Pension or not...
Discussion
Hello!
I am a director of a ltd company and currently invest in equities inside an ISA and also property in another ltd co, the property in particular provides a decent income / return
As such i have some funds inside those companies i cannot always access tax efficiently as i already draw a decent salary + dividends.
As there is no employer salary match i have never bothered to setup a pension
Main reason is that i'd ideally like to semi retire at an early age (40 ish ideally) (i'm 29 now) so have always steered away from locking cash away until 55 years old.
Any thoughts on this, or am i missing a trick here?
My main consideration is it would reduce corp tax, be protected in bankruptcy, and also i'd like the idea of buying a property inside a SIPP...
However, trying to work out a reasonable amount as i'd rather save towards my early retirement goal as priority.
Would it be prudent to perhaps put aside a small amount monthly in a SIPP and dollar cost average into some funds with the eventual goal to buy a commercial property down the line? Or stick to the property and other investments that go towards my early retirement goals?
There is a good chance i won't actually retire in the traditional sense at 40 and will likely always choose to earn an income of some kind so the early retirement thing is more a plan B incase for whatever reason i cannot work etc in the future...
I am a director of a ltd company and currently invest in equities inside an ISA and also property in another ltd co, the property in particular provides a decent income / return
As such i have some funds inside those companies i cannot always access tax efficiently as i already draw a decent salary + dividends.
As there is no employer salary match i have never bothered to setup a pension
Main reason is that i'd ideally like to semi retire at an early age (40 ish ideally) (i'm 29 now) so have always steered away from locking cash away until 55 years old.
Any thoughts on this, or am i missing a trick here?
My main consideration is it would reduce corp tax, be protected in bankruptcy, and also i'd like the idea of buying a property inside a SIPP...
However, trying to work out a reasonable amount as i'd rather save towards my early retirement goal as priority.
Would it be prudent to perhaps put aside a small amount monthly in a SIPP and dollar cost average into some funds with the eventual goal to buy a commercial property down the line? Or stick to the property and other investments that go towards my early retirement goals?
There is a good chance i won't actually retire in the traditional sense at 40 and will likely always choose to earn an income of some kind so the early retirement thing is more a plan B incase for whatever reason i cannot work etc in the future...
If not a member already, join this forum
https://forum.mrmoneymustache.com/
Post your numbers (I suggest the above as people don't want to talk money on here) and then see what people say.
Furthermore the forum is full of people who have done what you are trying to do so they can tell you how they did it.
Personally I would consider a SIPP as part of the roadmap of retirement if it saves you a chunk of tax, However, it might not work out that way if you sustain income from elsewhere in retirement and SIPP income pushes you into higher rate tax band and you may end up in the same situation. That's why I suggest you speak to the people on MMM. Then probably an accountant.
https://forum.mrmoneymustache.com/
Post your numbers (I suggest the above as people don't want to talk money on here) and then see what people say.
Furthermore the forum is full of people who have done what you are trying to do so they can tell you how they did it.
Personally I would consider a SIPP as part of the roadmap of retirement if it saves you a chunk of tax, However, it might not work out that way if you sustain income from elsewhere in retirement and SIPP income pushes you into higher rate tax band and you may end up in the same situation. That's why I suggest you speak to the people on MMM. Then probably an accountant.
Ignoring the above(!), there are two important questions here:
1) Do you own these companies (I ask because you say there is no employer salary match - but as a director of your own companies the decision on offering this would be entirely down to yourself)?
2) Are the funds within the companies integral to your retirement at 40 strategy or additional to this?
If they are integral you will have to pay the tax to get the funds out and invest accordingly.
If they are not, then the most tax efficient solution would be to move them into a pension/SIPP whereby you would pay no tax at all on moving the money over, can offset the cost against corporation tax within the companies and of course the money would now be in a tax free environment for income and growth.
One other thing to remember is you may wish to start retirement at 40 but it (hopefully!) won't end ad 60. You may, as you say, continue to earn an income for the first part of your retirement and then stop working altogether when you can access the money from your pension/SIPP.
