Financial Planning

Jaguar_Skills

Let me start by saying I completely understand that I am in an extremely privileged position, but I could really do with a bit more of a steer on my financial planning for the future.   I have tried to summarise as much as I can below but happy to answer anything else if more information is needed.

-          Aged 36, with two kids and a fiancée who doesn’t work.   Additional Rate Tax Payer.

 

-          We have two properties.  Our main residence which we have paid the mortgage off (following lots of overpayments and equity release from BTL).  A BTL which brings in circa £1,100 PCM with current mortgage payments of around £300.

 

-          My Private Pension with circa £250k (around 90% equities), I try and put roughly £30k in a year as my employer’s pension means that I nearly hit the £40k per annum.  I am slightly concerned that I am going to hit the lifetime allowance and so maybe I should not be putting so much in.   However, the trade off is that obviously it brings down my tax a bit.  I don’t really understand the implications of going over the £1,073,000 LTA however.

 

-          Workplace pension of £58k

 

-          OH Pension of circa £40k but as she is not currently working, she is not currently paying in.   We talked about the fact that if she does decide to go back to work, her money would probably go into her pension to balance things a bit.

 

-          Vanguard ISA which I pay £750 per month into (currently at circa £12k – probably need to max this out a bit more and maybe reduce pension payments?)

 

-          Both have LISAs which we put the £4k per tax year into.   Only just started this last tax year so with the govt bonus these are between £4k-£5k each.

I am sure I have probably missed information off here so please shout if anything more is needed.   I do try and be as careful as I can with money albeit I’ve never really studied anything to do with it.   Perhaps I need an IFA to go through everything? Not sure if it is really worth it….

El_Torro

Regarding your pension payments, do you get 40% tax relief on the full £30k you pay in a year? If not then you should definitely look to divert some of this to S&S ISAs. Even if you do it may be worth diverting some of the money anyway. Hitting the LTA isn’t a disaster, though it’s good to at least try to avoid it. 

Your partner can pay £2,880 a year into a pension, even if they have no income. Probably worth doing for retirement planning purposes. 

Your finances seem to be in reasonably good order so I’m not sure you need an IFA. Maybe if you want more insight into what you should be investing, though that can be learnt without using an IFA. 

Jaguar_Skills

 El_Torro said:

Regarding your pension payments, do you get 40% tax relief on the full £30k you pay in a year? If not then you should definitely look to divert some of this to S&S ISAs. Even if you do it may be worth diverting some of the money anyway. Hitting the LTA isn’t a disaster, though it’s good to at least try to avoid it. 

Your partner can pay £2,880 a year into a pension, even if they have no income. Probably worth doing for retirement planning purposes. 

Your finances seem to be in reasonably good order so I’m not sure you need an IFA. Maybe if you want more insight into what you should be investing, though that can be learnt without using an IFA. 

Re the 40%, how would I know if I am getting the 40% tax relief? I might be misunderstanding the question!

Dazed_and_C0nfused

Jaguar_Skills said:

 El_Torro said:

Regarding your pension payments, do you get 40% tax relief on the full £30k you pay in a year? If not then you should definitely look to divert some of this to S&S ISAs. Even if you do it may be worth diverting some of the money anyway. Hitting the LTA isn’t a disaster, though it’s good to at least try to avoid it. 

Your partner can pay £2,880 a year into a pension, even if they have no income. Probably worth doing for retirement planning purposes. 

Your finances seem to be in reasonably good order so I’m not sure you need an IFA. Maybe if you want more insight into what you should be investing, though that can be learnt without using an IFA. 

Re the 40%, how would I know if I am getting the 40% tax relief? I might be misunderstanding the question!

It depends on the method you use to contribute to the pension.

Net pay = you contribute and the contributions reduces your pay for tax purposes i.e. salary £170k and 10% net pay contribution = taxable pay (P60 pay amount) = £153k.  Maximum tax relief received each pay day.

Salary sacrifice = no tax relief is due to you as you are agreeing to a lower salary in return for your employer contributing more.  You save tax (and NI) by not having the salary to be taxed in the first place.

Relief at source = you pay a net contribution and the pension company adds basic rate tax relief.  If you are a higher (or additional) rate payer you will be due some extra tax relief as these contributions increase the amount of your basic rate tax band.  They also reduce your adjusted net income which is used for things like HICBC and PA taper but they don't reduce your taxable income.

In your situation you would get the additional tax relief via your Self Assessment return.

Jaguar_Skills

Dazed_and_C0nfused said:

Jaguar_Skills said:

 El_Torro said:

Regarding your pension payments, do you get 40% tax relief on the full £30k you pay in a year? If not then you should definitely look to divert some of this to S&S ISAs. Even if you do it may be worth diverting some of the money anyway. Hitting the LTA isn’t a disaster, though it’s good to at least try to avoid it. 

Your partner can pay £2,880 a year into a pension, even if they have no income. Probably worth doing for retirement planning purposes. 

Your finances seem to be in reasonably good order so I’m not sure you need an IFA. Maybe if you want more insight into what you should be investing, though that can be learnt without using an IFA. 

Re the 40%, how would I know if I am getting the 40% tax relief? I might be misunderstanding the question!

It depends on the method you use to contribute to the pension.

Net pay = you contribute and the contributions reduces your pay for tax purposes i.e. salary £170k and 10% net pay contribution = taxable pay (P60 pay amount) = £153k.  Maximum tax relief received each pay day.

Salary sacrifice = no tax relief is due to you as you are agreeing to a lower salary in return for your employer contributing more.  You save tax (and NI) by not having the salary to be taxed in the first place.

Relief at source = you pay a net contribution and the pension company adds basic rate tax relief.  If you are a higher (or additional) rate payer you will be due some extra tax relief as these contributions increase the amount of your basic rate tax band.  They also reduce your adjusted net income which is used for things like HICBC and PA taper but they don't reduce your taxable income.

In your situation you would get the additional tax relief via your Self Assessment return.

Got it.   I now make all my contributions via sal sacrifice to take advantage of my employer giving me the NI/