Pension: personal or company

[Numpty]

I wonder if you could help me with a pensions query. I can work out most things, but pensions defeat me.

I have a company pension scheme and I have a personal pension. I have paid nothing into either for a few years but want to start paying again.

At one time I was advised a personal pension was better; at another time I was advised a company pension was better. Between that advice and the duff mortgage advice I had, I no longer trust IFAs.

My question is: as a contractor, should I pay into one, the other or both?

Or is it not as simple as that?

(Ltd. co, age: mid 40s, salary £5250 rest as dividends, can afford £200 per month from the company at the moment, wife earning roughly minimum wage)

[DaveB]

I wonder if you could help me with a pensions query. I can work out most things, but pensions defeat me.

I have a company pension scheme and I have a personal pension. I have paid nothing into either for a few years but want to start paying again.

At one time I was advised a personal pension was better; at another time I was advised a company pension was better. Between that advice and the duff mortgage advice I had, I no longer trust IFAs.

My question is: as a contractor, should I pay into one, the other or both?

Or is it not as simple as that?

(Ltd. co, age: mid 40s, salary £5250 rest as dividends, can afford £200 per month from the company at the moment, wife earning roughly minimum wage)

IIRC it depends on what tax bracket you fall into. I may be wrong about this but :

If you are paying Lower Rate tax you are better paying for it from the Co. and saving the 21% CT.

If you are paying Higher Rate tax you are better off paying for it personally as you can then claim tax relief on the contributions at the higher rate.


However I'm neither an IFA nor an Accountant.

[ASB]

I wonder if you could help me with a pensions query. I can work out most things, but pensions defeat me.

I have a company pension scheme and I have a personal pension. I have paid nothing into either for a few years but want to start paying again.

At one time I was advised a personal pension was better; at another time I was advised a company pension was better. Between that advice and the duff mortgage advice I had, I no longer trust IFAs.

My question is: as a contractor, should I pay into one, the other or both?

Or is it not as simple as that?

(Ltd. co, age: mid 40s, salary £5250 rest as dividends, can afford £200 per month from the company at the moment, wife earning roughly minimum wage)

The search button is your friend. But, if you are paying divis then I am assuming IR35 is not an issue. In this case you are probably marginally better making personal contributions. You may want to make these into your existing scheme but check it's charges etc. A stakeholder may be cheaper.

For more control you might thingk about a sipp, thought charge levels might be a problem with the comparatively modest contributions. Also you might want to consider ISA's instead. All you are really talkingabout with a pension is tax deferment - though this does depend on your earnings. There is abetter tax case if you are a higher rate taxpayer in work and a standard rate payer in retirement.

[Numpty]

The search button is your friend.

I tried. I'm thick. This is just too hard. Far too much data, far too little information, way too many options.

But, if you are paying divis then I am assuming IR35 is not an issue.

I am now outside IR35 and I'm staying there.

In this case you are probably marginally better making personal contributions. You may want to make these into your existing scheme but check it's charges etc. A stakeholder may be cheaper.

Because the charges are capped at 1% but for a personal pension they are not? In which case they'll help themselves to the money another way.

My personal pension is winning so far.

For more control you might thingk about a sipp, thought charge levels might be a problem with the comparatively modest contributions.

I'm too thick to make a decision on the simple questions - so I defintely can't do a DIY pension!

Also you might want to consider ISA's instead.

I have never had 'spare' money so I've never invested in anything other than bunging a few quid in these pension schemes. ISAs were so heavily advertised I decided they were too good to be true. Requires a decision. Too hard. Also, based on my track record, the Treasurer will change the rules 3 months before I can get the money out again.

All you are really talkingabout with a pension is tax deferment - though this does depend on your earnings. There is abetter tax case if you are a higher rate taxpayer in work and a standard rate payer in retirement.

I expect my LtdCo to have a gross income of about £90k to £100k a year (excluding VAT), if that helps.

[IR35 Avoider]

I wonder if you could help me with a pensions query. I can work out most things, but pensions defeat me.

I have a company pension scheme and I have a personal pension. I have paid nothing into either for a few years but want to start paying again.