So on this basis the pension option could be the best of both worlds, providing you don't need this money as part of your retire at 40 plan.
Cheers
1) Do you own these companies (I ask because you say there is no employer salary match - but as a director of your own companies the decision on offering this would be entirely down to yourself)?
2) Are the funds within the companies integral to your retirement at 40 strategy or additional to this?
If they are integral you will have to pay the tax to get the funds out and invest accordingly.
If they are not, then the most tax efficient solution would be to move them into a pension/SIPP whereby you would pay no tax at all on moving the money over, can offset the cost against corporation tax within the companies and of course the money would now be in a tax free environment for income and growth.
One other thing to remember is you may wish to start retirement at 40 but it (hopefully!) won't end ad 60. You may, as you say, continue to earn an income for the first part of your retirement and then stop working altogether when you can access the money from your pension/SIPP.
So on this basis the pension option could be the best of both worlds, providing you don't need this money as part of your retire at 40 plan.
Cheers
Testaburger said:
wormus said:
Unless you are a professional footballer forget it. Think about the maths.
What utter garbage.Edited by anonymous-user on Monday 27th August 10:46
red_slr said:
If not a member already, join this forum
https://forum.mrmoneymustache.com/
Post your numbers (I suggest the above as people don't want to talk money on here) and then see what people say.
Furthermore the forum is full of people who have done what you are trying to do so they can tell you how they did it.
Personally I would consider a SIPP as part of the roadmap of retirement if it saves you a chunk of tax, However, it might not work out that way if you sustain income from elsewhere in retirement and SIPP income pushes you into higher rate tax band and you may end up in the same situation. That's why I suggest you speak to the people on MMM. Then probably an accountant.
Many thanks, i'll check it out. Used to read MMM a couple of years ago but had forgotten about the forums etchttps://forum.mrmoneymustache.com/
Post your numbers (I suggest the above as people don't want to talk money on here) and then see what people say.
Furthermore the forum is full of people who have done what you are trying to do so they can tell you how they did it.
Personally I would consider a SIPP as part of the roadmap of retirement if it saves you a chunk of tax, However, it might not work out that way if you sustain income from elsewhere in retirement and SIPP income pushes you into higher rate tax band and you may end up in the same situation. That's why I suggest you speak to the people on MMM. Then probably an accountant.
JulianPH said:
Ignoring the above(!), there are two important questions here:
1) Do you own these companies (I ask because you say there is no employer salary match - but as a director of your own companies the decision on offering this would be entirely down to yourself)?
2) Are the funds within the companies integral to your retirement at 40 strategy or additional to this?
If they are integral you will have to pay the tax to get the funds out and invest accordingly.
If they are not, then the most tax efficient solution would be to move them into a pension/SIPP whereby you would pay no tax at all on moving the money over, can offset the cost against corporation tax within the companies and of course the money would now be in a tax free environment for income and growth.
One other thing to remember is you may wish to start retirement at 40 but it (hopefully!) won't end ad 60. You may, as you say, continue to earn an income for the first part of your retirement and then stop working altogether when you can access the money from your pension/SIPP.
So on this basis the pension option could be the best of both worlds, providing you don't need this money as part of your retire at 40 plan.
Cheers
Many thanks Julian, to answer...1) Do you own these companies (I ask because you say there is no employer salary match - but as a director of your own companies the decision on offering this would be entirely down to yourself)?
2) Are the funds within the companies integral to your retirement at 40 strategy or additional to this?
If they are integral you will have to pay the tax to get the funds out and invest accordingly.
If they are not, then the most tax efficient solution would be to move them into a pension/SIPP whereby you would pay no tax at all on moving the money over, can offset the cost against corporation tax within the companies and of course the money would now be in a tax free environment for income and growth.
One other thing to remember is you may wish to start retirement at 40 but it (hopefully!) won't end ad 60. You may, as you say, continue to earn an income for the first part of your retirement and then stop working altogether when you can access the money from your pension/SIPP.
So on this basis the pension option could be the best of both worlds, providing you don't need this money as part of your retire at 40 plan.
