Pension Contributions - Closing Company

**mogga71** · 27 January 2020, 21:02

Originally posted by rogerfederer View Post

I thought it may be a wise idea to post this query as I suspect it could be a better option for many over MVL.

I'm a Director of multiple companies in the UK but have £200k in one particular Limited Co that I have the option of MVL'ing in entirety or, as I have just mused, pay £160k into a pension by using the allowance for this year and "back dating" (colloquially) 3 years in addition, using up £40k for each year to the tidy sum of £160k.

My concern is this: Pension changes are an unknown but are certain to happen. Are people here also using up their ISA allowance that, even after the dividend tax, could work out almost similar to current pension rules due to the annuity charges or early draw down fees.

I've had various pensions opened over the years but never a SIPP. I am in two minds about whether to throw £160k into a SIPP and bleed the money into a few low cost funds over a year or two (to offset market fluctuations) or whether to MVL the full £200k and invest in other ways, appreciating the yearly ISA limit. As pensions are a long game I accept the risk associated with them.

On the subject of providers, Hargreaves Lansdown: unhappy with the charges, pretentious attitude I experienced in the past with them and also the Woodford scandal - so they are not in the running.

The main contenders seem to be:
Halifax iWeb
AJBell
Sippdeal (owned by AJ Bell, I believe)
Interactive Investor (high monthly fees if you don't use the dealing capability often)
a.n.other

I've noticed from researching that charging has changes in the last 18 months and I'm now very much out of the loop.

Dealing:
The idea would be to open one and place the £160k in Vanguard (or similar) funds with minimal messing about over the years unless market catastrophe hits or Vanguard 'do an Enron' on us all. Trading will be limited to medium risk and lower risk funds/trackers, no individual shares.

Thanks for any info.
Seems every provider wants a slice of the SIPP pie and some providers are far better than others!

When you say are thinking of paying £160k into a SIPP this gives me the impression that you plan to put the money directly into this newly opened SIPP. Alas, that is not possible. You can only do that if you actually had the SIPP open for the full 4 years. If you quickly open up a SIPP now you can pay £40K money in for the 2019-20 year.

Presumably if you attempted to put more in (than the £40k) then the SIPP provider would pick up on it.

I am basically in the same dilemma. As a matter of interest, have you spoken to anybody about the MVL? If so, how much are they charging may I ask? Problem is that the MVL can takes ages to go through and there is talk of the Government putting a stop to Entrepreneurship Tax Relief (part of benefit of MVL) shortly.

Also, if you start the MVL rolling, are you supposed to ditch your accountant?

**rogerfederer** · 27 January 2020, 21:09

Originally posted by mogga71 View Post

When you say are thinking of paying £160k into a SIPP this gives me the impression that you plan to put the money directly into this newly opened SIPP. Alas, that is not possible. You can only do that if you actually had the SIPP open for the full 4 years. If you quickly open up a SIPP now you can pay £40K money in for the 2019-20 year.

Presumably if you attempted to put more in (than the £40k) then the SIPP provider would pick up on it.

I am basically in the same dilemma. As a matter of interest, have you spoken to anybody about the MVL?
Also, if you start the MVL rolling, are you supposed to ditch your accountant?

My understanding is that if you've had a pension opened in the last 4 years then that's all that matters; if push comes to shove I could put the money in the existing pension and then transfer it all to the SIPP but the outgoing transfer fees would likely be high.

Spoke to Maslins before on the phone a few times, would recommend them judging by the others. Their fees and costs (advertising, etc) are transparent and simple.

Keep your accountant going until Maslins tell you it's no longer required.

Edit:
From Hargreaves Lansdown (don't use them!) website:

Pension carry forward rules:

If you want to carry forward your pension allowance, there are two requirements you need to meet:

*You had a pension in each tax year you wish to carry forward from, regardless of whether or not you actually made a contribution (the State Pension doesn’t count).
*You have earnings in the current tax year of at least the total amount you are contributing. Although this does not apply to contributions your employer makes.

There are other factors to consider if you or your employer have contributed to other pensions in addition to your SIPP or you have been a member of a final salary scheme - please download the Annual Allowance & Carry Forward Factsheet for details.

**mogga71** · 27 January 2020, 21:28

Originally posted by rogerfederer View Post

My understanding is that if you've had a pension opened in the last 4 years then that's all that matters; if push comes to shove I could put the money in the existing pension and then transfer it all to the SIPP but the outgoing transfer fees would likely be high.

Spoke to Maslins before on the phone a few times, would recommend them judging by the others. Their fees and costs (advertising, etc) are transparent and simple.

Keep your accountant going until Maslins tell you it's no longer required.

