starting a pension in 40's with a fair amount

midlifesaver

Hello all,

I was wondering if anybody can help me with some financial planning.

My situation is I have a limited company my salary and dividends come through at around £120k-£150k per year (pre personal tax). I have £200k left on my flat with equity of about £400k.

I have no personal savings, no ISA and a pension from years ago worth about £15k. I’m 43 years old.

What I’d like is to make the most of any tax breaks and save for retirement.

I’d like to start putting in £1-£1.5k per month, and I’d love to have the flexibility to put in more if I’ve had a good month.

Does anybody have any suggestions? I’m thinking of maxing out the cash ISA and then for the pension I’m really not so sure. I don’t want to spend a fortune on fund managers and would like a simple set-up that I do not need to change every 12 months,.


Any help is greatly appreciated

Brynsam

midlifesaver wrote: »

I was wondering if anybody can help me with some financial planning.

My situation is I have a limited company my salary and dividends come through at around £120k-£150k per year (pre personal tax).

The obvious candidate would seem to be an IFA! Invest some of your dividend income on your own financial future - could be the best investment you ever make. If you have income of upwards of £100K pa you don't need to rely on free 'advice' based on next to no knowledge of your situation (health, attitude to risk, financial dependants...).

Dox

midlifesaver wrote: »

My situation is I have a limited company my salary and dividends come through at around £120k-£150k per year (pre personal tax).
I have no personal savings, no ISA and a pension from years ago worth about £15k. I’m 43 years old.
I’d like to start putting in £1-£1.5k per month, and I’d love to have the flexibility to put in more if I’ve had a good month.

Does anybody have any suggestions?

If you have well over £100K a year coming in, why do you have no savings - and why do you only want to put in £1-£1.5K a month with 'more if you've had a good month'? Your company can make the contributions to your pension scheme with all the tax advantages that provides, rather than paying you taxable dividends.

A simple stakeholder pension would give you all you need (you could always transfer to a SIPP when it comes to taking benefits from the scheme if you want more flexibility).

midlifesaver

thnak you Brynsam, when I was writing my post it did seem naive to discount an IFA. How much do they typically charge?

midlifesaver

that's a really good question Dox! I have no idea why I haven't saved over the years. I'm always cautious taking too much money out of the business incae of a rainy day, and I did make some significant maortgage overpayments over the last couple of years. I don't think I've had time, or made time to understand savings and set it all up.

[Deleted User]

midlifesaver wrote: »

thnak you Brynsam, when I was writing my post it did seem naive to discount an IFA. How much do they typically charge?

I have paid around £3k historically for a one off consultation and plan

dunstonh

My situation is I have a limited company my salary and dividends come through at around £120k-£150k per year (pre personal tax). I have £200k left on my flat with equity of about £400k.

You are really missing a trick by not using pensions.

Does anybody have any suggestions?

The limited filters you have given do not remove any providers or options. i.e. they virtually all meet what you need.

I’m thinking of maxing out the cash ISA and then for the pension I’m really not so sure.

That would probably be a costly mistake.

I don’t want to spend a fortune on fund managers and would like a simple set-up that I do not need to change every 12 months,.

Yet you are quite happy to pay 40-80 times more a year in tax than the difference in charges.

when I was writing my post it did seem naive to discount an IFA. How much do they typically charge?

A lot less than the tax you are paying unnecessarily.

and I did make some significant maortgage overpayments over the last couple of years.

Again, financially not a good thing to do (noting we have very limited information).

I have paid around £3k historically for a one off consultation and plan

And in this scenario, it can be paid by the company and therefore reduce Corporation Tax.

MEM62

midlifesaver wrote: »

I have a limited company my salary and dividends come through at around £120k-£150k per year.

midlifesaver wrote: »

I have no personal savings, no ISA and a pension from years ago worth about £15k. I’m 43 years old.

midlifesaver wrote: »

I’d like to start putting in £1-£1.5k per month.

midlifesaver wrote: »

Does anybody have any suggestions?

Yes, prepare for a significant lifestyle change when you retire.

You are starting late and have missed out on years of tax efficiencies and investment growth. Even at the contribution rates you are suggesting, your retirement fund will not support the lifestyle that you current income would afford you.

