Self-Employed Pension Options

meggles

Morning All -
My husband is self-employed, mid-30's. Over breakfast this morning he says he'd like to start a pension, and wondered if i could look into it for him... que this post!

As I said, he's in his mid-30's. He has £15K lump sum, currently in a Hargreaves & Lansdown S&S ISA. He currently adds £50/month to this, but could stretch to a monthly input of ~£100 / month into a pension.

From the excellent guidance on this & other sites, I think his best option is either a Stakeholder Pension or a SIPP. I am a fairly competent investor, albeit from the US so used to their terminology / products.

What's the next step? Do I investigate SIPP & Stakeholder plans and compare charges, investment choices available? Or should I go down the financial advisor route, as a one off advice?

Any suggestions as to where to compare Stakeholder Pension providers? Neither which or moneysavingsexpert seem to have this comparison.

Thanks!

mania112

Stakeholder hasn't any advantages nowadays. It was meant to be a way to ensure your pension would have limited charging - but those limits are now far in excess of what can be found in a Personal Pension.

So SIPP v PP: SIPPs are good if you have specific/unique investment ideas, but otherwise they are largely more expensive than Personal Pensions.

For Personal Pensions without the help of an adviser, try here:

http://www.cavendishonline.co.uk/pensions/

greenglide

Is he really self employed?

If he is employed by his own limited company (IT contractor and others) he is not self employed.

There are savings to be had if he is trading via a limited company.

atush

What is the HL S&S isa invested in? What would HL charge for the same or similar on a pension?

I agree I w ould look at cavendish online, but it seems to me if you are choosing the investments it would help to know what you want to put inside the pension in order to minimize costs.

For instance some platforms allow investment trusts, others dont. Some are good for the Vanguard range of lifestyle funds, others are more expensive.

atush

greenglide wrote: »

Is he really self employed?

If he is employed by his own limited company (IT contractor and others) he is not self employed.

There are savings to be had if he is trading via a limited company.

Very good point, if he has a limited company that is a whole new bag.

meggles

He's in a partnership - not VAT registered or Ltd.

He's currently invested in two tracker funds, as my personal preference has been to put the majorities of my own monies in an index / tracker fund. His £15K is split 50/50 with Fidelity UK Index, Vanguard Developed World ex-UK Index.

With the amount of monies he has currently, I wouldn't suggest adding managed funds, bonds, etc. I would probably only add a managed fund around the £30 / 40K mark.

atush

So you are looking at funds, not single shares. So unless the costs are low, you dont really need a Sipp, a PP will suffice.

Does he and his partner have an accountant? Would it be to their benefit to become an LLC, to save on tax etc?

If so, having the company contribute to his pension could be the best way to go. In fact the company could contribute to pensions for both of them.

meggles

Thanks for the insight.... I will have my husband, his bussiness partner & bookkeper look into setting up a LLC for pension purposes.

In rough terms, could you spell out why having an LLC, and the LLC contribute into a pension, would be beneficial? My husband's business partner is a pain in the !!! money wise, but is closer to retirement age (50+). However, he hasn't made ANY provision as to a pension...

Yes - looking at funds, rather than individual shares to minimize risk. When I compare Personal pension & SIPP charges, etc they seem quite similiar. Am I looking in the wrong place?

atush

Well the company makes profits that tax is paid on. If the profits are in t he company, the company can pay into the pension. It is a tax deductible expense, so less tax is paid by the company. It never counts as income to the 2 partners. So they dont pay tax either.

meggles

Thanks for the info. Can I run a simple example to make sure I've understood?

Let's say their Pre-Tax Profit is £50,000
If each partner were to put £4000 into a pension
The company would put in £1000
Thus reducing their profits to £48,000

So the 'tax base' would be reduced, thus reducing the amount of tax the company pays.

Any very rough idea for how much and how complicated it would be to change a partnership into an LLC?

Thanks!

xylophone

https://www.gov.uk/business-legal-structures/overview

https://www.gov.uk/limited-company-formation/overview

http://www.contractorcalculator.co.uk/pensions_contractors_limited_company.aspx

https://www.unbiased.co.uk/