starting a pension at 53 and taking it at 60

ADC_3

I have enough funds in my business account to put away £100,000 in the next 7 years. Is this realistic or will it not have any time to generate anything. Taking it out of the business as drawings just attracts 40% tax.

crossleydd42

I would think it would pay, but take professional advice on this - the subject's too fraught not to. Get an independent financial advisor who charges a fee, not takes one through commission.

dunstonh

The pension is just a tax wrapper. What you place inside of it is the investment. The investment certainly has time to grow with 7 years.


edit: removed information that was based on personal contributions and not company due to misread.

whiteflag_3

dunstonh wrote:

The pension is just a tax wrapper. What you place inside of it is the investment.

The investment certainly has time to grow with 7 years. Plus, as it sounds like your a higher rate tax payer, it may be beneficial indeed. Considering the size of the contribution, you may need to do it over multiple years or at least some now and some next April when the contribution limits change.

If you have children, you may also find yourself getting a year a childrens/working tax credits as well as income is reduced by the amount of the pension contribution. A large single contribution would take your income right down.

dunstonh - can you explain what you mean by the above as you seem to be making something straightforward sound complicated. Why cant ADC just make a single contribution from the company next April 7th. Why would a large company contribution have an impact on personal taxation/ working tax credits/personal income?

dunstonh

I was pre-empting what usually follows when we get a post like this

Although, having re-read the post, I missed the company contribution bit and assumed personal. Hence my response. Please ignore my bit on that.

whiteflag_3

dunstonh wrote:

I was pre-empting what usually follows when we get a post like this

Although, having re-read the post, I missed the company.

No problem.

I like you, are waiting for the standard

"Hi ADC

have you considered investing in low cost SIPP ?"

ADC_3

Looked at Sipps. Is it true that if I put in 1K I then receive £512 back from the govt? So I then have £1512? So if I put in 100K the government gives me £51,200? Doesn't quite seem right...

whiteflag_3

ADC wrote:

Doesn't quite seem right...

Thats because its not right.
For personal contributions to a pension you get tax relief at the highest rate of tax you pay ie 22% or 40%.

Company contributions would not attract any personal tax reliefs, however the conributions will reduce or wipe out company profits and hence save corporation tax. And reduce the drawings you need to take, thus saving tax and NI etc etc

ADC for the amounts your are talking about, in my opion you really need to seek professional advice.