Highest Return/Lowest Risk Pension Options

scrooge2008

Best Company Director Pensions Compared in April 2023 (investingreviews.co.uk) - found this useful.

dunstonh

scrooge2008 said:

Best Company Director Pensions Compared in April 2023 (investingreviews.co.uk) - found this useful.

That is a marketing site that gets paid referral fees.   Having a referral link is all that requires to be listed on that site.   It is certainly not a site that focuses on quality.

scrooge2008

That may be the case Dunstonh but I have found it very informative and easy for a layman to understand. 

Please correct me if I am wrong or advise better strategy,  but my current thinking is to use a company like Pension Bee and contribute my whole tax allowance in each year thereby generating a 25% tax uplift on £12,750.00 (From Savings).  I will split this between a tracker fund 25% and cash or gilts.  I am hoping to get a return of around 30% overall on that £12,750 and continue to put this in every year until I am 68 and potentially indefinitely?

I am planning to have £55,000.00 in company reserves - in three different ZOPA pots for immediate, short term and longer term requirements.
 
I am also planning to pay in £1,000.00 a month from my company directly to this Pension Bee too to take advantage of the corporate tax relief.

What do you think?

Albermarle

 I will split this between a tracker fund 25% and cash or gilts.  I am hoping to get a return of around 30% overall on that £12,750 and continue to put this in every year until I am 68 and potentially indefinitely?

In very simple terms, the longer the time scale before you need the money, the higher should be the equity %, as it has the best chance of beating inflation. Long term being > 10 years.

For a more short term time scale ( < 5 years) the opposite should apply.

For medium term , say 7 to 10 years, some halfway house.

Caveat is that with a large % equity, it can be a bit of a roller coaster rise which does not suit many people. Which is why some of the most popular funds tend to be around 50%/60% equity.

When you say a return of 30% it is better to think in terms of % above inflation. For example 30% over 10 years when inflation is 60% is not a great result. In real terms it is a 30% loss.

dunstonh

That may be the case Dunstonh but I have found it very informative and easy for a layman to understand. 

Information may be useful but it is important to recognise that the providers listed are only there because they pay a referral fee if the person signs up from that link.   Especially, when that fact is not disclosed on the website and its pretends to review providers.   There are plenty of pensions available that I would place ahead of some of the providers listed on that site but they dont pay referral links.

That sort of thing happens frequently on the web and not just with financial products.     So called review sites will often only list those that give referral fees and it is not uncommon to see the top rated as being the one that has the highest referral fee.

Dazed_and_C0nfused

scrooge2008 said:

That may be the case Dunstonh but I have found it very informative and easy for a layman to understand. 

Please correct me if I am wrong or advise better strategy,  but my current thinking is to use a company like Pension Bee and contribute my whole tax allowance in each year thereby generating a 25% tax uplift on £12,750.00 (From Savings).  I will split this between a tracker fund 25% and cash or gilts.  I am hoping to get a return of around 30% overall on that £12,750 and continue to put this in every year until I am 68 and potentially indefinitely?

I am planning to have £55,000.00 in company reserves - in three different ZOPA pots for immediate, short term and longer term requirements.
 
I am also planning to pay in £1,000.00 a month from my company directly to this Pension Bee too to take advantage of the corporate tax relief.

What do you think?

Earlier you said this,

I take a wage of about £850.00 a month from the company 

So how would you be eligible to make a gross personal contribution of £15,937?

scrooge2008

I did get £850.00 a month, but as mentioned earlier the accountant has advised that this will be going up in April to £1047.50 a month - £12,570.00 a year.  Also I do a self assessment where I get income from other sources, outwith my business, so I am not sure whether any of that can be included as income.  It does all get taxed.

Also think perhaps 50/50 split might be wiser as may not need to access this pension at 68 so could leave it in longer if market was dire.

Is there a formula that can be used to estimate eventual pension pot that utilises compound interest and putting in a set amount each year that gets the government uplift.

Can I make contributions for previous years?

Thanks.

Dazed_and_C0nfused

scrooge2008 said:

I did get £850.00 a month, but as mentioned earlier the accountant has advised that this will be going up in April to £1047.50 a month - £12,570.00 a year.  Also I do a self assessment where I get income from other sources, outwith my business, so I am not sure whether any of that can be included as income.  It does all get taxed.

Can I make contributions for previous years?

Thanks.

No, you can only contribute for the current tax year.

It is sometimes possible to use carry forward to contribute more in the current year but that is where the £60,000 annual allowance has been used.

If your pensionable earnings are £12,570 then you can only pay £10,056.  Which will be grossed up to £12,570 with the basic rate tax relief.

It's not £12,570 plus basic rate tax relief.

scrooge2008

Thanks Dazed and Confused - that is the bit that I have been really struggling to get my head around and I am kicking myself that I did not do this much earlier as it seems like a no brainer .

What is included as pensionable earnings - is it just money from PAYE?

Dazed_and_C0nfused

scrooge2008 said:

Thanks Dazed and Confused - that is the bit that I have been really struggling to get my head around and I am kicking myself that I did not do this much earlier as it seems like a no brainer .

What is included as pensionable earnings - is it just money from PAYE?

No, more complicated and that would penalise the self employed!

This is a good start,

https://www.rossmartin.co.uk/private-client-a-estate-planning/income-losses-claims-reliefs/1034-relevant-earnings-for-pensions-purposes