Occupational Pension + Personal Pension??

buffalox

I am a member of a non-contributory pension scheme which if I remain in for the rest of my career (another 30 years roughly) will give me a pension of around 50k (best case scenario). I assume that this is taxed, and more than that, will be taxed at whatever 'higher rate' is in force at the time - currently 40% of course.

Does this mean that saving for a personal pension is pretty pointless as it would go on top and therefore be taxed at the 40% level? I've decided against a Stakeholder pension if I get one - recommended by the IFA I saw who wasn't that great - after spending a lot of time researching it.

Points to consider:
I might not stay in for another 30 years though which I won't know for at least 5 years.

I might move abroad restricting my ability to add to a personal pension I think?

If I did start a pension and got 50K pension + say about 10K at the end of it all then could I could reduce my tax liability in other ways - starting a business and offsetting costs or something?


Could any of you experienced people clarify any of that? Would really like to start a pension sooner rather than later as from April I would be able to claim tax relief at 40% on up to around 4.5K of pension contributions for that year (increasing thereafter) half going into the pension and half back from a tax return, meaning that it still might make sense to start one! Thanks!!

dunstonh

Does this mean that saving for a personal pension is pretty pointless as it would go on top and therefore be taxed at the 40% level?

Yes. Although you will be getting 40% tax relief at source and be able to take 25% back tax free. So a slight advantage. If you could get working/childrens tax credits because of the pension contributions that improves the pension option further (potential equivent of upto 72% in best scenario is possible). However, ISA maximised would be the logical option if you dont.

I've decided against a Stakeholder pension if I get one - recommended by the IFA I saw who wasn't that great - after spending a lot of time researching it.

You would generally recommend a stakeholder to an inexperienced investor who has little interest in following the investment.

buffalox

Thank you very much for your input, I appreciate it! As it happens I'm an experienced investor (though not with stocks and shares - only cash/accounts/bonds/property etc) with a great deal of interest in staying on top of things, so a personal pension would seem best!

Don't think I would get much in the way of tax credits though as I would be above the threshold by that time I think (66K).

I guess for some of my other questions I already know the right answer? i.e. can't continue pension contribution outside of the country.


I guess my question is this - assuming that I would be building up a cash ISA (I already have one for this tax year - to eventually be used as a deposit on a house), is saving for a pension really all that advantageous? I'd like to think it is and am prepared to save even if it is only marginally beneficial in my 'best case scenario' as it would seem to be the thing to do in any other circumstance. Am I right in assuming this?

Many thanks again...

dunstonh

As it happens I'm an experienced investor (though not with stocks and shares - only cash/accounts/bonds/property etc)

That doesnt make you an expereinced investor as the only investment there is property. Cash, accounts, bonds (assuming fixed term deposits) are all savings options.

Don't think I would get much in the way of tax credits though as I would be above the threshold by that time I think (66K).

Pension contributions lower your income and if the revised income level is within the limits of the credits you then get them. It is one of the positive points of a pension (to counteract some of the negatives).

is saving for a pension really all that advantageous?

Unless you will get increased tax credits than a stocks and shares ISA would probably be better given its flexibility. If you are still in the UK later, you could always pay the ISA into the pension as a single premium in a single year therefore reducing your income a lot and therefore qualifying you for tax credits for one year. In effect increasing the tax relief above 40% and making a pension worthwhile at that time.

EdInvestor

buffalox wrote: »

I might move abroad restricting my ability to add to a personal pension I think?

You can still contribute for up to 5 years after departure but you don't get any tax relief so there's usually no point.

If you have a spouse it might make sense to start a pension for him/her to use up age allowance post retirement.At least you would get 20% tax relief free.

If going overseas, paying voluntary NI at the self employed rate for the state pension is one of life's great bargains.

buffalox

Of course I'm not an experienced investor - just an interested one!

Many thanks for your answers - food for thought. It isn't a simple decision and you've helped me!