Looking for pension and retirement advice - in unusual circumstances

general_piffle

Greetings all, I'm looking for pension and retirement advice, and haven't really gone about preparing in a traditional way. 

Some brief background:

• 55 years old
• I've worked/contributed all of my life and am due the full state pension
• 2 businesses, one mine and one I share with my wife, mine has an annual turnover of about 150k, our joint business is around 500k annually
• I don't have a private or company pension of any sort
• My major asset (separate to our family home) is a property I have in London worth approx. 700k

Apart from that there are various assets, like cars and motorbikes that no doubt in 20 years or so I'll probably thin out as I get too old to at least ride the bikes.

My query is how best to prepare for retirement? I guess I'm thinking of working for another 10 to 12 years, with the last few of those years possibly being a bit more relaxed/part-time.

My business (the 150k turnover one) is a Ltd company and I'm the sole employee. Could I start tucking money away into a pension over the next 10 to 12 years? Would it be more beneficial to me and/or the business from a financial perspective to do this as a 'personal pension' or as an 'employer pension' and put money from company profits away each month?

The businesses I don't know; mine I couldn't really sell as it relies on me. The other business we could definitely sell, and I suspect my wife wouldn't mind retiring early if we were in a position to do so (she's 45). 

The property in London, I could sell I guess, or continue to rent out and take that as a monthly salary in retirement (rent is currently £1500 per month). For capital gains tax I spent more time living there than renting it out over a 20 year period of ownership, so I believe CGT will be minimal.

Finances are not really a strong-point for me, I've just worked damn hard all my life and had some lucky breaks. Any advice on company or personal pension from now until retirement - plus what to do with other assets as retirement approaches, would be very gratefully received. 

Thanks in advance!

Dazed_and_C0nfused

general_piffle said:

Greetings all, I'm looking for pension and retirement advice, and haven't really gone about preparing in a traditional way. 

Some brief background:

• 55 years old
• I've worked/contributed all of my life and am due the full state pension
• 2 businesses, one mine and one I share with my wife, mine has an annual turnover of about 150k, our joint business is around 500k annually
• I don't have a private or company pension of any sort
• My major asset (separate to our family home) is a property I have in London worth approx. 700k

Apart from that there are various assets, like cars and motorbikes that no doubt in 20 years or so I'll probably thin out as I get too old to at least ride the bikes.

My query is how best to prepare for retirement? I guess I'm thinking of working for another 10 to 12 years, with the last few of those years possibly being a bit more relaxed/part-time.

My business (the 150k turnover one) is a Ltd company and I'm the sole employee. Could I start tucking money away into a pension over the next 10 to 12 years? Would it be more beneficial to me and/or the business from a financial perspective to do this as a 'self employed pension' or as an 'employer pension' and put money from company profits away each month?

The businesses I don't know; mine I couldn't really sell as it relies on me. The other business we could definitely sell, and I suspect my wife wouldn't mind retiring early if we were in a position to do so (she's 45). 

The property in London, I could sell I guess, or continue to rent out and take that as a monthly salary in retirement (rent is currently £1500 per month). For capital gains tax I spent more time living there than renting it out over a 20 year period of ownership, so I believe CGT will be minimal.

Finances are not really a strong-point for me, I've just worked damn hard all my life and had some lucky breaks. Any advice on company/personal or self-employed pension from now until retirement - plus what to do with other assets as retirement approaches, would be very gratefully received. 

Thanks in advance!

The first thing you need to do is make it clear if you are self employed or not 🤔

You make no reference to any income from being self employed.  But you refer to self employed pensions a couple of times.

What income do you have from being self employed?  Or are you not actually self employed?  If not then why are you asking about self employed pensions?

general_piffle

Dazed_and_C0nfused said:

The first thing you need to do is make it clear if you are self employed or not 🤔

You make no reference to any income from being self employed.  But you refer to self employed pensions a couple of times.

What income do you have from being self employed?  Or are you not actually self employed?  If not then why are you asking about self employed pensions?

Sorry for the confusion! I'm not self-employed, I'm the sole employee (Director) of my Ltd company, which pays me salary and dividend. Plus a Director of the other company.

Tucosalamanca

I don't think that your situation is that unusual, fairly typical for a small business I suspect.

First thing I noticed was the property.
£18,000 income on a property worth £700,000, produces a yield of around 2.5%

I'm guessing that you paid far less, but as it stands, it's a terrible not a good investment (unless the property has some unique qualities and is worth keeping regardless of the return).

But let's wind back a little bit, you asked about pensions way back in 2012, what happened?
https://forums.moneysavingexpert.com/discussion/4065465/self-employed-please-recommend-a-pension-scheme#latest

Working damn hard all your life is all well and good but you really need to work smarter.

