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Pension or savings confusion (help!!)
LindA.
Posts: 25 Forumite
Hi, I am 55 I have two small pension funds. I also have a sum of money to invest. Do I save or add to a pension fund??
I am really worried about my financial future. I pay very little into the Peoples Pension at present, I am a seasonal worker, I do normally have a regular fairly good income. My mortgage is paid.
I am going to get some advice from Citizens Advice Bureau in the future.
Does any one have any ideas? - I am thinking to the future and can't see myself surviving on the funds I will have.
I am really worried about my financial future. I pay very little into the Peoples Pension at present, I am a seasonal worker, I do normally have a regular fairly good income. My mortgage is paid.
I am going to get some advice from Citizens Advice Bureau in the future.
Does any one have any ideas? - I am thinking to the future and can't see myself surviving on the funds I will have.
0
Comments
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Have you checked your state pension position?
https://www.gov.uk/check-state-pension
Had you thought of increasing your contributions to the People's Pension?
https://thepeoplespension.co.uk/employees/your-member-information/putting-your-money-into-the-peoples-pension/0 -
At age 55, a pension is equivalent to saving, since you can get the money out again when you want. Even worse case, if you put it in and get the tax uplift and then pay tax on it on the way out, you still gain because 25% of the withdrawal is tax free.
Example, you put £800 into savings and a pension at the same time.
The pension gets bumped up to £1000. The savings stays at £800.
One year later take the £800 out of savings. No tax, you've got £800. No gain.
Take the £1,000 out of pension. £250 is tax free. Pay at most* 20% tax on the £750 leaving you £600, add the £250, you've just magically made £50. (If no tax is due, you've made £200)
That is on each £1,000 you "save" into a pension. Note, you cant put in more than you earn.
* This assumes you are a 20% tax rate payer.0 -
AnotherJoe wrote: »At age 55, a pension is equivalent to saving, since you can get the money out again when you want. Even worse case, if you put it in and get the tax uplift and then pay tax on it on the way out, you still gain because 25% of the withdrawal is tax free.
Example, you put £800 into savings and a pension at the same time.
The pension gets bumped up to £1000. The savings stays at £800.
One year later take the £800 out of savings. No tax, you've got £800. No gain.
Take the £1,000 out of pension. £250 is tax free. Pay at most* 20% tax on the £750 leaving you £600, add the £250, you've just magically made £50. (If no tax is due, you've made £200)
That is on each £1,000 you "save" into a pension. Note, you cant put in more than you earn.
* This assumes you are a 20% tax rate payer.
Is the 25% tax free allowance is for each withdrawal irrespectively how many withdrawals made in a year or there is a limit for it ??0 -
No limits as far as HMRC. Pension companies may have limits on the number just for admin reasons. Would you want to do more than one a month for example?0
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AnotherJoe wrote: »No limits as far as HMRC. Pension companies may have limits on the number just for admin reasons. Would you want to do more than one a month for example?
Yep that is what I was asking if it is allowed. But thanks I got the answer already.0
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