Is it too late

uncreative

I have just started contributing to a company pension scheme due to autoenrolement 1% for a few months forcing me to consider it more seriously. Neither my wife or I have ever contributed in the past to any scheme. We are both about to turn 40.

We have 3 flats in a ltd company which is where our money has gone before.

I have just managed to join the senior executive pension scheme at work which means if i contribute 5% they contribute 6%, so I have 11% contribution going in that totals £9,000 a year.

Now this seems like quite a lot and the cost after tax to me is not a lot at all due to the tax relief (costs me about £200 out of net pay).

What will this get me? Have i left it too late? Is this a waste of time?

PeacefulWaters

What will this get me?

Some sort of pension. Better than no sort of pension.

Have i left it too late?

Later than you should have done. Better late than never though.

Is this a waste of time?

Absolutely not. Could you pay more?

We have 3 flats in a ltd company

Could there be a tax efficient way of this limited company contributing to a pension for you?

ermine

uncreative wrote: »

What will this get me? Have i left it too late? Is this a waste of time?

It's unlikely to be a waste of time, and to be honest if you earn £81k p.a. losing £200 of it should be down in the noise.

As a terribly rough guide if you save £x per year for 20 years using a properly diversified equity portfolio and don't pay too much in fees you will get an income of £x p.a.

This is because you will save £x*20, you will benefit from some investment performance and some compound interest and the usual rule of thumb for a safe withdrawal rate for a 30-year retirement so you don't run out of money before you die is about 4-5% (which happens to be ~1/20th)

So it will give you about £10k p.a. if you retire at about 60. You can play with the variables to save longer, save more or do both, and of course this is part of your retirement income and to be added to that of your flats. You may get better investment performance. You may pay too much in fees - you need to understand what you are doing and the choices open to you to make an informed decision.

uncreative

Thanks PW,

is there a calculator that shows what this will likely yield at retirement age of 67? state pension (if its stil about) will get me a missus about £1000 per month and teh flats after tax will provide about £1400 through dividends, so £2400 is an ok number in todays money to get by on.

I have been thinking about state pension going pear shaped and if govt at the time removes the dividend rules then the tax efficiency of what we are doing goes.

ideally we will buy 2 more flats to get at least £2000 a month income, obviously notwithstanding the fct that they may require repairs etc.

uncreative

why oh why have i only started to think about these things approaching 40??? DOH.

atush

Google pension calculator there are a load of them.

Tell us more about your LC that holds the flats. Could it set up an executive pension for you? Which would lower the company's tax?

What is your total earned income from employment?

kidmugsy

Your best policy may be to diversify away from property, and contribute enough to a pension every year to avoid 40% income tax. Then if Mr Balls (or anyone else) abolished the 40% relief, reconsider. In your shoes, I'd "fill my boots" (ahem!) with 40% relief while it's still available.

uncreative

ltd company with me having 50 A shares, Wife has 50 B shares, Kids have 50 C Shares each.

Me and wife are directors. Will we need to autoenrol ultimately?

Not that much fat in it at the moment due to mortgages all on repayment basis so when we are 50 the 3 flats will be paid off. Trying to get 2 more in on strength of revalue with minimum equity injection. Push it up to 70% LTV, currently sitting at a bit above 50% LTV so extra 20% will get us abuot 36k to put down on 1 or 2 more depending on numbers.

Then its target age 50 to get them all paid off, yield £2500 gross income then £2000 net of CT availabel for divi's.

atush

Totes agree.

Too much in property. Putting it in an LC was a good idea at the time, but haven't some loopholes been closed around that idea? Re CGT maybe, can't remember.

atush

uncreative wrote: »

ltd company with me having 50 A shares, Wife has 50 B shares, Kids have 50 C Shares each.

Me and wife are directors. Will we need to autoenrol ultimately?

Not that much fat in it at the moment due to mortgages all on repayment basis so when we are 50 the 3 flats will be paid off. Trying to get 2 more in on strength of revalue with minimum equity injection. Push it up to 70% LTV, currently sitting at a bit above 50% LTV so extra 20% will get us abuot 36k to put down on 1 or 2 more depending on numbers.

Then its target age 50 to get them all paid off, yield £2500 gross income then £2000 net of CT availabel for divi's.

It isn't tax efficient to pay off the mtgs, as the income would then be all taxed? Are you overpaying?

You wont have to auto enroll if there are no employees?

uncreative

and to add to the mix in the next 12 months i will get into salary and car allowance over £100k so pension makes much more sense then as it will get me out of effectively 60% tax??