Pensions newbie - advice

moneysavermummy2014

Hello,

My husband and I are 33, and, through a combination of naivety and need, to this point we haven't been able to start saving towards our pensions.

We have a small BTL that achieves a rental of approx £500 pcm which we would like to hold onto for retirement, but we are now looking at starting a penion pot with a lump sum each. This lump sum would be surplus funds from our house sale as we are looking at moving shortly.

Can anyone offer me some help with the following?

- We were thinking of a lump sum of about £10k, maybe £12k each as a starter and then making regular payments in from then on. My husband will be able to make pension contributions via work, but I am a stay at home parent so my contributions would be limited until my children start school and I return to work. Is this starter amount big enough? Is it worth it?
- With me being a stay at home parent, what are my options for pension planning and pension contributions while I am out of work? Is it a case of I can pay into a private pension whatever I can afford and then receive a tax benefit at year end?
- I have three historical, very small pension pots from when I first stated working, each of about £1000k and each with a different provider. Is it better to have all my funds in one place as obviously growth on such small amounts is limited? Should I try and 'pool' everything together?
- Choosing a private pension - where do we even begin??? I don't have a clue where to start really; I find everything I read quite confusing??

We are planning to retire somewhere between 60 and 65 and will be mortgage free. In an ideal world we would have a joint income of circa £20k per annum from our pensions and BTL . We have separate funds investments locked away each year but pensions is an area we have neglected and are keen to resolve.

Any advice/help with the above would be much, much appreciated.

Thanks,

Lou xxx

dunstonh

but I am a stay at home parent

Which means you are limited to £3600 p.a. for pensions.

- I have three historical, very small pension pots from when I first stated working, each of about £1000k and each with a different provider. Is it better to have all my funds in one place as obviously growth on such small amounts is limited? Should I try and 'pool' everything together?

it would need an analysis of the pensions to see what is best. Some old plans are expensive and poor value compared to modern alternatives. Whilst other old plans can be real gems worth keeping.

- Choosing a private pension - where do we even begin??? I don't have a clue where to start really; I find everything I read quite confusing??

DIY or IFA. either do your own research etc or use an IFA to do it for you. Either is fine.

We are planning to retire somewhere between 60 and 65 and will be mortgage free.

With you planning earlier than state pension age (which will be around 68-70 by the time you get there) you are going to be needing a lot more retirement provision than the average person. Plus, you are starting from a late position and need to catch up.

A buy to let can help but remember that the lender will want to be repaid at some point and there is capital gains tax to pay on it when sold. One property is not going to be enough if you remain light on pensions.

moneysavermummy2014

Thanks - just to clarify, the BTL is on a capital repayment basis, not IO so will be cleared in about 20 years, at which point we could put the monthly rental income into the pension pot.

xylophone

I am assuming that you mean £1000 in each pension rather than £1,000,000:D

These are old defined contribution pensions rather than deferred pensions in defined benefit occupational schemes?

If DC are there any guarantees with the policies?

With regard to pension contributions see
https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief

As you have no relevant income, your contributions are limited to £2880 net, £3,600 gross.

http://adviser.royallondon.com/technical-central/information-guidance/contributions-and-tax-relief/member-contributions-tax-relief-and-annual-allowance/

kangoora

moneysavermummy2014 wrote: »

Thanks - just to clarify, the BTL is on a capital repayment basis, not IO so will be cleared in about 20 years, at which point we could put the monthly rental income into the pension pot.

You can't put rental income into a pension and get tax relief as it doesn't qualify as 'earned income'. However, if you have a job, you can contribute up to 100% of your salary up to £40K and live off your rental income. A small but important distincton.

I'm assuming you are declaring your rental income to HMRC.

moneysavermummy2014

kangoora wrote: »

You can't put rental income into a pension and get tax relief as it doesn't qualify as 'earned income'. However, if you have a job, you can contribute up to 100% of your salary up to £40K and live off your rental income. A small but important distincton.

I'm assuming you are declaring your rental income to HMRC.

Ahh thank you, that is helpful; I was unaware of the 'earned income' rule.

And yes, we declare (annual losses for the past three years unfortunately!) every year on our BTL via self-assessment. Which reminds me I need to crack on with my latest return......

atush

Why hold a BTL which is loss making? It makes no sense whatsoever.

I'd get rid, bank the equity and put into pensions as and when you have the income to support it as well as S&S isas.

kidmugsy

atush wrote: »

Why hold a BTL which is loss making? It makes no sense whatsoever.

I'd get rid, bank the equity and put into pensions as and when you have the income to support it as well as S&S isas.

Another option would be to put the extra capital into the new owner-occupied house? Is there money to be saved by borrowing at a lower LTV? Or could you go for the valuable flexibility of an offset mortgage?

moneysavermummy2014

atush wrote: »

Why hold a BTL which is loss making? It makes no sense whatsoever.

I'd get rid, bank the equity and put into pensions as and when you have the income to support it as well as S&S isas.

Because I can't sell it. I have tried. And tried. And tried. And tried.

So, we have to suck it up and deal with it.

greenglide

We have a small BTL that achieves a rental of approx £500 pcm which we would like to hold onto for retirement

and

Because I can't sell it. I have tried. And tried. And tried. And tried.

Would appear to be contradictory?

moneysavermummy2014

greenglide wrote: »

and

Would appear to be contradictory?

Does it?

The primary aim would be to sell it if we could. But, after four years, and no sale (and no properties of similar ilk selling in the area either; the market in that area has fallen through the floor) we have to suck it up and deal with it. We use the rental income to pay the capital and so yes, we would like to - as we have no current pension plan - to have this for retirement rather than the alternative which I see as flogging to a 'we buy any property' company for approx 60-70k loss.....