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  • FIRST POST
    • davidr99
    • By davidr99 10th Mar 18, 11:09 AM
    • 1Posts
    • 0Thanks
    davidr99
    Saving in a pension
    • #1
    • 10th Mar 18, 11:09 AM
    Saving in a pension 10th Mar 18 at 11:09 AM
    Hi,
    Just wanted some advice here. With saving rates so low I assume that it is better to save into a pension instead especially as you get tax relief of 20% added for each payment in. I'm 57 so I though instead of leaving all my money in accounts that at most pay 1-2% I should start putting a lot more into my pension as with the added tax releif it is a better deal. Just wanted to check I wasn't missing anything.
    Thanks,
    David
Page 1
    • Tcquins
    • By Tcquins 10th Mar 18, 11:21 AM
    • 54 Posts
    • 32 Thanks
    Tcquins
    • #2
    • 10th Mar 18, 11:21 AM
    • #2
    • 10th Mar 18, 11:21 AM
    putting greater sums into your pension is a good option at your age.

    You just need to make sure you!!!8217;re aware you!!!8217;re aware of the limits- so the lower of your earnings from your job and the 40,000 annual allowance (which includes your contribution plus the tax relief and your employer contributions).

    If you!!!8217;re retired and have no earnings you can put in 2880 before tax relief into your pension per tax year.
    • Froggitt
    • By Froggitt 10th Mar 18, 11:22 AM
    • 5,804 Posts
    • 3,068 Thanks
    Froggitt
    • #3
    • 10th Mar 18, 11:22 AM
    • #3
    • 10th Mar 18, 11:22 AM
    20% or more depending on your tax status, plus the income, plus the growth.

    Take 25% out tax free, and the rest is taxed at your normal rate when you take it out.....that could be the downside for you. Once you start taking it out though, the amount you can put in is restricted.
    illegitimi non carborundum
    • colsten
    • By colsten 10th Mar 18, 11:24 AM
    • 9,029 Posts
    • 7,803 Thanks
    colsten
    • #4
    • 10th Mar 18, 11:24 AM
    • #4
    • 10th Mar 18, 11:24 AM
    You would get better responses on the Pensions Board but here are just a couple of considerations
    • pensions are investments. Investments are for longer term commitments - at least 5, better still 7-10 years. When are you planning to draw your pensions?
    • Investments can drop in value. Are you happy with a potential fall in your assets before you need to start drawing the money?
    • how much tax do you expect to have to pay once you are retired?
    • what sort of pension are we talking about? If works pension, it could be attractive if your employer adds additional money, too
    • how much money are we talking about? Should you consider paying for professional advice, rather than taking free opinions from strangers who don't know anything about your personal circumstances??
    Last edited by colsten; 10-03-2018 at 11:29 AM.
    • LHW99
    • By LHW99 10th Mar 18, 1:40 PM
    • 1,317 Posts
    • 1,215 Thanks
    LHW99
    • #5
    • 10th Mar 18, 1:40 PM
    • #5
    • 10th Mar 18, 1:40 PM
    pensions are investments. Investments are for longer term commitments - at least 5, better still 7-10 years. When are you planning to draw your pensions?
    However it is possible (though not necessarily a good idea) to keep the money as cash in a SIPP, if you only intend to leave it there short-term, and don't expect to have a large amount in.
    There is unlikely to be much if any interest paid on the money, although you would still have had the tax relief.
    I think some people look at hargreaves Lansdown for this, as it doesn't at the moment charge for keeping cash, as long as the SIPP is open at least a year (you may need to keep a minimum amount in it for that year).
    Last edited by LHW99; 10-03-2018 at 1:40 PM. Reason: clarity
    • sebthered
    • By sebthered 12th Mar 18, 6:31 PM
    • 40 Posts
    • 24 Thanks
    sebthered
    • #6
    • 12th Mar 18, 6:31 PM
    • #6
    • 12th Mar 18, 6:31 PM
    The tax relief is 25% - so for every 80 you contribute 100 is invested.
    One the way back out you get 25% tax free + your tax free allowance currently 11,500.
    All of my withdrawals will be 100% tax free, making it a very efficient way to invest (subject of course to how well the fund/s preform)
    • atush
    • By atush 13th Mar 18, 1:58 PM
    • 16,807 Posts
    • 10,489 Thanks
    atush
    • #7
    • 13th Mar 18, 1:58 PM
    • #7
    • 13th Mar 18, 1:58 PM
    I would pay more into pension.
    • FatherAbraham
    • By FatherAbraham 15th Mar 18, 10:49 AM
    • 765 Posts
    • 588 Thanks
    FatherAbraham
    • #8
    • 15th Mar 18, 10:49 AM
    • #8
    • 15th Mar 18, 10:49 AM
    Just wanted some advice here. With saving rates so low I assume that it is better to save into a pension instead especially as you get tax relief of 20% added for each payment in. I'm 57 so I though instead of leaving all my money in accounts that at most pay 1-2% I should start putting a lot more into my pension as with the added tax relief it is a better deal. Just wanted to check I wasn't missing anything.
    Thanks,
    David
    Originally posted by davidr99
    The level of savings rates has no real bearing on whether one should invest in a pension or not.

