Pensions, what to do?

gadgetmind

Autumnrust wrote: »

Maybe something to consider for the not to distant future though!

Yes, definitely. Depending on what happens with child benefit, you could also win on that if you avoid being a HR tax payer.

Wobblydeb

Autumnrust wrote: »

Hi Wobbly, thanks for this, so I understand this one right, say I earn £60k per annum. Are you suggesting that I pay £21k a year into a pension to take full advantage of the 40% tax benefits?

And then just live off £39k at 20% tax?

Actually it would be £17,525 assuming you get the full personal allowance and there's no adjustments for benefits in kind. i.e. Take your salary down to £42,475. After tax putting that £17,525 into your pension will cost you £860 / month. You might be able to persuade your employee to put in the 13.8% employer's NI which would add another £2,418 to the £17,525 in your pension pot.

I do this (albeit on a smaller salary) and it will leave you about £2,600 / month to live off. I can understand the desire to put a permanent roof over your head, so perhaps aim for the £10k per annum? I am not trying to belittle your existing pension savings, but was just a little worried that you might think putting £100 per month away would get you a decent pension.

I don't know if you've had a look at the savings and investments board, but that will help you make the most of your savings as you get your house deposit together.

gadgetmind wrote: »

Yes, definitely. Depending on what happens with child benefit, you could also win on that if you avoid being a HR tax payer.

Good point - potentially another £1,752 (if you have that second child ) a year in your pocket for sacrificing your salary into pensions. Actually it would be worth looking at salary sacrifice for childcare costs. Not something I know much about, but I'm sure there'll be some knowledgable people in the MSE forum somewhere!

fairleads

Autumnrust wrote: »

Hi Wobbly, thanks for this, so I understand this one right, say I earn £60k per annum. Are you suggesting that I pay £21k a year into a pension to take full advantage of the 40% tax benefits?

And then just live off £39k at 20% tax?

Fantastic idea, I think would struggle at the moment though. I am the only earner in our house and I support a wife and a 9 month old baby (planning for another ) we are also saving for a deposit on a house.

By no means am I trying to point out that we are hard off, but we have REALLY cut back over the past couple of years to pay off debt and save.

We had around £25k of debt between us which we have got down to £2,700 and we have £3,500 in the kitty for a house.

I would like to make large contributions into a pension, but I suppose I am getting caught up in the here and now at the moment.

Maybe something to consider for the not to distant future though!

Tempting though it maybe to allow the tax tail to wag the pension dog, and have all the IFAs salivating at the thought of all those fat fees, I think your first task is to divert most, if not all, surplus income into saving for a house deposit first.

Neverland

fairleads wrote: »

Tempting though it maybe to allow the tax tail to wag the pension dog, and have all the IFAs salivating at the thought of all those fat fees, I think your first task is to divert most, if not all, surplus income into saving for a house deposit first.

I don't think its that clear cut

Higher rate tax relief on pensions might not always be around

You will always have to save a house deposit out of after tax income

fairleads

darkpool wrote: »

so if actively managed unit trusts don't have typical annual charges of 2% what are the typical charges?

good to see you still call anyone that disagrees with you a troll.

According to Friends Life web, the cost of a typical UK all share fund, as per their SIPP, is as follows
1) FL extra fee .75%
2)Additional expense .1%
To which we add
3) Fund TER 1.66%
Sub total 2.51%
Brokerage fees within the fund est. 1.5%
IFA fee £1000 on 100K fund 1.0%
Grand total 5.01%

fairleads

Neverland wrote: »

You will always have to save a house deposit out of after tax income

And how does the OP manage that if all their extra income is going into a pension fund?

fairleads

Neverland wrote: »

My seven figure personal pension fund would indicate otherwise :cool:

Everything you need to knwo about self investment is here:

https://www.vanguard.co.uk/uk/mvc/investments/mutualfunds#fundstab

Following this link and hitting on their UK equity income tracker i note that from inception in June 2009 it has returned 18+ %. Whereas a popular EI managed fund has delivered 23+%. Not forgetting that the EI fund in question is not even a first quintile performer.

gadgetmind

fairleads wrote: »

Following this link and hitting on their UK equity income tracker i note that from inception in June 2009 it has returned 18+ %. Whereas a popular EI managed fund has delivered 23+%. Not forgetting that the EI fund in question is not even a first quintile performer.

1) I do hold some of the Vanguard Uk Equity Income tracker, but only as part of a much larger portfolio to give a little value bias. I would not use it for anything other than this.
2) It's hard to do comparisons over such short time periods.
3) The different returns tell you little unless you also know the risk levels of the two investments.

Neverland

fairleads wrote: »

And how does the OP manage that if all their extra income is going into a pension fund?

By switching some of his savings from the (untaxed) pension into a (taxed) house deposit fund later on?

gadgetmind

Neverland wrote: »

By switching some of his savings from the (untaxed) pension into a (taxed) house deposit fund later on?

Perhaps you'd care to explain how that switch would work?