Have i already got enough in my pension fund

jimnew

I am 42 years old and have been lucky enough to have saved well over the years and have a pension fund just over £100 000.

How much is that likely to pay as pension(roughly)?

And should i now stop paying into my pension and pay off my large mortage(over £100 000)

Neverland

If you are a higher rate tax payer (40% or 50%) its a no brainer to put more money into your pension until you are down to basic rate tax

Its simply because of the tax relief doubling your money

bigfreddiel

jimnew wrote: »

I am 42 years old and have been lucky enough to have saved well over the years and have a pension fund just over £100 000.

How much is that likely to pay as pension(roughly)?

And should i now stop paying into my pension and pay off my large mortage(over £100 000)

right now £100k will get you £5k/annum roughly - in the 90's £100k would have got you £15k roughly - so what do you think your £100k will get you in 26 years time when you are 68?

Of course you £100k will have grown by say 4% per annum and will be worth £266k so what do you think that will buy you?

so there you have it

btw how many people had a pot of £100k in the 90's wages from 50's - 90's were a lot lower - I started on £3k in the 70's as an graduate engineer with BAe

fj

Aegis

Neverland wrote: »

If you are a higher rate tax payer (40% or 50%) its a no brainer to put more money into your pension until you are down to basic rate tax

Its simply because of the tax relief doubling your money

What about the annual allowance charge? If you were to try paying in enough as a 50% taxpayer to take you down to 20%, you'd quickly be incurring a lot of annual allowance charges.

It's not a no brainer by any stretch of the imagination. You need to consider annual and lifetime allowances when funding a pension, as contributing too much can cause major headaches later in life.

Neverland

Aegis wrote: »

What about the annual allowance charge? If you were to try paying in enough as a 50% taxpayer to take you down to 20%, you'd quickly be incurring a lot of annual allowance charges.

It's not a no brainer by any stretch of the imagination. You need to consider annual and lifetime allowances when funding a pension, as contributing too much can cause major headaches later in life.

(a) 95% people can't put £50k in a pension so he's quite safe

(b) read the OP, hes 42 and hes got £100k in his fund

Aegis

Neverland wrote: »

(a) 95% people can't put £50k in a pension so he's quite safe

Irrelevant, you stated that someone paying 50% tax should pay enough into a pension to bring their tax rate down to basic rate. That's why I highlighted the annual allowance as an issue.

(b) read the OP, hes 42 and hes got £100k in his fund

And if he were to blindly follow your advice as a 50% taxpayer, he'd likely breach the lifetime allowance even if he retired at 55, having incurred annual allowance charges pretty much every year.


This is precisely why it pays to know more about someone's specific situation before advising them to do anything.

Neverland

Aegis wrote: »

And if he were to blindly follow your advice as a 50% taxpayer, he'd likely breach the lifetime allowance even if he retired at 55, having incurred annual allowance charges pretty much every year.


This is precisely why it pays to know more about someone's specific situation before advising them to do anything.

Really?

So £50k x 13 = £650k + £100k = £750k plus investment growth at 55

You must know some hot investments...

Aegis

Neverland wrote: »

Really?

So £50k x 13 = £650k + £100k = £750k plus investment growth at 55

You must know some hot investments...

And the rest? It's not just £50k to take you from basic rate to 50%, is it?

Neverland

Aegis wrote: »

And the rest? It's not just £50k to take you from basic rate to 50%, is it?

I thought they had put in a £50k/pa limit now?:think:

Soon to be £30k pa maybe after the budget..:(

Aegis

Neverland wrote: »

I thought they had put in a £50k/pa limit now?:think:

Soon to be £30k pa maybe after the budget..:(

No, they have a tax relievable maximum contribution of £50k, with unused allowance carried forward for up to 3 years. Excess over this is subject to the annual allowance charge, but allowable.

As such, you could pay in about £108k per year to bring the income tax rate down to basic rate from spot on the £150k level, but there would be an annual allowance charge of 20% on £58k a year.

See why that's not good advice? You'd quickly end up paying tax on the contribution, tax on crystallisation and tax on the pension income.

Neverland

Aegis wrote: »

No, they have a tax relievable maximum contribution of £50k, with unused allowance carried forward for up to 3 years. Excess over this is subject to the annual allowance charge, but allowable.

As such, you could pay in about £108k per year to bring the income tax rate down to basic rate from spot on the £150k level, but there would be an annual allowance charge of 20% on £58k a year.

See why that's not good advice? You'd quickly end up paying tax on the contribution, tax on crystallisation and tax on the pension income.

I had actually read that the cf was a one-off..

...this is kind of academic debate though...

...how many people can afford to put a gross £50k into their pension fund...

there are only about an estimated 200k 50% tax payers...

I'll bet you £5 the OP is not one of them