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Jason

Starting A Pension (To Avoid 40% Tax)

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Well my first comment will be can't you save anymore than that?

Seriously £790 for a year is nothing. After 30 years you'd only have added £23,700 and whilst you might get some growth, it is highly unlikely that you'll even get to £100k unless stupid inflation occurs and then a £100k pension pot will buy nothing.

You should really be saving 15% of you gross income , which I am guessing should mean you saving about £5610.

hmm, so 790 a year may buy nothing with a very high risk of stupid inflation, surely, then, 790 a year is too much to put in?

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Indeed - I know people who lost on Equitable (don't know how much but they certainly weren't happy!).

Yep. Pooling your pension with others who have priority always was a mugs game.

All I'm saying is that people need to think carefully about the drawbacks instead of getting a pension just because of the prevailing wisdom that says "that's how you make provision for your old age". A pension is not the right choice for everyone.

Fair point. Better buy a couple of BTLs for your pension. After all, we know housing only ever goes up.

(Point being, any investment carries risks)

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No. The requirement to buy an annuity has been dropped. And even before that, there was a long window (never less than 20 years) in which to buy it.

Not that 20 years will help those born just the wrong side of the Birthday of Doom (April 6th 1960) who are unlikely ever to see decent annuity rates. But for today's 30-year-olds there's a much better story.

Actually it was never less than 25 years. Those for whom the minimum age is over 50 no longer have any upper age limit. Still won't help people born at the generational Wrong Time.

Edited by porca misèria

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Err...you only pay the 40% on the bit over the threshold , not the total amount.

I realise that (an additional £158 in tax this year), but I'm hoping next year it will be 2-3k above the threshold, so would start putting that in.

All I'm saying is that people need to think carefully about the drawbacks instead of getting a pension just because of the prevailing wisdom that says "that's how you make provision for your old age". A pension is not the right choice for everyone.

I quite agree, as I'm the type of person who has to find the ins and outs of everything before I dive in - so, I'm starting a year early. For now, I would much prefer to overpay my mortgage as I'm on a 4.99% rate, and don't a managed investment would beat this after charges. Also I expect to pay my mortgage off in the next 8-10years completely.

I'll have a look into salary sacrifice.

So, many thanks everyone for your comments.

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Hi all, my time to ask for some advice - this time on pensions.

I've just realised this tax year I'll be pushed into the 40% tax bracket, so I'm thinking about starting a pension to put anything above the 40% bracket into the pension. This tax year it will only be £790, so not too fussed but next tax year I will probably be pushed further into it (depending on tax thresholds etc, but I doubt they will be raised).

A few facts:

+ I'm 30,

+ my employer doesn't contribute,

+ I don't trust pensions

One thing you might wish to consider is to ask the employer to pay any future salary increases as a pension contribution, especially if you can convince them to contribute the 13.8% employer's NIC as well.

If you're saving 40% + 2% + 13.8% it becomes very attractive.

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I will be doing to same as the OP.

My basic is circa £40k and I am on target to get a £5k bonus this year.

I have a company car which is a band c vehicle so I pay 13 tax on that.

I have 3 kids so I receive child benefit (not sure how much exactly as wife deals with that but about £180 per month).

Therefore if I go in to the 40% bracket my company car tax doubles and I wont get circa £2160 child benefit.

My employer will put in 5% contribution.

I gues this will be my strategy for a number of years to come as going to 40% is a huge burden for me.

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I've been paying into a private pension for 12 years...I am not joking when I say It would have been worth more if I had put the money in a current account every month !!!

Save your money, invest it yourself and don't join in the pension ponzi. When it collapses there will be some be very unhappy hungry people.

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I paid in all of the over 40% tax threshold for efficiency.

Result?

- I will now pay more tax on my pension

- Over a thirty year investment with a "good" pension company in boom times, the fund was still only worth about the amount paid in, even including the tax benefit.

- I was lucky enough to have it mature when the stock market was reasonably bouyant. The best incrementing (goes up with inflation) annuity I could buy returned £2000 pa on a sum of about £75K (I took the maximum cash lump allowed). I took the £6000 pa non-incrementing spouse not included option.

If you factor in inflation, it means that you will never see a return on even the capital paid in. In contrast my bog-standard BS accounts increased yearly, the cash is ALL MINE and pretty much beyond government dirty tricks or insurance company collapses, well, I'll get the £50K back if it all goes belly up.

Keep it under your own control. SIPP if you want, precious metal whatever, just make sure it's out of reach of third-party investors and the government.

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No, he does mean tax avoidance, which is completely legal, unlike tax evasion.

