Pensions Tapering
Discussion
Finance bods,
Quick question, if you don't mind. If affected by the pension contributions allowance taper (i.e. no more than £10k of contributions pa), is there any reason to contribute more than that to a pension rather than holding it outside the pension to preserve ability to access? You never know what you might need for school fees, house purchases, LP capital calls and so on.
I suppose you sacrifice the benefit of the 25% tax free amount (which will probably be gone by the time I take my pension far in the future) as well as the ability to phase income over time to stay below the 40/45% income tax thresholds as relevant.
Anything else I should be aware of?
Quick question, if you don't mind. If affected by the pension contributions allowance taper (i.e. no more than £10k of contributions pa), is there any reason to contribute more than that to a pension rather than holding it outside the pension to preserve ability to access? You never know what you might need for school fees, house purchases, LP capital calls and so on.
I suppose you sacrifice the benefit of the 25% tax free amount (which will probably be gone by the time I take my pension far in the future) as well as the ability to phase income over time to stay below the 40/45% income tax thresholds as relevant.
Anything else I should be aware of?
Probably minimal carry-forwards are available to me.
I suppose my real question is why is so much noise made about SIPPs and the like when realistically it can only make up a minority of one's future planning?
If I put in £10k pa until I retired it would not get me anywhere near what I would consider a reasonable pot.
I suppose my real question is why is so much noise made about SIPPs and the like when realistically it can only make up a minority of one's future planning?
If I put in £10k pa until I retired it would not get me anywhere near what I would consider a reasonable pot.
NickCQ said:
Probably minimal carry-forwards are available to me.
I suppose my real question is why is so much noise made about SIPPs and the like when realistically it can only make up a minority of one's future planning?
If I put in £10k pa until I retired it would not get me anywhere near what I would consider a reasonable pot.
Not that many people earn north of £210,000 pa, but I do agree that everyone should have the same maximum allowance regardless of income.I suppose my real question is why is so much noise made about SIPPs and the like when realistically it can only make up a minority of one's future planning?
If I put in £10k pa until I retired it would not get me anywhere near what I would consider a reasonable pot.
PurpleMoonlight said:
NickCQ said:
Probably minimal carry-forwards are available to me.
I suppose my real question is why is so much noise made about SIPPs and the like when realistically it can only make up a minority of one's future planning?
If I put in £10k pa until I retired it would not get me anywhere near what I would consider a reasonable pot.
Not that many people earn north of £210,000 pa, but I do agree that everyone should have the same maximum allowance regardless of income.I suppose my real question is why is so much noise made about SIPPs and the like when realistically it can only make up a minority of one's future planning?
If I put in £10k pa until I retired it would not get me anywhere near what I would consider a reasonable pot.
PurpleMoonlight said:
tuffer said:
I worked it out to be £170K, Anything over £110K it is reduced by £1 for every £2 you earn to a maximum of £30K, so £110K + £60K = £10K max allowance.
No, it over £150,000 so £10,000 maximum pension contribution is hit at £210,000.If you have your own company you could make a £40k employer contribution into your SIPP/pension regardless of your earnings.
If not, you could ask your employer if they could restructure your package to achieve the same.
They should be happy to do this as it is more tax efficient for them.
If not, you could ask your employer if they could restructure your package to achieve the same.
They should be happy to do this as it is more tax efficient for them.
JulianPH said:
If you have your own company you could make a £40k employer contribution into your SIPP/pension regardless of your earnings.
If not, you could ask your employer if they could restructure your package to achieve the same.
They should be happy to do this as it is more tax efficient for them.
This would be an interesting possibility. However, my layman's reading of the rules is that employer pension contributions are counted in 'adjusted income' (but not 'threshold income'). Therefore, wouldn't restructuring compensation with a higher employer contribution still put one in the taper zone, removing the income tax relief above £10k? If not, you could ask your employer if they could restructure your package to achieve the same.
They should be happy to do this as it is more tax efficient for them.
NickCQ said:
JulianPH said:
If you have your own company you could make a £40k employer contribution into your SIPP/pension regardless of your earnings.
If not, you could ask your employer if they could restructure your package to achieve the same.
They should be happy to do this as it is more tax efficient for them.
This would be an interesting possibility. However, my layman's reading of the rules is that employer pension contributions are counted in 'adjusted income' (but not 'threshold income'). Therefore, wouldn't restructuring compensation with a higher employer contribution still put one in the taper zone, removing the income tax relief above £10k? If not, you could ask your employer if they could restructure your package to achieve the same.
They should be happy to do this as it is more tax efficient for them.
Sorry, trying to be inventive and not thinking it through properly before posting.
How about an ISA?
JulianPH said:
NickCQ said:
JulianPH said:
If you have your own company you could make a £40k employer contribution into your SIPP/pension regardless of your earnings.
If not, you could ask your employer if they could restructure your package to achieve the same.
They should be happy to do this as it is more tax efficient for them.
This would be an interesting possibility. However, my layman's reading of the rules is that employer pension contributions are counted in 'adjusted income' (but not 'threshold income'). Therefore, wouldn't restructuring compensation with a higher employer contribution still put one in the taper zone, removing the income tax relief above £10k? If not, you could ask your employer if they could restructure your package to achieve the same.
They should be happy to do this as it is more tax efficient for them.
