Is it too late

atush

Yes, you really really need to pay more into pension. Is that 100K all from employment? Or does it include the rental income?

You are limited to 40K per annum, but if you have been a member of an occuptaional pension you can claw back unused allowances from the rpevious 3 years to shelter more?

Can the flats be interest only?

jamesd

Starting at 50 beats starting later as many people do.

You'll be limited by the 40k annual pension contribution limit so one thing you might consider doing is using VCTs a bit. 30% initial income tax relief, capped at the income tax actually paid during the year, HMRC will give you the relief in-year once you tell them that you've made the investment and assuming you're using PAYE. Think of VCTs as income deferral. You can take the money out again after five years, though 6-8 is likely to be better. Along the way you can expect around 5% of the purchase price as tax free income each year, how much depends on the VCT.. If your risk tolerance is suitable you might eventually be able to eliminate your income tax bill. You can recycle the proceeds of selling VCTs into new VCT purchases so you can get the 30% tax relief repeatedly, subject to the rule that you can't buy back a particular VCT within six months of selling it and get the tax relief.

You'll need to be aware of the lifetime allowance for pension contributions, £1.25 million but likely to fall. This becomes significant because a common income drawdown income level is 4% of the pot size increasing with inflation. At say £1 million lifetime allowance this is just £40,000 so it may not allow using only pensions to meet your income needs.

Live ISAs VCTs have the advantage of being available before the earliest pension taking age of 55, or older from 2028.

I agree with the advice to get 40% tax relief while it's available. Several parties have suggested that they will reduce this, perhaps to 30%. If a party that doesn't have this plan gets to be the government you will have some reasonable time to use this while it's still there.

Putting money away is good but you also need a plan that includes target income levels, safety margins and target retirement age so you have a target to use in your planning.

jamesd

uncreative wrote: »

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

Only if also employees.

uncreative wrote: »

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.

Repayment is throwing money away. Why are you doing it?

Use VCTs and you get 30% tax refund. Use pensions and you get 40%. Why on earth don't you prefer to do any capital repaying after the kind government has given you extra free money on top of yours to make it cheaper?

I don't know about you but I'm planning to pay off my mortgage using nothing but tax relief money from a pension. I'm also planning to use VCTs to mostly eliminate my income tax bill, starting with the 2014/5 tax year that just ended.

If you're desperate to get rid of mortgages, do it with the pension tax free lump sums when you can get those, or with the proceeds of VCT sales. Or with the initial tax relief on the VCT buys so the repaying is being done with tax that you'd otherwise have paid.

uncreative

never thought about it like that Jamesd, you mean pay off mortgage with pension lump sum on retirement? I have been angling to get rid of teh debt as soon as possible. Could I switch to interest only and do AVCs for the pension up to my £40k annual allowance. If i did that for 15 years I would get close to the LTA........hmmm what a great post..!

Arrghh - mo money mo problems. It all seemed a heck of a lot simpler when i was earning £50k and had a tonne of debt (half joking half not)

uncreative

Also VCTs - i had looked at them and EIS as well but felt the risk element wasnt worth the gain at the time

uncreative

jamesd are you a financial advisor? you seem well clued up on all this stuff. I have a strong maths/engineering background so get to understand a few of the ins and outs of these things through research but i am learning fast that a little knowledge is a very very dangerous thing......

atush

Basically as a high earner, with a lot of property instead of pensions you are not being tax efficient. At all.

The nation thanks you for your contribution lol.

kidmugsy

I've looked at EISs and funked it: look very risky, and the effective minimum contributions also look too big for us. If I knew of smaller effective minimum contributions I might regain an interest in them.

We found it well worthwhile to keep our owner-occupied mortgage until after drawing our pension lump sums.

uncreative

atush wrote: »

Basically as a high earner, with a lot of property instead of pensions you are not being tax efficient. At all.

The nation thanks you for your contribution lol.

Yes my cumulative tax and NI on my march payslip for this year are almost £32k!! and the Ltd company will have a CT bill of around £3k so in total a contribution of £35k to the British economy. Oucha.

atush

So ask your company acct about interest only mtgs and an executive pension and up your current contribs to get some of that 40% tax back- if you pay 40%, every 100 into a pension only costs you 60.