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Now that I've settled and am getting a little older, I need to start thinking about a pension. My employer doesn't currently provide anything, and as an American, I don't know the first thing about the pension system here. Ideally, I would be interested in going down the self-directed route of picking my own stocks. Can anyone give me a primer on the taxation treatment of pensions in this country, and also suggest the lowest-cost providers of self-directed products?

Cheers!

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basically, with UK pensions you contribute while you are working, getting an income tax rebate, and then draw from this when you retire, paying the income tax at this later stage. This is an effective tax-dodge because most people live off lower income when they retire, so pay lower marginal tax rates than they would have done on the money they contributed to their pension in the first place

for self-invested, you need a SIPP (Self Invested Personal Pension). Two I am aware of that are good in their own ways are Hargeaves Lansdown (annual 0.5% charge on self invested holdings and probably a dealing charge too) and Alliance Trust (fixed annual charge, better for higher balances, and also dealing charges). You can legally tranfer funds between them for smallish costs, and you can hold as many individual SIPPs with different providers as you like, subject to a maximum total annual contribution that you are unlikely to breach.

Edited by Si1

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Now that I've settled and am getting a little older, I need to start thinking about a pension. My employer doesn't currently provide anything, and as an American, I don't know the first thing about the pension system here. Ideally, I would be interested in going down the self-directed route of picking my own stocks. Can anyone give me a primer on the taxation treatment of pensions in this country, and also suggest the lowest-cost providers of self-directed products?

Cheers!

Are you permanently in the UK? If not, your tax situation with a UK pension might get complex.

In pure tax terms, it makes a lot of sense to put money taxed at higher rates into a pension. With money taxed at 'standard' rate the benefits are at best marginal.

FWIW, I have a SIPP (self-invested pension) with Hargreaves Lansdown. They're the best provider for UK funds and competitive for UK shares, but not so good for non-UK assets 'cos there's no online trading in them.

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Hargreaves Lansdown are indeed a good option for investing in UK funds and UK shares. They're also a good starting point if you want to read up on pensions. They aren't necessarily the cheapest though, particularly with direct share investing.

One thing that hasn't been stated clearly so far, when you pay a pension contribution the pension provider claims back basic rate tax for you, so if you pay £80 to the pension provider they claim £20 (i.e. the 20% tax you paid on £100 gross income) from HMRC and the amount invested is £100.

If you are a higher rate tax payer then you need to claim higher rate relief (an extra £20 in the example above) via your tax return. Don't forget to do this!

Also it's worth knowing that in the next few years it's very likely that all employers will be forced to offer a pension for staff and pay into it too. The previous government initiated this, the coalition are expected to tweak slightly and confirm.

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  • 142 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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