Limited company director and pensions

kel1974

Hi

Can anyone give a little bit of advice?

I am the director and only employee of my small business.  I take home an average of £550 a month after business costs - expenses, paying contractors etc.  So as you can see, this isn't much.  As I have a child and disability the rest of my finances are made up of universal credit.  I just turned 50 and started to think about pensions.  I have checked my government pensions contributions and I am on forecast to receive the maximum state pension, but wondered if I should be contributing to a private pension.  I do have an old pension that is forecast to mature at £30 000, but this was obtained through working in the local government sector years ago so I can't put into that.  Based on Martin's pension's information he advised to put in half your age as a percentage of your wages, so for me that would be around £137 as 25% of £550 is 137.5, but this is a very small amount for the pensions pot, but a large amount of my very small wages.

Is this worth doing anyone? Thanks in advance

Dazed_and_C0nfused

kel1974 said:

Hi

Can anyone give a little bit of advice?

I am the director and only employee of my small business.  I take home an average of £550 a month after business costs - expenses, paying contractors etc.  So as you can see, this isn't much.  As I have a child and disability the rest of my finances are made up of universal credit.  I just turned 50 and started to think about pensions.  I have checked my government pensions contributions and I am on forecast to receive the maximum state pension, but wondered if I should be contributing to a private pension.  I do have an old pension that is forecast to mature at £30 000, but this was obtained through working in the local government sector years ago so I can't put into that.  Based on Martin's pension's information he advised to put in half your age as a percentage of your wages, so for me that would be around £137 as 25% of £550 is 137.5, but this is a very small amount for the pensions pot, but a large amount of my very small wages.

Is this worth doing anyone? Thanks in advance

Are you sure about that?

A local government (LGPS) pension is more like deferred salary, you will receive £x per year (revalued for inflation on an annual basis) based on your salary and length of service.  It's not a pot of money and definitely doesn't "mature".  Although it will have a normal pension age, quite possibly 60, where the pension accrued will be paid without actuarial reduction.

You should find out more about that pension as it might surprise you how much it is expected to pay.

dunstonh

 I do have an old pension that is forecast to mature at £30 000, but this was obtained through working in the local government sector years ago so I can't put into that.  

As mentioned above, that comment does not make sense, as LGPS is a defined benefit scheme that pays defined benefits.  It doesn't have a fund value.

 Based on Martin's pension's information he advised to put in half your age as a percentage of your wages, so for me that would be around £137 as 25% of £550 is 137.5, but this is a very small amount for the pensions pot, but a large amount of my very small wages.

Martin doesnt give advice.  He is a journalist.   His opinions can often be very sensible, but they are not personalised.  He himself admitted to me many years ago that what is written has to be short and snappy and cannot cover all variences and that it wont be right for everyone all of the time.

So, you should focus on your needs and not be worried about generic examples.

Is this worth doing anyone? 

It doesnt appear you are on for much of an income in retirement.  Are you single or do you have a spouse or partner that you will be able to rely on?   If you do, then you should view retirement planning jointly.

Ultimately, anything you put aside is better than not putting anything aside.  

amyfairweather

When you ask if 'you' should be paying in to a personal pension, the answer is no.

What you should do though is have your Ltd company pay in to your pension as an EMPLOYER contribution, NOT EMPLOYEE.  It will save on your Corporation Tax and Dividend Tax bill.

Take a look at the likes of PensionBee, etc.  There is free money available simply for signing up and you are not stuck with another set monthly outgoing, you can pay in when you have the funds available.

I would suggest looking at efficiencies as well in the business.  The amount of waste I get to see is unbelievable.

Marcon

kel1974 said:

Hi

Can anyone give a little bit of advice?

I am the director and only employee of my small business.  I take home an average of £550 a month after business costs - expenses, paying contractors etc.  So as you can see, this isn't much.  As I have a child and disability the rest of my finances are made up of universal credit.  I just turned 50 and started to think about pensions.  I have checked my government pensions contributions and I am on forecast to receive the maximum state pension, but wondered if I should be contributing to a private pension.  I do have an old pension that is forecast to mature at £30 000, but this was obtained through working in the local government sector years ago so I can't put into that.  Based on Martin's pension's information he advised to put in half your age as a percentage of your wages, so for me that would be around £137 as 25% of £550 is 137.5, but this is a very small amount for the pensions pot, but a large amount of my very small wages.

Is this worth doing anyone? Thanks in advance

If you (or more accurately your limited company) makes pension contributions to a private pension for you, how will this be funded? Beware reaching the point where your salary drops below the level at which you are credited with NI contributions even though you/your employer don't actually pay NI.

See https://www.gov.uk/government/publications/rates-and-allowances-national-insurance-contributions/rates-and-allowances-national-insurance-contributions You may be forecast to receive the maximum state pension, but I'll wager that forecast includes the caveat that you have to pay at least another n years to reach the maximum?