At one time I was advised a personal pension was better; at another time I was advised a company pension was better. Between that advice and the duff mortgage advice I had, I no longer trust IFAs.

My question is: as a contractor, should I pay into one, the other or both?

Or is it not as simple as that?

(Ltd. co, age: mid 40s, salary £5250 rest as dividends, can afford £200 per month from the company at the moment, wife earning roughly minimum wage)

I presume by company pension you mean something like an EPP or SSAS. The advantage of these used to be they allowed much bigger contributions. This is no longer true, so they are best for hardly anyone now.

The best thing to do is make company (employer) contributions into a personal pension. (A stakeholder is just a particular type of personal pension, so is a SIPP.)

ASB refers to there being a case for making personal contributions from dividends - the advantage (if there was one) was always marginal, and I thought it had disappeared in a recent budget.

It's not true that the pension route just defers tax - at an absolute minimum it can reduce it by 25%.

Don't forget that employer contributions completely immunise that chunk of money against IR35, something that is valuable even if you think your contract passes. (i.e. it is valuable because IR35 is so uncertain some of your money is always caught, if you look at it in a probabilistic sense.)

[Hex]

ASB refers to their being a case for making personal contributions from dividends - the advantage was always marginal, and I thought it had disappeared in a recent budget.

Yes - I think that too. The reason is that the tax relief you get on personal contributions is now only 20%, whereas by making a company payment you are avoiding CT of 21%.

[ASB]

I tried. I'm thick. This is just too hard. Far too much data, far too little information, way too many options.


I am now outside IR35 and I'm staying there.


Because the charges are capped at 1% but for a personal pension they are not? In which case they'll help themselves to the money another way.

My personal pension is winning so far.


I'm too thick to make a decision on the simple questions - so I defintely can't do a DIY pension!


I have never had 'spare' money so I've never invested in anything other than bunging a few quid in these pension schemes. ISAs were so heavily advertised I decided they were too good to be true. Requires a decision. Too hard. Also, based on my track record, the Treasurer will change the rules 3 months before I can get the money out again.


I expect my LtdCo to have a gross income of about £90k to £100k a year (excluding VAT), if that helps.

Ok, try this and what it links to. http://forums.contractoruk.com/accou...+contributions

The reason there are too many options is that there are so many different sets of circumstances.

In yours it is likely that you will be slightly better off by making personal contributions. There are a number of cases where the company contribution will win and it all depends on how rates and relief change over time and your individual status.

Because of the long term nature the differences can become substantial over a long period, but it does involve quite a lot of number crunching of you own numbers and regular review to be sure you are gaining the maximum relief possible overall.

[Numpty]

Thank you for your help.

So it's not just me, this stuff is tricky!

[glashIFA@Paramount]

I wonder if you could help me with a pensions query. I can work out most things, but pensions defeat me.

I have a company pension scheme and I have a personal pension. I have paid nothing into either for a few years but want to start paying again.

At one time I was advised a personal pension was better; at another time I was advised a company pension was better. Between that advice and the duff mortgage advice I had, I no longer trust IFAs.
My question is: as a contractor, should I pay into one, the other or both?

Or is it not as simple as that?

(Ltd. co, age: mid 40s, salary £5250 rest as dividends, can afford £200 per month from the company at the moment, wife earning roughly minimum wage)

i once went on holiday and it turned out to be a nightmare - didn't stop me going on holiday again!!!!!

Find an IFA that's recommended and you can trust. Pensions aren't really complicated, you just need to be clear on the options (which change on a regular basis unfortunately!).

[Numpty]

Find an IFA that's recommended and you can trust.

I originally got my financial advice from my bank - that was probably the worst.

I was recommended a mortgage advisor by a friend for my first mortgage. Got sold a pup.

I was recommended an IFA by my first accountant. He sold me the company pension plan.

The IFA the sold me my endowment was recommended by a colleague. After 12 years that was worth less than I had paid in.

I was recommended another IFA by my 3rd accountant. He sold me the private pension plan.

If you had been sold four different rubbish holidays by four different holiday shops, what conclusion would you come to about holiday shops?


As far as I can see and based on my personal experience IFAs are generally only lining their own pockets with commission and their advice is sh!te.

Seriously.