I am surprised that your accountant has not already raised this issue with you. A good accountant would have done!

Speak to an IFA and get the ball rolling. Fortunately, your income is sufficient to give you the opportunity of building a reasonable pot by retirement age but I would not waste any more years in getting your pension provision sorted.

ex-pat_scot

a few things, in no particular order.


1. war chest. As a contractor, how much do you have, is it in the company as retained profits, or do you withdraw into ISA? You will be the best person to work out how much of a cushion you require, but wisdom typically suggests 6m min / 12m ideal of your basic life costs. Normally these are retained in the business, unless it is tax efficient to withdraw.


2. savings. Your company can make tax efficient pension contributions. Frankly £1,500 odd per month is not going to cut it as a decent retirement plan. With nothing in your pot, you need to be thinking about the full £40,000 pa plus possibly using your unused prior year allowances. 10 years of that would get you £400,000 contributions, which is a good start.


3. your plan. Your general lack of financial stability suggests you are perhaps drifting, enjoying the day to day but without any real long term goal. Except you have now asked the question, so you at least recognise the need.
You need to come up with a broad life plan. Dull perhaps, but that will form the basis of everything else.


- how much do I need / want at the moment?
- how long do I want to continue doing the same?
- when do I want to stop? (/slow / etc)
- how much will I need / want at that point?


Then the calculations:
- what is my surplus (income over expenditure)
- how to invest tax-efficiently (probably SIPP)
- what will that provide, given the amount, duration and your risk appetite / expected investment return?
- if that is insufficient, can I change amount, duration or risk appetite?
- is this doable, or do I have to rethink?


Lifestyle is also a key consideration. Are you going to continue in the same vein, same income, work and spending patterns? Family?


You need to work through some of these before coming up with some sort of more detailed plan, I think.

xylophone

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/extract-profits-from-business/

Consider a pension contribution from the company.

You could see an IFA

https://adviserbook.co.uk/

Check "confirmed independent" when options come up.

Or DIY

https://www.amazon.co.uk/DIY-Pensions-Simple-Retirement-Planning-ebook/dp/B00B7QN8XM

https://monevator.com/find-the-best-online-broker/

https://monevator.com/low-cost-index-trackers/

midlifesaver

ex-pat_scot wrote: »

a few things, in no particular order.


1. war chest. As a contractor, how much do you have, is it in the company as retained profits, or do you withdraw into ISA? You will be the best person to work out how much of a cushion you require, but wisdom typically suggests 6m min / 12m ideal of your basic life costs. Normally these are retained in the business, unless it is tax efficient to withdraw.


2. savings. Your company can make tax efficient pension contributions. Frankly £1,500 odd per month is not going to cut it as a decent retirement plan. With nothing in your pot, you need to be thinking about the full £40,000 pa plus possibly using your unused prior year allowances. 10 years of that would get you £400,000 contributions, which is a good start.


3. your plan. Your general lack of financial stability suggests you are perhaps drifting, enjoying the day to day but without any real long term goal. Except you have now asked the question, so you at least recognise the need.
You need to come up with a broad life plan. Dull perhaps, but that will form the basis of everything else.


- how much do I need / want at the moment?
- how long do I want to continue doing the same?
- when do I want to stop? (/slow / etc)
- how much will I need / want at that point?


Then the calculations:
- what is my surplus (income over expenditure)
- how to invest tax-efficiently (probably SIPP)
- what will that provide, given the amount, duration and your risk appetite / expected investment return?
- if that is insufficient, can I change amount, duration or risk appetite?
- is this doable, or do I have to rethink?


Lifestyle is also a key consideration. Are you going to continue in the same vein, same income, work and spending patterns? Family?


You need to work through some of these before coming up with some sort of more detailed plan, I think.

You've touched upon quite a few points here. I suppose I've always been more interested in having fun with it now, rather than having a huge nest egg when I'm older. Paying straight from my business into a pension and avoiding tax would be a good start. I pay huge amounts of tax from the business and personal, I'm not a contractor the business is smallish with 2 people working for me and about £350k in gross profits per year. I've spoken to a couple of friends who have recommended IFA's.


thank you to everybody for your suggestions and pointers. I just need to get this sorted asap.