(lack of) retirement planning

AnotherJoe

db75 wrote: »

weirdly was an ex colleage recommendation, I was told that they tool a %age of gains and therefore were incentivised but turned out to be far from the case.

Its not weird at all really, if people dont know what they should or could get, they have nothing to compare with. Lets say its been rising at a steady 5-6% a year. they might be very happy with that. never mind they could have got 8-10% (which over 30 years could make hundreds of thousands of pounds difference) if they dont know what they are missing they will be happy bunnies. Ignorant , but happy, bunnies.


A bit like getting a great deal off a new car, "the nice dealer gave us a thousand off and a bouquet of flowers for the wife". So they recommend them. Unaware they could have got ten grand off (though no flowers) using XYZ Online Car Deals.

Bimbly

My knowledge of Limited Company pension contributions is, er, limited, but couldn't the OP make the best out of tax relief by living off some of his/her savings while putting all profits/salary into a pension?

Making sure to keep back some for emergencies.

Dazed_and_confused

BLB53

In addition to growth from the fund you will get 25% extra from HMRC on your initial contributions (more if you are HR tax payer).

Given op's disclose that they aren't actually self employed but have a limited company I'm not sure it is in the op's best interests to pay into a pension from their own money.

Sounds like they need input from an IFA to fully understand the best way forward.

xylophone

i have raised pension benefits with my accountant before and he has ended up talking me out of it.

Give me strength!

https://www.pensionbee.com/pensions-explained/pension-contributions/contributing-to-your-pension-from-your-limited-company?ast=RS83l6

https://www.moneyadviceservice.org.uk/en/articles/choosing-a-financial-adviser

https://adviserbook.co.uk You can type in your location and then set the filters on the right hand side for Confirmed Independent, retirement planning etc etc.

dunstonh

LTD company....i have raised pension benefits with my accountant before and he has ended up talking me out of it.

Most accountants I deal with are perfectly fine. Although I often have to explain the tax benefits to them on various tax wrappers. However, on a number of occasions, I have had running battles with some accountants whose knowledge is stuck in the 70s and they don't have a clue but worse still, they don't want to know. One accountant even accused me of a missale and that what I was proposing could not be done. It could and it saved over £10k in tax. The accountant never apologised.

Accountants generally look at what has happened. A good accountant will look forwards as well and help you plan but they are restricted as they are not FAs or IFAs. They do not hold the regulatory permissions to give financial advice. So, they steer you to a position or get their linked IFA to give the advice. Most accountants do not link to an FA (although some do).

tacpot12

dunstonh wrote: »

Today, a modern pension or S&S ISA can have access to over 30,000 investments. You can have an Aviva pension and invest in Standard Life funds or vice versa. Its not all tied in with one company nowadays.

And therein lies another terror for the first time investor; the range of choices. But as Dunstonh also observed it is doing nothing that carries the biggest risk. Many of us feel compelled to find the very best fund, when actually any good fund would do the job we need it to. Similarly with risk, I would generally advise people to only take the risks they need to, to acheive their aim, but as investors we agonise over whether we are taking too much risk, when actually investing in any very large UK-domicled fund is a pretty safe bet.

db75 wrote: »

thanks tacpot

sounds like good advice, although ill be 50 after the first experiment...I wouldnt even know where to begin with research, any pointers?

So, get to know your way around Trustnet (https://www.trustnnet.com), and use it to find a global equity find that has a very large capitalisation, is consistently in the top two quartiles and has a well regarded management team - consider using the FE ratings on Trustnet. You could even create a virtual portfolio using the portfolio feature, add the funds you are considering into the portfolio with a target investment amount (£9k? or whatever) and watch them for six months.

Taking my suggestion of investing 2.5% of wealth for 7 years, then 25% for 7 years then 75% will certainly take the OP until they are in their fifties to move to being mostly invested in equities, but the aim was to build confidence in a system that they have little confidence in, and to move them to a situation where their long term retirement and care needs are protected from inflation, with short term needs being met from cash savings.

The problem with moving too fast is that in the event of a market downturn, the novice investor may loose confidence and withdraw all the investments at a significant loss. Clearly, moving too slowly runs the risk of not protecting short term needs from the effects of inflaction, but the OP seems to have some financial capacity to add to their cash savings while putting a toe into the world of equity investing.

AlanP_2

Whilst you look into pension options and what funds to invest in, whether via an IFA or not, the clock is ticking.

If you are now convinced that a PENSION is a good idea, with contributions from your Limited Company to minimise CGT etc as above, why not open a pension with one of the DIY shops (Hargreaves Lansdown, AJ Bell, Fidelityc or Cavendish say) and make company payments in to it now?

They can stay in cash if you haven't decided on a fund or funds but at least you will have started to benefit form the tax break.

NOTE - You can't access funds in a pension until 55 at the moment so if you think you will need non-work related income in the next 12 years or so don't put it ALL in a pension.

Do you have a partner? What is their pension situation as if you a re couple in retirement it is household income that is likely to be key. For example if you have a non-earning partner they can contribute £2880 per year into a pension which HMRC grosses up to £3600 for them automatically.

This pot can build and then be drawn down when required at 55+, ideally scheduled to minimise tax paid on the way out.

db75

Just catching up on the thread - i called my accountant on his advice, citing some of the comments here and he replied:

pensions are in my opinion neutral. Yes they save 20% tax but you you have to pay into the pot and tie up your cash/liquidity. Recent changes are beneficial so yes if funds available you could make some contributions into a company pension scheme. IFA’s are always keen to sell the tax benefits but not details the overall returns and management fees over the years.

fair comment?

kidmugsy

db75 wrote: »

pensions are in my opinion neutral. Yes they save 20% tax but you have to pay into the pot and tie up your cash/liquidity. Recent changes are beneficial so yes if funds available you could make some contributions into a company pension scheme. IFA’s are always keen to sell the tax benefits but not details the overall returns and management fees over the years.

Ho, hum: compared to what? If the alternative is to draw the money as dividends you also avoid the income tax on the dividends.

Suppose you pay yourself a salary of a bit above £8k; then your tax-free divis are about £3k of unused Personal Allowance and £2k of Dividend Allowance. Thereafter 7.5% and then, above the higher rate threshold, it's 32.5%.

dunstonh

pensions are in my opinion neutral. Yes they save 20% tax but you you have to pay into the pot and tie up your cash/liquidity.

The whole point of saving for retirement is to have the funds in retirement.

Also, corporation tax is 19%. You are not just saving that. You are avoiding dividend tax of 7.5% if basic rate or 32.5% if higher rate (or income tax and NI if you do it that way).

Recent changes are beneficial so yes if funds available you could make some contributions into a company pension scheme.

Recent changes were not as big as made out. They improved options that already existed for 20 years.

IFA’s are always keen to sell the tax benefits but not details the overall returns and management fees over the years.

That is BS. It is a regulatory requirement to show fees. They will appear on the pension provider illustration/charge document. They appear in the IFA report. They are disclosed annually with each statement.

The level of due diligence and research that IFAs are required to have on file and available for investment class business is staggering nowadays. Indeed, I just completed a pension and the investment report, including the charges disclosure and KIIDs was 79 pages (this included why each fund was recommended, its performance, charges and a summary of the methodology and due diligence carried out). That didnt include the suitability report which is issued in addition but it much shorter (this is a compliance-focused report that disregards performance and focuses on why and costs).

The additional comments by the accountant don't inspire confidence.