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Top up your pension...

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    #21
    Originally posted by SueEllen View Post
    At 55 when you can take out 25% tax free and take out a larger amount if you are willing to pay the tax on it.

    Everything is age and risk related.

    The sensible thing is to have investments in more than one thing.

    I know people who have ended up losing everything except their pension as it can't be touched.
    I agree (almost) completely. In my case I am already over 55 so I can put Company money into my SIPP 100% tax-free and then take out 25% tax-free. The rest I can invest as I like and draw down at the allowed rate.

    It's not hard to run the arithmetic to work out payback horizons. If you are inside IR35 (or want to act as if you are) then it is likely to be about 7 years, depending on age and therefore max drawdown rate. I.e. After 7 years the pension option overtakes the salary option.

    IMHO both inflation rate and rate of investment return are irrelevant to the comparison since they will both apply equally to the salary+saving and the SIPP options.

    However I would caution that the existing untouchability of pensions savings is not logically compatible with Osborne's free access to pension funds, and I expect that protection to disappear.


    Edit: I am assuming max drawdown rate as per the old regulations because I understand that exceeding that rate, as per Osborne new regs, causes limitations on further input to the pension. I may be wrong about that, I just haven't examined it.
    Last edited by expat; 15 April 2015, 04:10.

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      #22
      Originally posted by TheFaQQer View Post
      You'd need to get that £15k out of the company somehow first, which could well attract income tax. Having a company pension means you don't have to do that, plus it's an expense so you don't pay corporation tax on it.
      Fair point. It depends how much your company ears and how much you personally spend, if that 15k having to come out within your personal taxable income is a problem.

      However you will end up paying tax on it so how much benefit do you actually get? Tax on pensions isn't something I know well enough to do the figures. Say for example you put £10k into a pension every year for 30 years, Vs taking £10k out in a dividend that attracts higher rate tax, for an ISA (tax the £10k and put the remainder in the ISA). Assume they go in the exact same stocks/funds/whatever, giving 5% annual growth. What happens?
      Originally posted by MaryPoppins
      I'd still not breastfeed a nazi
      Originally posted by vetran
      Urine is quite nourishing

      Comment


        #23
        What seemed useful to me was the ability to bung money in on the run up to 55 minimising the risk of restrictive changes. Yet from what I have read rules are expected to stop that.
        I have also read 55 is to move with changes in the pension age.
        Also ....how many pension funds will allow the rules to be fully exploited?

        Too much uncertainty for me as yet

        Comment


          #24
          Originally posted by d000hg View Post
          Fair point. It depends how much your company ears and how much you personally spend, if that 15k having to come out within your personal taxable income is a problem.

          However you will end up paying tax on it so how much benefit do you actually get? Tax on pensions isn't something I know well enough to do the figures. Say for example you put £10k into a pension every year for 30 years, Vs taking £10k out in a dividend that attracts higher rate tax, for an ISA (tax the £10k and put the remainder in the ISA). Assume they go in the exact same stocks/funds/whatever, giving 5% annual growth. What happens?
          But that's not a fair comparison. You get tax relief on pension contributions.

          So your 10k into your pension was only actually a personal contribution of 6k + 2k + 2k (if you were a 40% tax payer).
          Your 10k into your ISA was actually 10K after tax. You're already 40% up.
          What happens in General, stays in General.
          You know what they say about assumptions!

          Comment


            #25
            Originally posted by MarillionFan View Post
            And there was SimonMac questioning my pension top up a couple of weeks ago.
            I was questioning your sums, not your motives!
            Originally posted by Stevie Wonder Boy
            I can't see any way to do it can you please advise?

            I want my account deleted and all of my information removed, I want to invoke my right to be forgotten.

            Comment


              #26
              I think I covered that in my question.

              a)your company puts 10k in to a pension each year
              b)your company pays out 10k (after you already reached your personal allowance) and you put what is left after personal tax into an ISA.

              Clearly less goes into the ISA each year but then in 30 years it is tax-free to take it out... so what is a proper calculation, taking into account company tax liability, personal tax, tax relief, etc, etc.
              Originally posted by MaryPoppins
              I'd still not breastfeed a nazi
              Originally posted by vetran
              Urine is quite nourishing

              Comment


                #27
                Originally posted by SimonMac View Post
                I was questioning your sums, not your motives!
                Well my sums turned out to be correct. Now waiting for 35k tax rebate.
                What happens in General, stays in General.
                You know what they say about assumptions!

                Comment


                  #28
                  Originally posted by MarillionFan View Post
                  Well my sums turned out to be correct. Now waiting for 35k tax rebate.
                  Which cost you £35K and increased mortgage payments!
                  Originally posted by Stevie Wonder Boy
                  I can't see any way to do it can you please advise?

                  I want my account deleted and all of my information removed, I want to invoke my right to be forgotten.

                  Comment


                    #29
                    Originally posted by d000hg View Post
                    I think I covered that in my question.

                    a)your company puts 10k in to a pension each year
                    b)your company pays out 10k (after you already reached your personal allowance) and you put what is left after personal tax into an ISA.

                    Clearly less goes into the ISA each year but then in 30 years it is tax-free to take it out... so what is a proper calculation, taking into account company tax liability, personal tax, tax relief, etc, etc.
                    Its tax free under today's rules, there is nothing to say the Govt in X years time doing a Cyprus and grabbing peoples deposits that they hold as savings.

                    No one knows what the future will bring, thats why the first thing anyone should do with extra cash is pay down existing debt then have a balance of Pension, Property and ISA
                    Originally posted by Stevie Wonder Boy
                    I can't see any way to do it can you please advise?

                    I want my account deleted and all of my information removed, I want to invoke my right to be forgotten.

                    Comment


                      #30
                      Originally posted by SimonMac View Post
                      Which cost you £35K and increased mortgage payments!
                      You're a little thick aren't you. That's why you'll always be a low level jobbing contractor.
                      What happens in General, stays in General.
                      You know what they say about assumptions!

                      Comment

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