...think of your audience....present yourself ...efficiency is the right word in this context....forget your Dictionary and it's legal definitions...what are you...?....a lawyer or a human being....?... :rolleyes:

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I've been looking into the same sort of stuff - putting money out of premium bonds and into a stocks & shares ISA, now looking at moving my current company pension into a SIPP.

Anyone know how that works from an employer's contributions point of view? Website just says open it, we'll sort the details out - does that mean they'll close off/transfer in any other accounts i've got, and arrange with employer to put contributions into the SIPP instead?

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Fair point. Better buy a couple of BTLs for your pension. After all, we know housing only ever goes up.

(Point being, any investment carries risks)

Yes a pension is an investment with risk (a bet), but I think that some (many?) people don't view a pension in the same terms as a BTL, a trade on the stock market, a flutter on the horses or a punt on gold. I expect many get a pension as that is "what they are supposed to do" and then simply do not think about it anymore, telling themselves they've followed the advice of the government and financial advisers so they don't need to worry about their old age.

With a pension the government will help subsidies your stake with a tax incentive but the hitch is that you can't get your chips out of the casino until you are over 55 and even then there are limits on how much and when.

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....Yes a pension is an investment with risk....

...life is a risk...even back in the days of the cave man... the ball game was risk management ...it still is today...with no guarantees....that's life.... :rolleyes:

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...life is a risk...even back in the days of the cave man... the ball game was risk management ...it still is today...with no guarantees....that's life.... :rolleyes:

Your point? I'm simply saying evaluate the risk, consider the alternatives and decide what is best for you in your circumstances.

I suspect too few people think about risks associated with pensions as they are sold the upsides by government and financial advisers and blinded by the thought of 'saving' some money that would otherwise be taken from them as tax. I'm just pointing out the downsides.

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Your point? I'm simply saying evaluate the risk, consider the alternatives and decide what is best for you in your circumstances.

I suspect too few people think about risks associated with pensions as they are sold the upsides by government and financial advisers and blinded by the thought of 'saving' some money that would otherwise be taken from them as tax. I'm just pointing out the downsides.

...risk aside...the main problem with private pensions are the fees charged by the pension companies....regulatory control should be tightened to ensure these costs 'fees' are more transparent or such 'investments' could turn into the next great misselling scandal.... :rolleyes:

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No. The requirement to buy an annuity has been dropped. And even before that, there was a long window (never less than 20 years) in which to buy it.

Not that 20 years will help those born just the wrong side of the Birthday of Doom (April 6th 1960) who are unlikely ever to see decent annuity rates. But for today's 30-year-olds there's a much better story.

I stand corrected - but is it not still the case that you can only take 25% as a lump sum? What are you allowed to do with the other 75%?

On the contrary, a pension is a Very Good place to have your savings. It means you qualify for means-tested benefits!

Depends upon the sort of financial difficulties you find yourself in and whether any benefits would be available to you or sufficient for your needs.

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Some random points:

Someone mentioned obligation to buy annuity has gone, well only if you have other income over 20k??

http://www.pensioncalculator.org/golden-rules/annuity-changes-for-2011/

Fees are a bit of a red herring if you want to DIY. My IFA told me "SIPPs" are far too expensive (ie he will get no comission). Alliance trust is £125 + vat a year. http://www.alliancetrustsavings.co.uk/pensions/select-sipp/

Then you can invest in vanguard trackers as someone already mentioned with TERs of less than .25%.

https://www.vanguard.co.uk/uk/portal/Funds/funds-and-documents.jsp

And if you are are really lazy you can buy a life strategy fund that does some rebalancing for you.

https://www.vanguard.co.uk/documents/factsheets/lifeStrategy60_equity.pdf

Seems that there is a lot of low cost pension stuff in the USA and in the UK we are just stuffed by IFAs which is why everyone seems to have such a dim view of pensions.

If you can get your employer to contribute through salary sacrifice, they save NIC, you save tax and everyone is laughing! (Until the world stock markets crash and annuity rates are 1% by the time we all retire!!!!)

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I've been paying into a private pension for 12 years...I am not joking when I say It would have been worth more if I had put the money in a current account every month !!!

Save your money, invest it yourself and don't join in the pension ponzi. When it collapses there will be some be very unhappy hungry people.

