Mid 20s, want to put 100k in private pension. Best option?

Perelandra

At your age, you won't be able to access your pension normally at 55 either; with the recent changes that have been made, the age at which you can draw on your pension has been raised for younger people, with an indication that it will be raised further- so I'd be working on the assumption that it cannot be drawn until 60 or so.

hugheskevi

There is also the lifetime allowance of £1.25M, over which you will be taxed.

This is potentially a big consideration for younger people investing larger amounts.

Assume you are 25, take the pension at age 59, and receive a growth rate (net of fees) of 6%.

A pot of £175,000 would cause you to breach the Lifetime Allowance under the assumptions above. Even saving at £40,000 p/a from a nil base, you would rapidly build up a pension pot which puts you in danger of breaching the limit. That would mean that in future you may not be able to benefit from employer contributions (or be heavily taxed on them when you commence your pension).

Of course, you would expect the Lifetime Allowance to increase over time, but in recent times it has fallen by £550,000 and there is no automatic indexation and the Lib Dems at least want to reduce it further. Hence you would be gambling on policy change. On the other hand, a bird in the hand may be worth two in bush if policy change goes in another direction (eg higher rate tax abolition).

TheTracker

hugheskevi wrote: »

This is potentially a big consideration for younger people investing larger amounts.

Assume you are 25, take the pension at age 59, and receive a growth rate (net of fees) of 6%.

A pot of £175,000 would cause you to breach the Lifetime Allowance under the assumptions above. Even saving at £40,000 p/a from a nil base, you would rapidly build up a pension pot which puts you in danger of breaching the limit. That would mean that in future you may not be able to benefit from employer contributions (or be heavily taxed on them when you commence your pension).

Of course, you would expect the Lifetime Allowance to increase over time, but in recent times it has fallen by £550,000 and there is no automatic indexation and the Lib Dems at least want to reduce it further. Hence you would be gambling on policy change. On the other hand, a bird in the hand may be worth two in bush if policy change goes in another direction (eg higher rate tax abolition).

I'm counting on it raising over time and use the assumption in my planning. Maybe I'll be wrong. I would be very surprised if over time and in bursts it wasn't increased to match inflation. I've colleagues who were adding 100k+/year for a while (I still wonder if doing that rather than buying a house was wiser) and I gather the clampdown was to staunch that as much as anything. The15k NISA is an interesting twist that moves toward a tax at source rather than tax on usage model.

chucknorris

Looks like the OP has a habit of story telling: https://forums.moneysavingexpert.com/discussion/5099766=

Opinion wrote: »

The other day they were going to sell you 25% of the house for £10,000, now they're selling you 100% for £200,000?



The other day you were retiring with your mortgage paid off and £300,000 in the bank.

https://forums.moneysavingexpert.com/discussion/5079330

Your wasting everyone's time with your repeated lies!! One minute you're 24, the next minute you're 26. One minute this, one minute that. If I wasn't tired and hadn't seen others play your game I would go through and post more of your absurdities.