If finances are not your strong point, I would say that it's essential to take professional advice.

With two businesses, you must have some involvement with accountants.
You're running limited companies, that gives you lots of tax efficient options (which you don't appear to be utilising).
I would be contacting my accountant (or finding a new one) for a chat asap.
They can guide you and will know an IFA to deal with pension planning (among other things).

I wouldn't leave it any longer as I fear that you're not currently making the best decisions....

general_piffle

Tucosalamanca said:

I don't think that your situation is that unusual, fairly typical for a small business I suspect.

First thing I noticed was the property.
£18,000 income on a property worth £700,000, produces a yield of around 2.5%

I'm guessing that you paid far less, but as it stands, it's a terrible not a good investment (unless the property has some unique qualities and is worth keeping regardless of the return).

But let's wind back a little bit, you asked about pensions way back in 2012, what happened?
https://forums.moneysavingexpert.com/discussion/4065465/self-employed-please-recommend-a-pension-scheme#latest

Working damn hard all your life is all well and good but you really need to work smarter.

If finances are not your strong point, I would say that it's essential to take professional advice.

With two businesses, you must have some involvement with accountants.
You're running limited companies, that gives you lots of tax efficient options (which you don't appear to be utilising).
I would be contacting my accountant (or finding a new one) for a chat asap.
They can guide you and will know an IFA to deal with pension planning (among other things).

I wouldn't leave it any longer as I fear that you're not currently making the best decisions....

I paid £175,000 for the property now worth £700,000. So, not too shabby.

Yes, when I asked back in 2012 I did start paying into a pension, but not consistently. Built up a small pot which got cashed in when I turned 55 last year, and absorbed by something key. Let's say a 'life event'. But this is by-the-by and not particularly relevant now.

Yes, we have a good accountant. Who I've already contacted about exactly this. However, I was hoping to gain some insights here. Thanks.

Dazed_and_C0nfused

general_piffle said:

Tucosalamanca said:

I don't think that your situation is that unusual, fairly typical for a small business I suspect.

First thing I noticed was the property.
£18,000 income on a property worth £700,000, produces a yield of around 2.5%

I'm guessing that you paid far less, but as it stands, it's a terrible not a good investment (unless the property has some unique qualities and is worth keeping regardless of the return).

But let's wind back a little bit, you asked about pensions way back in 2012, what happened?
https://forums.moneysavingexpert.com/discussion/4065465/self-employed-please-recommend-a-pension-scheme#latest

Working damn hard all your life is all well and good but you really need to work smarter.

If finances are not your strong point, I would say that it's essential to take professional advice.

With two businesses, you must have some involvement with accountants.
You're running limited companies, that gives you lots of tax efficient options (which you don't appear to be utilising).
I would be contacting my accountant (or finding a new one) for a chat asap.
They can guide you and will know an IFA to deal with pension planning (among other things).

I wouldn't leave it any longer as I fear that you're not currently making the best decisions....

I paid £175,000 for the property now worth £700,000. So, not too shabby.

Yes, when I asked back in 2012 I did start paying into a pension, but not consistently. Built up a small pot which got cashed in when I turned 55 last year, and absorbed by something key. Let's say a 'life event'. But this is by-the-by and not particularly relevant now.

Yes, we have a good accountant. Who I've already contacted about exactly this. However, I was hoping to gain some insights here. Thanks.

That is a really important piece of information which your original post neglected to mention.

Was it cashed in under the small pots rules?

If not then it seems like you have triggered the Money Purchase Annual Allowance.  Which places a significant restriction on future contributions to a DC pension.

Linton

How much ongoing income will you need in retirement?
You have not said much about your wife’s potential retirement income. 

Do you wish to leave a large inheritance after both of you die?

These are mainly rhetorical questions to indicate some of the sort of factors you need to consider  To make useful recommendations one needs to know a lot about your circumstances.

I feel your situation is sufficiently complex involving asset allocation, retirement planning, investment management and tax optimisation for you to get professional advice from a regulated Independent Financial Advisor rather than an accountant.  Avoid anyone who is not explicitly Independent as they may be no more than a salesman for their employers products.

Marcon

general_piffle said:

Greetings all, I'm looking for pension and retirement advice, and haven't really gone about preparing in a traditional way. 

Some brief background:

• 55 years old
• I've worked/contributed all of my life and am due the full state pension
• 2 businesses, one mine and one I share with my wife, mine has an annual turnover of about 150k, our joint business is around 500k annually
• I don't have a private or company pension of any sort
• My major asset (separate to our family home) is a property I have in London worth approx. 700k

Apart from that there are various assets, like cars and motorbikes that no doubt in 20 years or so I'll probably thin out as I get too old to at least ride the bikes.

