I spent several years in the private sector (but government backed) and from that I have zero pension too. Its not a given these days.

bendix

It seems to me the OP is making every possible excuse and justification for not having a pension, when it's patently obvious he needs one.

Arguing that how does he know how much he needs in 30 years is an irrelevance when he KNOWS he will need something. Ergo, it's critically important to stop sitting around with his thumb up his jaksy and do something about it.

Stop making excuses and man up.

smo

Bendix - !!!! off you !!!! - dont be such a smart !!!! when you know jack about other peoples situations.

I'm asking for advice, its fairly normal for people not to know how much they will need or where to start otherwise everyone would have one already would they???

atush

Last i heard, dividends were taxable. Mine are taxed that's for sure.

Second, if your company pays you the director a pension, it counts as a business cost, therefore lowering tax paid.

Discuss this with yoru accnt, and you can ask him what HE is doing for his retirement?

dunstonh

Being a director and having a pension doesnt go hand in hand.

Actually it does have a close relationship as its one of the best ways to get money out of your company without paying tax and NI on it. Accountants and advisers are forever telling directors to utilise pensions.

I have a good accountant, I barely pay any tax.

The lack of mention of pension and the impression you pay barely any tax suggests otherwise? Obviously we dont know what you AND YOUR COMPANY tax position is. So, we cant comment specifically with confidence we are correct. However, whilst you may not pay much tax, what about corporation tax? If you are not paying much there, then it suggests you have limited profitability. So, that may well explain why pensions have not been mentioned. If your company is profitable and you are paying corporation tax then you may want to question why pension has not been mentioned.

Pensions are not a perfect solution. Like all the tax wrappers for investments, they have pros and cons. However, for certain groups of people they can be more attractive than others. Director of "own" company is one of those groups.