Starting to save from age 33

davide691

I think a £1.2m pension pot would generate a bigger annual income than £44k. You said you wanted to avoid annuities. On current drawdown rules, you could draw a maximum of around 4.32% of your pot (assuming 3% gilt yield) - i.e., an income of £51.8k

gadgetmind

I agree with all of the above. Max out your pension to make use of tax relief and employer contributions. Note that income above £100k is taxed at over 60%!

Your partner should probably consider -
1) Maxing our his/her S&S ISA allowance.
2) If not caring for children under 12, registering as self-employed and paying Class 2 NI to get additional years of state pension contributions. (Note that your pension contribution could get you Child Benefit back if you "go large")
3) Pay £2880pa into a pension that gets grossed up to £3600 by HMG.

They can also invest in assets that produce income (property including REITs, bonds, etc.) and those creating a dividend stream (individual equities, Investment Trusts, some funds) and still pay zero tax. Income comes within personal allowance and dividends don't create any more tax liability until into higher rate.

As for seeing an IFA, you seem like a bright bunny so please keep asking questions at least for now. Which wrappers to invest in is the first question, and after that comes asset allocation. Let's address these one at once or you might explode.

planteria

good post gadgetmind.

westy22 wrote: »

Bear in mind that HMRC have a lifetime limit for pension pot contributions of £1.25m and a maximum annual contribution limit of £40,000 pa from April 14.

is this accurate? is it £1.25m contributions or the size of the pension pot that is limited by the lifetime allowance?

averageish

planteria wrote: »

good post gadgetmind.

is this accurate? is it £1.25m contributions or the size of the pension pot that is limited by the lifetime allowance?

Cannot be the size of the overall pension pot really, as growth is unknown and subject to market forces, surely?

Then again, we have some pretty stupid tax laws!

planteria

i concur with your thinking, but is it right?

westy22

It was my bad wording causing confusion - it is, in fact, the total size of the pot that is limited to £1.25m so, daft as it is, you have to factor in future growth of the investments therein.

The lifetime allowance (£1.5m in the 2012/13 tax year, reducing to £1.25m in 2014/15) is the maximum total value of all your pensions, measured when you take benefits or reach age 75, whichever is sooner.

planteria

westy22 wrote: »

It was my bad wording causing confusion - it is, in fact, the total size of the pot that is limited to £1.25m so, daft as it is, you have to factor in future growth of the investments therein.

i thought so. thank you for confirming. it actually makes it very difficult to plan...if aiming high. if it was a contribution limit then it would be easy: 'pile as much as you can in, then stop'. & the sooner you reached the limit, the more time there would be for the pot to grow, and the larger pension pot you could benefit from.

whereas, as a younger person, it's difficult to know how well your investments will do, and therefore how much to allocate to the pot. on reflection, i think it is a cack system;)

atush

I think (but am unsure) that if you register your pot for relief while below the limit, future growth won't bring the tax hammer down on you if it goes over the limit. But do check?

innovate

http://www.hmrc.gov.uk/pensionschemes/understanding-la.htm

And specifically http://www.hmrc.gov.uk/pensionschemes/pension-savings-la.htm

planteria

thanks innovate.

the way i read it atush, is that 'protection' has been possible, and still is going forwards, but going forwards it won't be. for people in their 20s, 30s, 40s, for example, we are left hoping to build substantial pension pots, but having the thought in the back of our minds that we don't want to contribute too much. this shouldn't be a worry, perhaps, but I just think it's odd.