Short Term Pension Advice

diver10

Sarahspangles said:

diver10 said:

NoMore said:

Is she a director of this company ? Most tax efficient would be to make contributions directly from the company to a pension.

she is one of the directors, yes

Have the directors planned for the eventual closure, or for how each will manage to exit? It’s outside my experience but I’ve seen posts where prior planning could have reduced the tax bills.

I have got a SIPP, and it’s not difficult to manage. The platform is no more difficult to use than an online banking app. You then need to choose funds, just as you do in most workplace pensions. The platform probabiy has much more choice, but may suggest some favourite funds which makes it less overwhelming. Users of this forum can’t advise but will normally comment on choices.

Ive no idea about the tax planning on the winding up of the business but the plan is around 5/6 years which coincides with the owner being 65/66 and my wife being 60.  It's a small company with 5 employees plus around 10 subcontractors. 

I think SIPP may be the way forward, it's just very new to me. Ive been very fortunate to have an excellent FS Pension and although we are good at saving, we aren't that good at making our money work well. 

What ever happened to the old style (are they old now) Personal Pensions? 

diver10

dunstonh said:

she is one of the directors, yes

Is her pension contribution a personal contribution or employer contribution?
It should be employer contribution as there is more tax saved that way.

Stakeholder pensions are largely obsolete now (or perhaps niche would be a better word).   However, she could use that.      The main difference between a SIPP and a stakeholder pension is the SIPP has over 30,000 invest options whereas the stakeholder has around 20 (typically).      However, just because the SIPP has over 30,000 options doesn't mean you need to use 30,000.    The same investment styles on the 20 fund stakeholder exist on the SIPP.

So most good providers of SIPP would offer a hands off investment (AJ Bell, Vanguard Etc....)?

The whole point of a real SIPP is investment selection availability.  So, yes.

It's definately a Personal contribution, that was the plan. Ive asked my brother in law (the owner) how he funds his pension but im pretty sure it's out of company funds not his pre taxed income. 

If she chooses a good broad range of funds, is there a need to buy/sell swap all the time? This is the bit I dont understand. 

diver10

Albermarle said:

Sarahspangles said:

diver10 said:

NoMore said:

Is she a director of this company ? Most tax efficient would be to make contributions directly from the company to a pension.

she is one of the directors, yes

Have the directors planned for the eventual closure, or for how each will manage to exit? It’s outside my experience but I’ve seen posts where prior planning could have reduced the tax bills.

I have got a SIPP, and it’s not difficult to manage. The platform is no more difficult to use than an online banking app. You then need to choose funds, just as you do in most workplace pensions. The platform probabiy has much more choice, but may suggest some favourite funds which makes it less overwhelming. Users of this forum can’t advise but will normally comment on choices.

You can pay an IFA for personalised financial advice.
You can learn the basics your self. This forum can be very useful for that.

This is how I have ended up here. 

I have had two IFAs in the last 12 months who have gone through the early stages of their process. I cannot get my head around paying near on £1000 for advice whether we take it or not or 3% fee* for anything invested plus at least 1% a year. Maybe I'm missing something? I know SIPP providers charge.

*contacted an IFA as we also have a lump sum to invest as well as the need for a pension. 

diver10

LHW99 said:

My wife is concerned that her fund may not grow or even keep up with even the best Cash ISAs; she listens to others in the office whose pensions are not doing well.

NoMore said:

First place to start is probably her current work pension. This may be a the easiest and if salary sacrifice available most tax efficient way.

She doesn't have one/an option other than a Stakeholder that she pays £20 a month into. They are a small company which is run by her and a brother. 

The two statements in bold seem rather contrary. Who are these "others in the office", if it's only her and a brother (presumably also a director?). Are they not employees of the company?

it's a small company with 5 employees plus around 10 subcontractors. Two in the office who are often checking their pension Apps on phone and announcing the results out loud. Maybe I ought to have left this information out, in reality she's just not much of a "risk" taker, which in reality has cost us some good potential gains over the last 30 years or so. 

Sarahspangles

diver10 said:

Sarahspangles said:

diver10 said:

NoMore said:

Is she a director of this company ? Most tax efficient would be to make contributions directly from the company to a pension.

she is one of the directors, yes

Have the directors planned for the eventual closure, or for how each will manage to exit? It’s outside my experience but I’ve seen posts where prior planning could have reduced the tax bills.

I have got a SIPP, and it’s not difficult to manage. The platform is no more difficult to use than an online banking app. You then need to choose funds, just as you do in most workplace pensions. The platform probabiy has much more choice, but may suggest some favourite funds which makes it less overwhelming. Users of this forum can’t advise but will normally comment on choices.

Ive no idea about the tax planning on the winding up of the business but the plan is around 5/6 years which coincides with the owner being 65/66 and my wife being 60.  It's a small company with 5 employees plus around 10 subcontractors. 

