Youngish married couple and no pensions

acl2009

My husband is 35 and I am 28, we are both in full time employment but neither of us are paying into a pension. I work for the emergency services so there is an employers pension available to me which I will start paying into when I return to work part time after maternity leave next year.

My main concern is my husband. He is director of his own quite succesful company and is the primary income earner. He had a pension when he was employed by a company but this ended a few years ago so won't be very much when he retires. I'm worried that if we were to set up a pension for him now we would need to pay in around £500 for it to give us a worthwhile income. When I return to work part time our joint monthly income will be aprx £4000 p/m. We need to budget for around £300-£350 month for his annual tax bill so to lose another £500 a month is quite a chunk of our income going each month. We don't have any debts other then our mortgage which we plan to over-pay each month from January next year to reduce the term of our borrowing and interest.

Is it still worthwhile setting up a pension or should we look at some kind of long term investment?

Thank you in advance.

atush

He should set up a pension, and even better he can choose how much his company contributes to it (as their busines expense not his income). If he is a HRTaxpayer then he will get 40% relief. So this will actuallly Lower his tax bill. It will lower the tax and NI his company pays as well.

Does his business have an accountant? If not, he needs to see one who is a tax specialist and set a company director pension plan ASAP.

Did you pay into your pension before maternity leave?

acl2009

Thank you for the reply atush....

They are a Ltd company so have a chartered accountant. Anything to lower his tax bill is always a bonus! I'll get him to ring his accountant on Monday.

I'm not currently paying into my employers pension. I start my maternity leave in May and won't be returning until next May, by which time I will be 30. I do have a very small pension from a previous employer but this wouldn't amount to more then few pounds each month come retirement!

BeatTheSystem

acl2009 wrote: »

Thank you for the reply atush....

They are a Ltd company so have a chartered accountant. Anything to lower his tax bill is always a bonus! I'll get him to ring his accountant on Monday.

I'm not currently paying into my employers pension. I start my maternity leave in May and won't be returning until next May, by which time I will be 30. I do have a very small pension from a previous employer but this wouldn't amount to more then few pounds each month come retirement!

He should be paying himself approx 7500 pa via PAYE and the rest in dividends. The company should make annual pension contributions ideally to the current maximum allowable of 50K which will reduce corporation tax to the absolute minimum which I presume is only being paid at 20%.

Been doing this for 10 years, it all works very nicely.

dunstonh

I'm worried that if we were to set up a pension for him now we would need to pay in around £500 for it to give us a worthwhile income.

Quite possibly more. A rough guide is to aim to have £35k in your pension by age 35. He has zero. Your are coming from quite a bit behind.

Is it still worthwhile setting up a pension or should we look at some kind of long term investment?

That is like asking if you should buy a car or petrol. A pension is not an investment. A pension contains investments.

For company directors, a pension can be very efficient as it allows money to be paid out of the company without tax and NI. Alternative options dont allow that.

xylophone

He is not wholly without provision - he does appear to have some kind of deferred pension.
However it certainly seems time to set up a pension.
http://www.needanadviser.com/html/article.php/zcid/647/type/article/finance/Award_Winning_Pension_Advice_Pensions_Advice_Executive_Pension_Plans_EPP might be worth a read.

atush

You should join your company pension now and get ain fewmonths contribs- you are throwing away the money they contribute.

property.advert

From the lack of advice received, I think firing the accountant would be the first sensible move.

atush

I have to say I agree, I was thinking there was no acct due to the way things were not being picked up.