I've been paying into a pension for about the same time and its worth more than £1m

Difference is I manage it myself and deliberately found the lowest cost provider

Too many people blame "the system" for their own failures

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Some random points:

Someone mentioned obligation to buy annuity has gone, well only if you have other income over 20k??

http://www.pensioncalculator.org/golden-rules/annuity-changes-for-2011/

Fees are a bit of a red herring if you want to DIY. My IFA told me "SIPPs" are far too expensive (ie he will get no comission). Alliance trust is £125 + vat a year. http://www.alliancetrustsavings.co.uk/pensions/select-sipp/

Then you can invest in vanguard trackers as someone already mentioned with TERs of less than .25%.

https://www.vanguard.co.uk/uk/portal/Funds/funds-and-documents.jsp

And if you are are really lazy you can buy a life strategy fund that does some rebalancing for you.

https://www.vanguard.co.uk/documents/factsheets/lifeStrategy60_equity.pdf

Seems that there is a lot of low cost pension stuff in the USA and in the UK we are just stuffed by IFAs which is why everyone seems to have such a dim view of pensions.

If you can get your employer to contribute through salary sacrifice, they save NIC, you save tax and everyone is laughing! (Until the world stock markets crash and annuity rates are 1% by the time we all retire!!!!)

Was looking at http://www.hl.co.uk/pensions/sipp/charges-and-interest-rates - from what i can see potentially no charges from the SIPP provider, only on what i choose to invest in?

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One thing you might wish to consider is to ask the employer to pay any future salary increases as a pension contribution, especially if you can convince them to contribute the 13.8% employer's NIC as well.

If you're saving 40% + 2% + 13.8% it becomes very attractive.

This

Basically you get to nearly double you invest free without risk provided you agree not to take it out until 55 and limit what you do with 75% after that

Seems a fair deal to me

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Was looking at http://www.hl.co.uk/pensions/sipp/charges-and-interest-rates - from what i can see potentially no charges from the SIPP provider, only on what i choose to invest in?

The SIPP provider gets kick backs in up front and tail commission from the unit trust provider

Hargreaves Lansdowne are raking in hidden fees from the fund management companies

The company is in the FTSE-100, taking money indirectly from the savings of the people who invest in their platforms

Personally, wouldn't touch it with a barge pole

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I've been paying into a pension for about the same time and its worth more than £1m

Difference is I manage it myself and deliberately found the lowest cost provider

Too many people blame "the system" for their own failures

I don't think I blamed anyone, did I ?

I'm just saying giving your pension money to some bozo to invest in the biggest ponzi scheme in history is a BAD idea. You can talk about schemes/commission etc but if you don't see a penny of it then it's not much good to you.

You come across as a sanctimonious ars*, btw, you should read what people write rather than telling everyone how great you are, no one cares.

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I don't think I blamed anyone, did I ?

I'm just saying giving your pension money to some bozo to invest in the biggest ponzi scheme in history is a BAD idea. You can talk about schemes/commission etc but if you don't see a penny of it then it's not much good to you.

You come across as a sanctimonious ars*, btw, you should read what people write rather than telling everyone how great you are, no one cares.

Would you like some cheese with that whine?

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When discussing pensions outside the HPC community, many people (well, those who care) will say a government will steal from it any time they like, they will then cite what Brown did over a decade ago.

However, lots of people forget the recent stealing going on. However I can only vaguely remember the points/dates:

+ The government changed the law forcing pension funds to buy 'safe' assets, of which mainly consists of government bonds.

+ The BOE then flooded the market with new capital by buying up these bonds, artificially creating competition and pushing returns to record lows.

+ The BOE are about to do it again.

I have spoke to friends who are IFA's and to be honest, they know nothing in terms of economics, and only know about the products they are selling. In fact, out of all my friends, they all see me as a economic guru - especially as I'm pessimistic about house prices, yet bought my house in the last two years.

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When discussing pensions outside the HPC community, many people (well, those who care) will say a government will steal from it any time they like, they will then cite what Brown did over a decade ago.

However, lots of people forget the recent stealing going on. However I can only vaguely remember the points/dates:

+ The government changed the law forcing pension funds to buy 'safe' assets, of which mainly consists of government bonds.

+ The BOE then flooded the market with new capital by buying up these bonds, artificially creating competition and pushing returns to record lows.

+ The BOE are about to do it again.

I have spoke to friends who are IFA's and to be honest, they know nothing in terms of economics, and only know about the products they are selling. In fact, out of all my friends, they all see me as a economic guru - especially as I'm pessimistic about house prices, yet bought my house in the last two years.

Its not all one way: in the mid-1990s the government made company pension schemes much more valuable to employees by making companies offer index linked inflation proof pensions

This made defined benefit pension hugely valuable to employees and hugely expensive to employers

So all the DB schemes started closing...

...unintended consequences

Now we have a mess where anyone under 40 has to provide for themselves or hope there will be a state pension by 2050...

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  • 317 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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