    You're comparing several different things at once, which can make distinctions blurred:
    • Should you save or invest your money? ("asset allocation")
    • Should your wealth be in a (limited-access) pension arrangement or in an immediately-available form (investment-vehicle choice)

    It's possible to put money into a pension arrangement, but use a cash-based investment for the wealth -- this is often done when one is close to drawing the money out, or has fixed liabilities to discharge, such as an (interest-only) mortgage falling due.

    Please note that the "tax relief" argument is mostly illusory -- money put into a pension arrangement is tax-relieved on the way in, but must be (mostly) taxed as income on the way out. It's effectively income-taxation deferral which is going on. This is advantageous if your tax rate is lower in retirement than it was when you accumulated the pension -- and there's also a 25% exemption from taxation (the "lump sum") on withdrawal, which can make pension-based wealth attractive. However, the benefit is nothing like the nominal value of the tax relief.

    Pension arrangements are more regulated, and often have somewhat higher costs than non-pension arrangements (such as ISAs) -- it's important to take these things into account. Some types of pension arrangement (for example, self-invested personal pensions, or "SIPPs") are spectacularly unsuited for use by people who aren't really interested in managing such things -- here's a sensationalised and over-the-top account of a specialised pension product not working out as the original investor intended, partly because he didn't ensure that there was cash available to pay fees: http://www.thisismoney.co.uk/money/pensions/article-5442467/John-left-just-3-000-100-000-pension.html.

    Warmest regards,
    FA
    • Paul_DNAP
    • By Paul_DNAP 15th Mar 18, 1:35 PM
    • 95 Posts
    • 105 Thanks
    Paul_DNAP
    • #9
    • 15th Mar 18, 1:35 PM
    • #9
    • 15th Mar 18, 1:35 PM
    It could be a good time to check your national insurance record, if there are any gaps in employment or contribution that will stop you qualifying for a full state pension you should consider making voluntary contributions to complete your stamps.
    • eskbanker
    • By eskbanker 15th Mar 18, 1:39 PM
    • 7,431 Posts
    • 8,001 Thanks
    eskbanker
    It could be a good time to check your national insurance record, if there are any gaps in employment or contribution that will stop you qualifying for a full state pension you should consider making voluntary contributions to complete your stamps.
    Originally posted by Paul_DNAP
    Indeed, state pension projection and NI history can be reviewed (separately) at:

    https://www.gov.uk/check-state-pension
    https://www.gov.uk/check-national-insurance-record
    • sam_scott
    • By sam_scott 21st Mar 18, 7:54 PM
    • 30 Posts
    • 4 Thanks
    sam_scott
    If you can afford to I would definitely pay into the pension....
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