Pension Contributions

[bennno]

Should I cut my pension contributions and divert more towards mortgage or other uses.

Aged 42, £350k in pension, £20k per year going in...... (unclear if that about right, ahead of where I should be etc)

[K12beano]

bennno said:

Should I cut my pension contributions and divert more towards mortgage or Coke and Hookers

String piece long how is

[sidicks]

K12beano said:

bennno said:

Should I cut my pension contributions and divert more towards mortgage or Coke and Hookers

String piece long how is

Pretty much!

Questions for the OP:
When do you want to retire?
What income do you want in retirement?
What other assets / savings do you have?

Then you can investigate whether you can meet your requirements under different return and savings rates etc!

[K12beano]

Slightly more seriously, you need to know what your target fund for your retirement pot is, how quickly you'll hit any lifetime allowances, and bear in mind if you've got an annual allowance now it might be worth utilising it as fully as possible because it doesn't feel like those allowances are getting more generous any time soon.

And depending where you feel you are on the risk scale and how much you have to pay for your debt (especially compared to any possible investment returns), you might just want the comfort of saying goodbye to any debt as early as possible for psychological reasons!

[bennno]

Lifetime allowance is £1M. can anybody more knowledgable than me advise that with average growth over the next 23 years what a present fund value of £350k would be worth?

[sidicks]

bennno said:

Lifetime allowance is £1M. can anybody more knowledgable than me advise that with average growth over the next 23 years what a present fund value of £350k would be worth?

At 2% growth it is £550k
At 4% growth it is £860k
At 6% growth it is £1,340k
At 8% growth it is £2,050k

Take your pick...!

[anonymous-user]

bennno said:

£350k in pension, £20k per year going in...... (unclear if that about right, ahead of where I should be etc)

Just like this guy http://www.thisismoney.co.uk/money/pensions/articl...

Get it spent

[bennno]

I guess just 33 years younger, thanks all. perhaps interpreting this wrong but it looks like I can scale it back a bit.

bennno

[sidicks]

bennno said:

I guess just 33 years younger, thanks all. perhaps interpreting this wrong but it looks like I can scale it back a bit.

bennno

I think K12beanno has raised the key point - lifetime allowance is one thing, but annual allowance is worth considering - annual allowance is currently £40k (I think) but appears likely to be reduced further over time. For those earning over £150k, annual allowance is now just £10k, so depending on your circumstances it may be worth using up previously unused allowances (up to 3 previous years) thereafter you can reduce your contributions back to £10k etc

[randlemarcus]

sidicks said:

At 2% growth it is £550k
At 4% growth it is £860k
At 6% growth it is £1,340k
At 8% growth it is £2,050k

Take your pick...!

Out of curious ignorance, how does that work? Is the allowance "this much input, then we punish you" or is it "value of fund,and if it does well, we punish you"?

[gibbon]

You should be able to reliably make 5%, if not, sack your adviser/try harder yourself!

So as long as you are happy with that retirement age I would scale it back a bit if i was you, the total pot limit should soon start to rise a touch with inflation, so i wouldnt stop altogether.

If it was me i would scale back to £10k contributions, check the past performance of my funds and readjust if needed, and look to other options for investment for generating income later in life.

[sidicks]

randlemarcus said:

Out of curious ignorance, how does that work? Is the allowance "this much input, then we punish you" or is it "value of fund,and if it does well, we punish you"?

It's value of fund (which makes little sense) so savers are forced to guess what future returns might be and adjust their contributions accordingly to avoid an excess tax charge.

[randlemarcus]

sidicks said:

It's value of fund (which makes little sense) so savers are forced to guess what future returns might be and adjust their contributions accordingly to avoid an excess tax charge.

Thanks. That makes no sense but I presume made it easier to avoid dodges to inflate the value. Ho hum.

[SMB]

randlemarcus said:

Thanks. That makes no sense but I presume made it easier to avoid dodges to inflate the value. Ho hum.

To be clear, `The LTA is the value of the fund at the time you capitalise it, if you take it earlier than NRA before it's exceeded the limit there is no tax charge.

[sidicks]

SMB said:

To be clear, `The LTA is the value of the fund at the time you capitalise it, if you take it earlier than NRA before it's exceeded the limit there is no tax charge.

As I understand it, if you think you might exceed the limit you can protect your fund now (and not suffer additional tax in the future) but cannot make further contributions so are not able to add money later on if investment performance is poor.

Is that right?

[bmwmike]

Similar age far less in the pot think I better start retirement planning lol

[SMB]

sidicks said:

As I understand it, if you think you might exceed the limit you can protect your fund now (and not suffer additional tax in the future) but cannot make further contributions so are not able to add money later on if investment performance is poor.

Is that right?

no not quite


You can apply for individual or fixed protection, but in both cases your current fund value (as of April 16 for the latest ) has to already exceed the new current limit) ie your current value would already have to be over 1m in order to request protection. If your current fund is worth under 1m, then your new LTA is 1m ( plus some inflation growth going forward).

fixed protection stops future contributions, individual protection allows future contributions but your limit is fixed at the current capital value ( at more than 1m as of April 2016)

[bennno]

sidicks said:

bennno said:

I guess just 33 years younger, thanks all. perhaps interpreting this wrong but it looks like I can scale it back a bit.

bennno

I think K12beanno has raised the key point - lifetime allowance is one thing, but annual allowance is worth considering - annual allowance is currently £40k (I think) but appears likely to be reduced further over time. For those earning over £150k, annual allowance is now just £10k, so depending on your circumstances it may be worth using up previously unused allowances (up to 3 previous years) thereafter you can reduce your contributions back to £10k etc

So say you are in a role where you earn circa that value but its variable, i.e. might be £130k or might be £170k how does the pension annual allowance now work? Is there a risk that if you clip over £150k you suddenly owe the tax relief back on your contributions?

[LeoSayer]

SMB said:

LTA is 1m ( plus some inflation growth going forward).

Worth noting.

[jonny996]

bennno said:

Lifetime allowance is £1M. can anybody more knowledgable than me advise that with average growth over the next 23 years what a present fund value of £350k would be worth?

are you really planning on working until you are 65? why not keep contributions at same level & retire a few years early