65 and self employed

barumd

Hi All,
I am 65 and have been self employed for the past 10 years, I have a small (£20k) plan with The Equitable Life in which I am able to make further payments.
This tax year I will be in the 40% bracket and wonder whether it would be beneficial to make a payment of £10k or invest this sum elsewhere.
I do not have any other pension arrangements.
I intend working on until aged 70.

Any advice would be appreciated.

dunstonh

I do not have any other pension arrangements.

Hopefully you other saving/investments though as getting to retirement with just £20k is not great. Especially as self employed get lower state pensions.

In the scheme of things your pot is tiny. 10k will double its value but it will still be tiny. You should aim to have around £35k in a pension by age 35. That gives you an idea of how far out you are. It will take a lot more than £10k to change that.

However, if the contribution is fully allowable for 40% relief, then £10k net contribution will see £12500 going in the pension with your tax bill reduced by £2500. So, in effect, you would have paid in £7500 but got £12500 value. Nothing else is going to match that sort of gain.

atush

I agree with D.

You should put in as much as you can afford (certainy an amt that will equate with how much you are into HRTax. And keep doing that each year until you retire. And save as much as you can outside your pension.

If you have been earning over HRT limits and have such a small pension so far I am seriously wondering what you have been doing with your dosh.

And not sure you should invest in EL- don't know what their performance is like. Maybe you should look at a personal pension instead?

barumd

I was put off pensions many years ago when moving from a national company with an FS scheme, the transfer value was so poor then.
As for monies earned since, I have been putting that into buy to lets.

It is just that I have maximised my tax allowances for the current year and would rather not give it to the tax man. As for the EL, it just gives me a means to put money in without starting up a new fund, I will transfer the Monies to another provider when the time comes.

As a point of interest I chose EL as they were the WHICH best buy at the time!
I bought a TV they recommended which turned out to have very poor sound quality, also a food mixer that would struggle when anything thicker than milk went in, so much for the WHICH magazine.

atush

I know they were highly regarded in the past.

My point was, if they aren't making money now it would be worth your time and effort to start a new pension instead.

barumd

That is a thought atush but as I have not got that many years left I am mindful of the start up costs/fees with a new pension provider.
The section I can put into with EL is the unit linked funds, comprising 50% each of International growth and UK FTSE 100.

dunstonh

I was put off pensions many years ago when moving from a national company with an FS scheme, the transfer value was so poor then.

A final salary pension vs a money purchase pension is like comparing a car with a motorbike. Both are vehicles but both are very different. 99 times out of 100 you would not transfer a final salary scheme as the transfer value would not be enough to make up for lost benefits.

As for the EL, it just gives me a means to put money in without starting up a new fund, I will transfer the Monies to another provider when the time comes.

Eq Life are closed for business. You wont be able to pay it to them unless you happen to have a plan that contractually has to allow it (unusual)

As a point of interest I chose EL as they were the WHICH best buy at the time!

Which? also recommended Endowments. They used to show Standard Life yet they were not that good either. They have airbrushed things like this out of their history.

That is a thought atush but as I have not got that many years left I am mindful of the start up costs/fees with a new pension provider.

What makes you think that an increment into an old fashioned plan with higher charges than modern ones would be cheaper? new money is new money whether it tops up a plan or goes into a new plan.

atush

There are sonme fairly low cost providers and platforms esp if you want to choose your own investments.

Whatever you do, you need to make more provision. BTL may have been good for you (and I am not against it) but they are illiquid and property prices have fallen greatly recently so they do carry investment risk.

barumd

dunstonh wrote: »

A final salary pension vs a money purchase pension is like comparing a car with a motorbike. Both are vehicles but both are very different. 99 times out of 100 you would not transfer a final salary scheme as the transfer value would not be enough to make up for lost benefits.

• This was in1976, very early days and before pensions became transferable. (So I was advised at the time).

Eq Life are closed for business. You wont be able to pay it to them unless you happen to have a plan that contractually has to allow it (unusual)

• EL are not closed for business, as said I am able to pay in to EL in the unit linked funds section. They tell me I am not able to pay into the with profits section as I have not paid into that for some time.

Which? also recommended Endowments. They used to show Standard Life yet they were not that good either. They have airbrushed things like this out of their history.

• Probably done the same with my TV and mixer.

What makes you think that an increment into an old fashioned plan with higher charges than modern ones would be cheaper? new money is new money whether it tops up a plan or goes into a new plan.

• I assume there is a set up charge for a new plan. EL will charge 4.5% of premium paid in so I guess that is the bit I have to compare against a new provider.

dunstonh

EL are not closed for business, as said I am able to pay in to EL in the unit linked funds section. They tell me I am not able to pay into the with profits section as I have not paid into that for some time.

Equitable Life closed their doors for business over a decade ago. This doesnt prevent you keeping paying what you already pay and some of their plans have contractual requirements to allow you to top up. If yours allows increments, then it is one of those.

I assume there is a set up charge for a new plan. EL will charge 4.5% of premium paid in so I guess that is the bit I have to compare against a new provider.

You may be better off with a modern mono charged pension with no initial charges. Even a multi charge pension with a small initial charge but much lower annual charge may be better for you than a mono charged plan.

*MF*

@ OP - be aware, if you are not already so.

Following the sale of parts of the Equitable group operations to the Halifax Group on 1 March 2001, Equitable Investment Fund Managers Limited (EIFM) became a wholly-owned subsidiary of Halifax Financial Services (Holdings) Limited and changed its name to Halifax Investment Fund Managers Limited on 9 April 2001.

From 3rd March 2008 Halifax Investment Fund Managers Limited changed its name to HBOS Investment Fund Managers (HIFM). From 2nd November 2009 the investment management of ELAS Unit Linked funds (except for the Equitable Life Property funds) was transferred from Insight Investment Management (Global) Limited to Scottish Widows Investment Partnership Limited (SWIP), a member of Lloyds Banking Group.

From 1 October 2010, management of the Equitable Life with-profits fund was transferred to BlackRock Investment Management (UK) Limited with the exception of the property element which is managed by Invista Real Estate investment Management Holdings plc.

From here:

http://www.equitable.co.uk/policyholders/latest-fund-prices-and-performance/fund-prices-and-performance