Pension advice

[Diestl]

Hi,

I would like some recommendations for pensions, I don't have one and am 33, would like to do it straight from the Ltd account to save tax. Also how much should I be paying in a month?

[DiscoStu]

There's lots of fabulous BTL city centre apartments going cheap at the moment

[Doggy Styles]

Hi,

I would like some recommendations for pensions, I don't have one and am 33, would like to do it straight from the Ltd account to save tax. Also how much should I be paying in a month?

Is this about sex romps with pensioners again? I thought you'd been sectioned.

[eliquant]

don't bother with 'Pension Schemes' or pensions .. just get the money .. invest wisely and retire on your nest eggs.

Rule no.1 protect your investment.

Don't let other invest your money on your behalf .. which is what pension schemes are all about.

But in terms of tax benefits on Private Pension plans etc. I'm no guru.

[Doggy Styles]

Don't let other invest your money on your behalf ..

This is actually very, very good advice.

For a serious answer to your question, look up SIPP on The Motley Fool.

[expat]

You can:
1. just invest your money in savings, bonds, and shares, not to mention other assets like BTL (not recommending that), and not bother to call it a pension;
or
2. use some deal (implicitly with the govt) whereby you gain some shelter from tax in return for accepting their encouragement to save.
2a. ISA: you pay money in after tax, and there is no more tax to pay on interest, dividends, or capital gains. The money is yours to use.
2b. Pension, e.g. SIPP. You pay in money that is not taxed, but it is taxed on the way out when it starts to pay you a pension. 75% of the money is locked in until a certain age, e.g. 55.

You can find the explanation of these, and the pros & cons, around especially on Motley Fool. That site is IMHO much reduced in previous years, from a highly educative site based on investment, especially shares, to a Daily Mail sort of "Your Money" magazine about choosing credit cards and mortgages; but it still has the basics of pensions, and the discussion boards are interesting.

My take:
SIPP, what it does is defer taxation. If it defers it from 40% to 20% this is a large gain. If your choice is Company Contributions vs saving Salary, you are gaining NICs too, and will never have to pay them on the pension. Also, you can take out 25% as a tax-free lump sum: that 25% has never paid tax anywhere.

ISA: flexible: you can withdraw if need be. But not put back in. Probably good if you have a long time to go.

Just invest yourself: I would point out 2 perceived disadvantages of this, that I don't see as quite so bad:
1. dividends are taxed. Well, yes, but you get a notional tax credit at basic rate. By comparison, the same dividends in an ISA or SIPP will not get that, so the basic-rate part of the ISA or SIPP tax shelter is in fact useless for share dividends.
2. capital gains are taxed. Yes, but not until you realise them (i.e. sell shares). You can sell up to your capital gains threshold every year without CGT. That's the first 9600.00. Hold shares till you retire, then mix sell-offs and income, and you probably won't need to pay CGT on a normal pension.

It is often said that you should choose an investment because it is a good investment, and not because of the tax treatment. But at least in my case, the SIPP is just too much free money to pass up.

[EternalOptimist]

you could spend it all on nice holidays and work till you drop

[DimPrawn]

Hi,

I would like some recommendations for pensions, I don't have one and am 33, would like to do it straight from the Ltd account to save tax. Also how much should I be paying in a month?

This is a good thing. If you'd have poured good money into a pension, the funds now would be worth bugger all.

And with the UK on meltdown, the likelyhood of ever seeing that money in retirement is remote.

http://news.bbc.co.uk/1/hi/business/7719799.stm

I would suggest you stick the money in cash ISA's and high interest accounts and wait a few years and then buy into commodities and property.

But it's your choice.

[expat]

This is a good thing. If you'd have poured good money into a pension, the funds now would be worth bugger all.

And with the UK on meltdown, the likelyhood of ever seeing that money in retirement is remote.

http://news.bbc.co.uk/1/hi/business/7719799.stm

I would suggest you stick the money in cash ISA's and high interest accounts and wait a few years and then buy into commodities and property.

But it's your choice.

I should point out that I omitted to mention anything called a Pension Fund. A SIPP is merely a type of saving and investing account, with special characteristics of taxation and paying out, to reflect that its purpose is to allow you to save for your pension. It's not a pension fund, it's a saving/investing account. The money remains yours.

But DP's specific advice here is good. It is better to diversify, and having cash ready for when a good investment comes along is also a good idea.

As the Talmud said about 1400 years ago, you should have a third of your wealth in land, a third in business, and a third in cash. Your own house may be a good start on the "land" investment class, shares in a SIPP are investing in business, so you still have the cash to do.

[expat]

Drink it.

Don't save anything.

Live on state benefits in retirement.

<Zeity in "where's all that frigging money in my pensions gone then?" mode>

The net return on investment is not bad that way, and guarantees on the personal part of it are high (once you've spent it nobody can take it away). But later returns are patchy.