I think SIPP may be the way forward, it's just very new to me. Ive been very fortunate to have an excellent FS Pension and although we are good at saving, we aren't that good at making our money work well. 

What ever happened to the old style (are they old now) Personal Pensions? 

It is still possible to set up a personal pension, lots of people end up with one as they leave a job and convert a workplace pension to one where they contribute directly.  SIPPs do tend to be recommended because if you choose a cost effective platform and get your head round how investment works the fees and charges are lower.

I know a few small business owners, and their accountant (separate firm) seems to be/has been involved in ensuring that pension contributions and arrangements for retirement on sale/closure are tax efficient. It seems odd that there is a different arrangement for one director but the other is on the same footing as an employee.

dunstonh

I have had two IFAs in the last 12 months who have gone through the early stages of their process. I cannot get my head around paying near on £1000 for advice whether we take it or not or 3% fee* for anything invested plus at least 1% a year. Maybe I'm missing something? I know SIPP providers charge.

Well, at the moment she has been paying into the pension the wrong way for a director.   She has a product that is largely obsolete (or niche at best) and likely three times the cost of what an IFA can put together and doesn't know about the investments.

 It seems odd that there is a different arrangement for one director but the other is on the same footing as an employee.

That is odd, as you say.  Typically, pension contributions for the directors tends to match the shareholding ratio.  Otherwise if its not even, it means one director is getting more out of the company than the other.    

Sarahspangles

diver10 said:

This is how I have ended up here. 

I have had two IFAs in the last 12 months who have gone through the early stages of their process. I cannot get my head around paying near on £1000 for advice whether we take it or not or 3% fee* for anything invested plus at least 1% a year. Maybe I'm missing something? I know SIPP providers charge.

*contacted an IFA as we also have a lump sum to invest as well as the need for a pension. 

Often people think they’re talking to an IFA where they are actually dealing with a (tied) Financial Advisor.

Good advice is worth the fee in the long run. You’re not paying for an hour of grass cutting, you’re paying for skills and knowledge and insurance to cover both parties if they advise you unsuitably.

Albermarle

diver10 said:

Sarahspangles said:

diver10 said:

NoMore said:

Is she a director of this company ? Most tax efficient would be to make contributions directly from the company to a pension.

she is one of the directors, yes

Have the directors planned for the eventual closure, or for how each will manage to exit? It’s outside my experience but I’ve seen posts where prior planning could have reduced the tax bills.

I have got a SIPP, and it’s not difficult to manage. The platform is no more difficult to use than an online banking app. You then need to choose funds, just as you do in most workplace pensions. The platform probabiy has much more choice, but may suggest some favourite funds which makes it less overwhelming. Users of this forum can’t advise but will normally comment on choices.

Ive no idea about the tax planning on the winding up of the business but the plan is around 5/6 years which coincides with the owner being 65/66 and my wife being 60.  It's a small company with 5 employees plus around 10 subcontractors. 

I think SIPP may be the way forward, it's just very new to me. Ive been very fortunate to have an excellent FS Pension and although we are good at saving, we aren't that good at making our money work well. 

What ever happened to the old style (are they old now) Personal Pensions? 

Technically a final salary type pension is known as a Defined Benefit ( DB) pension.
The other type are known as Defined Contribution ( DC) pensions.
SIPPs, personal pensions, stakeholder pensions, workplace pensions ( if not DB ) auto enrolment pensions, robo pensions etc are all variations of a DC pension. They all are bound by exactly the same tax and legal rules. 
The difference tend to be in the range of investments available ( from thousands to just a handful) and differences in charging structure.
Once SIPPs were really for more experienced investors, but for some reason seem to have become the go to product for many, despite the fact that for the majority something simpler would probably be more suitable. 
One advantage with most SIPP providers, is that they have up to date software and good websites/apps, which is not always the case for other DC providers. 

diver10

dunstonh said:

I have had two IFAs in the last 12 months who have gone through the early stages of their process. I cannot get my head around paying near on £1000 for advice whether we take it or not or 3% fee* for anything invested plus at least 1% a year. Maybe I'm missing something? I know SIPP providers charge.

Well, at the moment she has been paying into the pension the wrong way for a director.   She has a product that is largely obsolete (or niche at best) and likely three times the cost of what an IFA can put together and doesn't know about the investments.

 It seems odd that there is a different arrangement for one director but the other is on the same footing as an employee.

That is odd, as you say.  Typically, pension contributions for the directors tends to match the shareholding ratio.  Otherwise if its not even, it means one director is getting more out of the company than the other.    

she's a non-shareholding director. The stakeholder pension was taken out 20 years ago, someone came into her workplace and "sold" it to her. It's a silly nominal amount but it's what she thought that she could afford at the time.  It's annoying but I can't hold her hand all the time and ive no idea what pension provisions all the 5 staff have; I think they range from nothing to banging away the maximum pa.

diver10

Thanks everyone, I think having looked at the options unless my wife comes back with any ideas then im going to suggest a Managed Fund with one of the bigger providers.