Unsure - Pension or OP

pauler

I Think the 3% is fine just make sure you check your interest rates on your statements and keep checking the market for better deals. you'd be shocked how many brilliant deals there are out there. I recently transferred my £3000 pension into a high interest Pension Scheme now i'm getting 15% interest and don't have to pay into it anymore.

jamesd

Yorkie's claim was that there is no tax at any point once it is inside the ISA. Income tax before it goes in doesn't change that statement.

That statement is also wrong, but not because of income tax. There's still tax paid on dividends and a tax charge paid on interest on uninvested money. Also corporation tax paid by the companies paying the dividends.

gadgetmind

jamesd wrote: »

There's still tax paid on dividends

No, not really. It's just that you can no longer claim back the credit that you get because of ...

Also corporation tax paid by the companies paying the dividends.

... this.

jem16

Ben- wrote: »

But, my tax code is k50 due to company car, free fuel and private health care.
Hasn't the 40% reduced to 32k?

With a K50 tax code you are entitled to no personal allowance and will have to pay tax on an extra £500 of your income.

So if you are quoting £32k as your salary, for you 40% tax will start at £32,010 minus £500 ( if the K50 is for tax year 2013/14) so £31,510.

You are due 40% tax on £500 so best to be paying into a pension.

Ben-_2

Will I get 40% back on each payment I make?

In total I earnt 34'200 last year

[Deleted User]

If you put £75 per month towards your mortgage in overpayments for the next 10 years you will have paid £9,000 towards your mortgage.

If you put £160 per month into a pension for the next 10 years, with tax relief and your employers match (and possibly salary sacrifice) you will have a pension worth at least £48,000 (probably a bunch more).

Take your pick.

jem16

Ben- wrote: »

Will I get 40% back on each payment I make?

Only on the amount you actually pay 40% tax on. As far as last year was concerned, you were into higher rate tax by £2190 so that's what you would be entitled to 40% tax rebate on.

Ben-_2

citricsquid wrote: »

If you put £75 per month towards your mortgage in overpayments for the next 10 years you will have paid £9,000 towards your mortgage.

If you put £160 per month into a pension for the next 10 years, with tax relief and your employers match (and possibly salary sacrifice) you will have a pension worth at least £48,000 (probably a bunch more).

Take your pick.

Does that take into consideration the interest saved long term on the mortgage?

redbuzzard

Ben, the £9,000 doesn't include the interest saving, but the government will probably inflate your mortgage away for you

Just to offer you a little encouragement - is this your first issue? My wife gave up work when ours came, so we lost an income and gained some expense, which I expected to be a real struggle.

In fact, that we virtually stopped going out in the evenings and eating out (socialising became more home based, ours or other people's), combined with rather more attention to budgeting, saving on work related expenses, and child benefit I suppose meant that we seemed to be better off!

Best wishes for the future. Take advantage of the employer pension contributions if you can, and try to find economies elsewhere.

jamesd

The interest saved long term on the mortgage is irrelevant because the calculation ignored the growth in investment value, which is likely to be worth considerably more than that.