Sorry, trying to be inventive and not thinking it through properly before posting.
How about an ISA?
NickCQ said:
Inventive is good! I think some combination of ISA / LISA / pension and mortgage overpayments should be OK for now, maybe spend or donate the rest if there's no tax-advantaged way to keep hold of it
ISA/LISA/VCT/EIS all offer great tax breaks. Mortgage overpayment is usually a good thing. Buy parcels of land and try and strike lucky with planning permission. Invest private equity into small (well researched business). Classic (or future classic) cars is another obvious one that you can enjoy and pay no tax on any gains...JulianPH said:
NickCQ said:
Inventive is good! I think some combination of ISA / LISA / pension and mortgage overpayments should be OK for now, maybe spend or donate the rest if there's no tax-advantaged way to keep hold of it
ISA/LISA/VCT/EIS all offer great tax breaks. Mortgage overpayment is usually a good thing. Buy parcels of land and try and strike lucky with planning permission. Invest private equity into small (well researched business). Classic (or future classic) cars is another obvious one that you can enjoy and pay no tax on any gains...However, way too much PE exposure through work already, need to diversify a little bit!
NickCQ said:
JulianPH said:
NickCQ said:
Inventive is good! I think some combination of ISA / LISA / pension and mortgage overpayments should be OK for now, maybe spend or donate the rest if there's no tax-advantaged way to keep hold of it
ISA/LISA/VCT/EIS all offer great tax breaks. Mortgage overpayment is usually a good thing. Buy parcels of land and try and strike lucky with planning permission. Invest private equity into small (well researched business). Classic (or future classic) cars is another obvious one that you can enjoy and pay no tax on any gains...However, way too much PE exposure through work already, need to diversify a little bit!
So you don't even need planning permission (which would make it worth a fortune relative to the purchase price) to make that investment work. Very low maintenance too.
I actually used my SIPP when I was paying 50% income tax, so it only cost me half the purchase price and the yield is effectively 24% on my actual cash investment!
The increase in land price has not been reflected in the increase in rental yield, so you would be looking at 4% to 6% yield at today's prices in my neck of the woods.
JulianPH said:
Land is a good idea. I bought some 10 years ago and rent it out as paddock land. Yield is 12% on what I paid, waiting list of horse owners and the land itself has nearly trebled in value.
So you don't even need planning permission (which would make it worth a fortune relative to the purchase price) to make that investment work. Very low maintenance too.
I actually used my SIPP when I was paying 50% income tax, so it only cost me half the purchase price and the yield is effectively 24% on my actual cash investment!
The increase in land price has not been reflected in the increase in rental yield, so you would be looking at 4% to 6% yield at today's prices in my neck of the woods.
Forgive me for saying so, but aren't you painting a slightly rosy picture of the paddock land idea?So you don't even need planning permission (which would make it worth a fortune relative to the purchase price) to make that investment work. Very low maintenance too.
I actually used my SIPP when I was paying 50% income tax, so it only cost me half the purchase price and the yield is effectively 24% on my actual cash investment!
The increase in land price has not been reflected in the increase in rental yield, so you would be looking at 4% to 6% yield at today's prices in my neck of the woods.
I remember you posting about it some time ago and actually "phoned a friend" to run it past them and he said "yeah great, erm, don't you remember....", and I did (Goodness knows how I could have forgotten. Senility I suppose). And dumped it in the bin-tray.
The barbershop idea above's a goodun tho. Currently keep 4. Missed a 5th last month too. Mind you it is a bit simple and straightforward.
Edited by drainbrain on Tuesday 8th August 16:35
drainbrain said:
JulianPH said:
Land is a good idea. I bought some 10 years ago and rent it out as paddock land. Yield is 12% on what I paid, waiting list of horse owners and the land itself has nearly trebled in value.
So you don't even need planning permission (which would make it worth a fortune relative to the purchase price) to make that investment work. Very low maintenance too.
I actually used my SIPP when I was paying 50% income tax, so it only cost me half the purchase price and the yield is effectively 24% on my actual cash investment!
The increase in land price has not been reflected in the increase in rental yield, so you would be looking at 4% to 6% yield at today's prices in my neck of the woods.
Forgive me for saying so, but aren't you painting a slightly rosy picture of the paddock land idea?So you don't even need planning permission (which would make it worth a fortune relative to the purchase price) to make that investment work. Very low maintenance too.
I actually used my SIPP when I was paying 50% income tax, so it only cost me half the purchase price and the yield is effectively 24% on my actual cash investment!
The increase in land price has not been reflected in the increase in rental yield, so you would be looking at 4% to 6% yield at today's prices in my neck of the woods.
I remember you posting about it some time ago and actually "phoned a friend" to run it past them and he said "yeah great, erm, don't you remember....", and I did (Goodness knows how I could have forgotten. Senility I suppose). And dumped it in the bin-tray.
The barbershop idea above's a goodun tho. Currently keep 4. Missed a 5th last month too. Mind you it is a bit simple and straightforward.
Edited by drainbrain on Tuesday 8th August 16:35
It is now getting close to £15,000 an acre.
I also did it through my SIPP so it cost me £2,500 an acre back then (50% income tax).
Only overhead has been £700 on some estate fencing maintenance.
4th best investment I have ever made. If I get planning permission on any of them it could be my 3rd best. Sometimes it is better to keep things simple.
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