Edit:
From Hargreaves Lansdown (don't use them!) website:

Pension carry forward rules:

If you want to carry forward your pension allowance, there are two requirements you need to meet:

*You had a pension in each tax year you wish to carry forward from, regardless of whether or not you actually made a contribution (the State Pension doesn’t count).
*You have earnings in the current tax year of at least the total amount you are contributing. Although this does not apply to contributions your employer makes.

There are other factors to consider if you or your employer have contributed to other pensions in addition to your SIPP or you have been a member of a final salary scheme - please download the Annual Allowance & Carry Forward Factsheet for details.

Thanks for the info .... very helpful. Hopefully you are OK with the pensions .... although I am not 100% sure if you can transfer any old pension to a SIPP. You probably would be OK I reckon.

Oh and guess who my SIPP provider is .... yip H&L. TBH I have been very happy with them.

**adubya** · 27 January 2020, 21:45

Originally posted by mogga71 View Post

You can only do that if you actually had the SIPP open for the full 4 years.

This is incorrect. You only need to have to have been a member of a UK-registered pension scheme in each of the tax years from which you wish to carry forward. This doesn not have to be the new SIPP.

**Maslins** · 28 January 2020, 10:26

In principle it's doable. Do ensure you have the usage of all those previous year's allowances, and also ensure you factor in any possible pension contributions you might have already made (ie are you sure you haven't put a penny into a pension over the last ~4 years).

I would suggest liaising with an IFA before making a significant transaction like that, they'll be better placed than accountants to assess these things.

Also worth checking whether you'll be able to get full corporation tax relief for that size of contribution. If you've been making huge profits in recent years you likely will be. If profits have been modest for a while, you may not.

Yes some will say I'm biased, but the MVL option puts the money into your personal hands, likely at just 10% personal tax. Whilst the pension option is more tax efficient immediately, that money's locked into your pension. As you suggest, things could change leading to raids on that (though I don't think any suggestion this is likely in the near future). Even where they don't, you'll almost certainly incur some personal tax when you draw that down upon retirement further down the line...though lots of variables to dictate how much.

**wattaj** · 28 January 2020, 10:55

May I counter one small point? You state that Interactive Investor has "high monthly fees if you don't use the dealing capability often". This is not quite correct. If you have more than circa £30k in any one of a SIPP, Share Account, or ISA, then II will start to become the cheaper option than a provider charging a set percentage (e.g. Hargreaves Lansdowne). Also, II's charge is across all other their products and not per product as other providers may be.

It's worth taking a second look.

I'll be moving over to II in the near future as I can have a SIP, an ISA, and the boy's Junior ISA all for a monthly fee of £24 or so... must recheck that.

**WordIsBond** · 28 January 2020, 11:54

Originally posted by Maslins View Post

Yes some will say I'm biased, but the MVL option puts the money into your personal hands, likely at just 10% personal tax. Whilst the pension option is more tax efficient immediately, that money's locked into your pension.

Pretty much the best case of taking the money out of the pension is you get 1/4 tax-free and the rest at 20%. That nets out to 15% taxation, as opposed to the 10% MVL. It's not just that the money is in your control as opposed to being locked up, it's also a lower tax burden with MVL.

That doesn't take into consideration the inheritance ramifications of having money in your pension when your contract with life expires. If you are going to have a large estate with inheritance tax kicking in, having the money in the pension could be a good thing. But failing that, MVL looks to me like a slam dunk choice in the situation.

Edit: and unlike Maslins, no one could accuse me of bias. They might accuse me of stupidity, arrogance, ugliness, and bad jokes, but no bias re: MVL, FWIW.

**adubya** · 28 January 2020, 14:07

Originally posted by WordIsBond View Post

Pretty much the best case of taking the money out of the pension is you get 1/4 tax-free and the rest at 20%. That nets out to 15% taxation, as opposed to the 10% MVL. It's not just that the money is in your control as opposed to being locked up, it's also a lower tax burden with MVL.

Company pension contributions will not be subject to corp. tax (notwithstanding the above comments), what is the situation with a MVL cash extraction ? Retained profits will already have had corp tax deducted, what happens to current company tax year income ?

**peel3000** · 28 January 2020, 14:08

Similar here..

I've been advised that you can pay into my previous year's pension (of which I haven't used the full 40k allocation)..

I'm considering adding funds (up the limit) in my current private pension (that I've had since I started contracting) for last year (18-19).
Also also putting up to the 40k limit into a new SIPP that I recently opened up (for this year 19-20)..

I think you're free to move money from pension to pension, so you could always move it to the SIPP..

That is, if what I've been advised is correct..

Cheers,

NP

Pension Contributions - Closing Company