I have debts - should I still start a pension?

Dithering_Dad

dunstonh wrote: »

It's only the second state pension you wont get and thats because you are not employed but self employed.

unless you have your own limited company, then you're viewed as an employee and pay the usual NI and PAYE contributions - naturally you only pay yourself minimum wage and take the rest in dividends.

dunstonh wrote: »

Oh DD, at £300pm you really need better than a stakeholder. I cringe at an amount like that being invested in a bog standard managed fund. Still, we have your thread for that

if you're cringing at £300 a month, your toes will curl when I start paying employer contributions into there as well, especially if I get caught by IR35.

I promise Dunstonh that as soon as I get my company settled and I've put my emergency money into my offset, I'll try and sort out an IFA and move away from my crappy stakeholder. Thanks for your concern though, it is quite comforting.

stressqueen

Thanks very much for all that. Dunstonh - in essence do you think it's worth me restarting my contributions in light of my cc debts?

EdInvestor

Are you paying contributions to the state pension?If not, that's the first step for you, class 2 NICs are only about 2 quid a week , the bargain of the century.

Check your state pension situation here:

https://www.thepensionservice.gov.uk

Otherwise paying off debt has to be the first priority.Reducing mortgage the second.

After that I'd have thought an investment ISA is a better bet than a pension, as you retain access to the money.

Suggest you check up on the old pension.

Write and ask for:

1.Current value
2.Transfer value
3.Fund(s) it is invested in and any alternatives
4.List of charges levied.

Then report back.It's probably going to be sensible to reorganise this money to a better performing and cheaper arrangement.

Ian_W

EdInvestor wrote: »

After that I'd have thought an investment ISA is a better bet than a pension, as you retain access to the money.

Think you missed something in an earlier post, Ed?

stressqueen wrote:

Or would you advise another type of product? (I need something I can't access).

Dithering_Dad

stressqueen wrote: »

So a stakeholder pension is the best option (only option?) for me? Or would you advise another type of product? (I need something I can't access). And another stupid question - this pension would be in addition to the state pension?

I would put your money away in a pension rather than an ISA. I know there are various arguments about the relative merits of ISAs and pensions, but you seem to be very like me in that you have irregular employment, so the temptation to dip into the ISA when times are hard would be too much and so your retirement pot would never get anywhere.

Also, if times are really bad and you have to claim benefits, your ISA savings your ISA savings will be taken into account, whereas your pension will not.

I've not idea if you are a high rate tax payer, but if you are then a pension really comes into its own because you will be receiving tax relief of 40% when you put your money into your pension, but when it actually get paid out via an annuity or income drawdown, you will be taxed at 20% - providing your annual pension is below the UEL threshold. This for me makes contributing into a pension a "no brainer" for high-rate taxpayers.

Talking about tax, as you are a freelancer do you have a limited company? If you do then you don't need to worry about reduced State Second pension as you will be contributing full NI's and hopefully you will be registered for the flat rate VAT scheme where you claim VAT from your customers at 17.5% but then hand it over to HRMC at 13% (12% in the first year) - that adds up to an additonal day of billing per month for me. You also receive £150 per year for efiling your tax returns and can claim the majority of your income as dividends from the company saving national insurance and tax. If you don't have a limited company then I'd certainly look into it if I were you.

Sorry for the long post, things are quiet in the the office today

Paul_Herring

Dithering_Dad wrote:

I've not idea if you are a high rate tax payer, but if you are then a pension really comes into its own because you will be receiving tax relief of 40% when you put your money into your pension,

Only the money taxed at 40% will get the 40% tax back - and the difference between (currently)22% and 40% isn't paid automatically into the pension but paid as a refund when you fill in your tax return at year end.

but when it actually get paid out via an annuity or income drawdown, you will be taxed at 20%

This assumes that the pensioner will be in the lower rate tax band when they receive their pension.

stressqueen

Thanks DD, I don't have a limited company as you aren't allowed to invoice through them if you're working as an individual in the film industry.

I'm going to call my current pension providers and get the info I need - I wioll certainly report back! You've all been enormously helpful.