My query is how best to prepare for retirement? I guess I'm thinking of working for another 10 to 12 years, with the last few of those years possibly being a bit more relaxed/part-time.

My business (the 150k turnover one) is a Ltd company and I'm the sole employee. Could I start tucking money away into a pension over the next 10 to 12 years? Would it be more beneficial to me and/or the business from a financial perspective to do this as a 'personal pension' or as an 'employer pension' and put money from company profits away each month?

The businesses I don't know; mine I couldn't really sell as it relies on me. The other business we could definitely sell, and I suspect my wife wouldn't mind retiring early if we were in a position to do so (she's 45). 

The property in London, I could sell I guess, or continue to rent out and take that as a monthly salary in retirement (rent is currently £1500 per month). For capital gains tax I spent more time living there than renting it out over a 20 year period of ownership, so I believe CGT will be minimal.

Finances are not really a strong-point for me, I've just worked damn hard all my life and had some lucky breaks. Any advice on company or personal pension from now until retirement - plus what to do with other assets as retirement approaches, would be very gratefully received. 

Thanks in advance!

Reading your post, I can only whole-heartedly agree that finances are not a strong point for you! Not sure why your title uses the words 'unusual circumstances', though, since there's plenty in your post which indicates you are far from unusual. Focussed on running a business to the point where a lot of other things are back burnered while you deal with today...

You say you are due a full pension. Have you actually checked to see if that's the case, or are you assuming it is because you've worked for 'lots of years'? https://www.gov.uk/check-state-pension

general_piffle said:

I paid £175,000 for the property now worth £700,000. So, not too shabby.

...but sadly your take on CGT is hopelessly wide of the mark. It can't be your 'main residence' because you refer to 'a family home' and a wife - and in the eyes of HMRC a married couple can only have one main residence. Your accountant will be able to explain the tax position if you sell (spoiler alert: your belief that CGT will be 'minimal' may not be your accountant's view).

general_piffle said:

Yes, when I asked back in 2012 I did start paying into a pension, but not consistently. Built up a small pot which got cashed in when I turned 55 last year, and absorbed by something key. Let's say a 'life event'. But this is by-the-by and not particularly relevant now.

Pretty much anyone can generate turnover by selling goods or services, but you've said nothing about whether your companies are profitable - and profit is what matters. You can't build up a pension pot unless the money is there to contribute. The fact you needed to cash in a small pension at 55 suggests that profits aren't that healthy?

Your 'not particularly relevant' cashing in of a small pension could be an equally major misunderstanding along with your take on CGT. Unless you did so under the 'small pots rule' (and you'd need to have a provider who offered this AND specify that was what you were doing - and of course the pot would need to have been under £10K at the time you cashed it in), you've triggered the Money Purchase Annual Allowance, meaning you are severely limited to the amount of tax-relievable contributions you or your company can make to a pension: maximum of £10K per tax year, including any tax relief on personal contributions.

You may also have limited your ability to use something known as 'carry forward' - you have to be a member of a registered pension scheme during each tax year you want to carry forward, and if you've cashed in the only pension you've ever had, that's going to knock out at least one tax year from the sound of things. Edit: for clarity, you can't use carry forward for a defined contribution scheme if you've trigged the MPAA, but could still potentially use it for a defined benefit scheme (which would mean getting a job which offers such a scheme - which in your case seems highly unlikely, although it might actually be no bad idea in terms of pension provision!).

general_piffle said:

Yes, we have a good accountant. Who I've already contacted about exactly this. However, I was hoping to gain some insights here. Thanks.

Thirteen years ago you were posting about wanting to put your feet up in retirement etc https://forums.moneysavingexpert.com/discussion/4065465/self-employed-please-recommend-a-pension-scheme#latest but you've cashed in even the modest little pension pot you had.

Better late than never, but you've tied the hands of your accountant and any other adviser you choose to use by some of the actions you've taken, which have clearly been not so much ill-advised as totally un-advised. Hopefully it's not too late to ensure you and your wife can be put on track for a reasonable retirement after working so hard for so many years - but you need action, not just aspirations. 

Dazed_and_C0nfused

Marcon said:

general_piffle said:

Greetings all, I'm looking for pension and retirement advice, and haven't really gone about preparing in a traditional way. 

Some brief background:

• 55 years old
• I've worked/contributed all of my life and am due the full state pension
• 2 businesses, one mine and one I share with my wife, mine has an annual turnover of about 150k, our joint business is around 500k annually
• I don't have a private or company pension of any sort
• My major asset (separate to our family home) is a property I have in London worth approx. 700k

Apart from that there are various assets, like cars and motorbikes that no doubt in 20 years or so I'll probably thin out as I get too old to at least ride the bikes.

My query is how best to prepare for retirement? I guess I'm thinking of working for another 10 to 12 years, with the last few of those years possibly being a bit more relaxed/part-time.

My business (the 150k turnover one) is a Ltd company and I'm the sole employee. Could I start tucking money away into a pension over the next 10 to 12 years? Would it be more beneficial to me and/or the business from a financial perspective to do this as a 'personal pension' or as an 'employer pension' and put money from company profits away each month?

The businesses I don't know; mine I couldn't really sell as it relies on me. The other business we could definitely sell, and I suspect my wife wouldn't mind retiring early if we were in a position to do so (she's 45). 

The property in London, I could sell I guess, or continue to rent out and take that as a monthly salary in retirement (rent is currently £1500 per month). For capital gains tax I spent more time living there than renting it out over a 20 year period of ownership, so I believe CGT will be minimal.

Finances are not really a strong-point for me, I've just worked damn hard all my life and had some lucky breaks. Any advice on company or personal pension from now until retirement - plus what to do with other assets as retirement approaches, would be very gratefully received. 

Thanks in advance!

Reading your post, I can only whole-heartedly agree that finances are not a strong point for you! Not sure why your title uses the words 'unusual circumstances', though, since there's plenty in your post which indicates you are far from unusual. Focussed on running a business to the point where a lot of other things are back burnered while you deal with today...

You say you are due a full pension. Have you actually checked to see if that's the case, or are you assuming it is because you've worked for 'lots of years'? https://www.gov.uk/check-state-pension

general_piffle said:

I paid £175,000 for the property now worth £700,000. So, not too shabby.

...but sadly your take on CGT is hopelessly wide of the mark. It can't be your 'main residence' because you refer to 'a family home' and a wife - and in the eyes of HMRC a married couple can only have one main residence. Your accountant will be able to explain the tax position if you sell (spoiler alert: your belief that CGT will be 'minimal' may not be your accountant's view).

general_piffle said:

Yes, when I asked back in 2012 I did start paying into a pension, but not consistently. Built up a small pot which got cashed in when I turned 55 last year, and absorbed by something key. Let's say a 'life event'. But this is by-the-by and not particularly relevant now.

Pretty much anyone can generate turnover by selling goods or services, but you've said nothing about whether your companies are profitable - and profit is what matters. You can't build up a pension pot unless the money is there to contribute. The fact you needed to cash in a small pension at 55 suggests that profits aren't that healthy?

Your 'not particularly relevant' cashing in of a small pension could be an equally major misunderstanding along with your take on CGT. Unless you did so under the 'small pots rule' (and you'd need to have a provider who offered this AND specify that was what you were doing - and of course the pot would need to have been under £10K at the time you cashed it in), you've triggered the Money Purchase Annual Allowance, meaning you are severely limited to the amount of tax-relievable contributions you or your company can make to a pension: maximum of £10K per tax year, including any tax relief on personal contributions.

You may also have limited your ability to use something known as 'carry forward' - you have to be a member of a registered pension scheme during each tax year you want to carry forward, and if you've cashed in the only pension you've ever had, that's going to knock out at least one tax year from the sound of things.

general_piffle said:

Yes, we have a good accountant. Who I've already contacted about exactly this. However, I was hoping to gain some insights here. Thanks.

Thirteen years ago you were posting about wanting to put your feet up in retirement etc https://forums.moneysavingexpert.com/discussion/4065465/self-employed-please-recommend-a-pension-scheme#latest but you've cashed in even the modest little pension pot you had.

Better late than never, but you've tied the hands of your accountant and any other adviser you choose to use by some of the actions you've taken, which have clearly been not so much ill-advised as totally un-advised. Hopefully it's not too late to ensure you and your wife can be put on track for a reasonable retirement after working so hard for so many years - but you need action, not just aspirations. 

Even that glimmer of hope doesn't exist.

I'm pretty sure carry forward is simply not an option once MPAA has been triggered.

QrizB

OP does your wife make decent money from her share of the business?

If you're subject to the MPAA, setting up a pension for your wife and stuffing that with cash might be your better option.

Tucosalamanca

I'm making an assumption but it appears that there's not huge profits available for pension investment.

The wife's allowances might have enough room to take all that they/the business can afford.

MPPA will cause pension issues for OP but if the London property is utilised more effectively (increasing rent, or selling and buying better yielding properties, or simply cashing in) he will be at least able to maximise his tax potential. 
They could sell the property and use it to fund day-to-day living (and have the residue invested elsewhere for a higher return than it is currently generating), take a peppercorn wage from the business, thereby maximising profitability and funds available for pension investment.

As long as they can avoid paying 40% tax, I don't think it's a total disaster.

I'd be interested to hear what their accountant and IFA come up with....