Cheers
Yes i do solely own them both. My thoughts on the salary match is that's usually one of the main perks to get "free" money in the form of the company match. Makes less of a plus point if those funds are from your own company? If i could add £10k to a pension and get someone else to add £10k would be a no brainer.
And yes the funds inside the companies are integral to the strategy.
At present, i don't try to draw down past what i need to spend (plus £20k to max the isa), and invest the rest in the property company. This is quite tax efficient as earned money is taxed at 19% corp tax then invested. The income of course will need to be taxed when it is eventually drawn from the property company so it's more of a tax deferred strategy?
However i may have no need to draw this for a long long time so it's there as a "safety net" so to speak - should my main business fail etc.
I don't intend to retire at 40 in the strict sense. More i'd like to have a cashflow from investments that i could rely on by 40 should i need to pay my basic expenses.
Seems like a sensible thing to do would be to add a certain % of the profits of the companies into a pension so there is best of both worlds as you said!
red_slr said:
Personally I would consider a SIPP as part of the roadmap of retirement if it saves you a chunk of tax, However, it might not work out that way if you sustain income from elsewhere in retirement and SIPP income pushes you into higher rate tax band and you may end up in the same situation. That's why I suggest you speak to the people on MMM. Then probably an accountant.
Not technically the case though. If you are a 40% tax payer whilst contributing you get the whole 40% tax back on your contributions (for now!).If you remain a 40% tax payer whilst withdrawing you are still entitled to one quarter of this being fax free. This has the net result of you paying 30% (three quarters of 40%) tax on your withdrawals. So you are 10% up on the deal.
Furthermore, half of the tax relief available to 40% tax payers is immediate (as it is reclaimed in their annual tax assessment - not invested within their SIPP). So a £32,000 SIPP contribution is grossed up to £40,000 (just as for a basic rate taxpayer) but an additional £8,000 (the balance) is reclaimed in the year the contribution is made.
This means a higher rate taxpayer can benefit from nearly a quarter of a million pounds worth of tax free cash over 30 years that sits outside of his/her pension, so is not subject to any income tax upon withdrawal - as it is never withdrawn.
Don't expect this to last much longer though!
trowelhead said:
Many thanks Julian, to answer...
Yes i do solely own them both. My thoughts on the salary match is that's usually one of the main perks to get "free" money in the form of the company match. Makes less of a plus point if those funds are from your own company? If i could add £10k to a pension and get someone else to add £10k would be a no brainer.
And yes the funds inside the companies are integral to the strategy.
At present, i don't try to draw down past what i need to spend (plus £20k to max the isa), and invest the rest in the property company. This is quite tax efficient as earned money is taxed at 19% corp tax then invested. The income of course will need to be taxed when it is eventually drawn from the property company so it's more of a tax deferred strategy?
However i may have no need to draw this for a long long time so it's there as a "safety net" so to speak - should my main business fail etc.
I don't intend to retire at 40 in the strict sense. More i'd like to have a cashflow from investments that i could rely on by 40 should i need to pay my basic expenses.
Seems like a sensible thing to do would be to add a certain % of the profits of the companies into a pension so there is best of both worlds as you said!
No problem! Yes i do solely own them both. My thoughts on the salary match is that's usually one of the main perks to get "free" money in the form of the company match. Makes less of a plus point if those funds are from your own company? If i could add £10k to a pension and get someone else to add £10k would be a no brainer.
And yes the funds inside the companies are integral to the strategy.
At present, i don't try to draw down past what i need to spend (plus £20k to max the isa), and invest the rest in the property company. This is quite tax efficient as earned money is taxed at 19% corp tax then invested. The income of course will need to be taxed when it is eventually drawn from the property company so it's more of a tax deferred strategy?
However i may have no need to draw this for a long long time so it's there as a "safety net" so to speak - should my main business fail etc.
I don't intend to retire at 40 in the strict sense. More i'd like to have a cashflow from investments that i could rely on by 40 should i need to pay my basic expenses.
Seems like a sensible thing to do would be to add a certain % of the profits of the companies into a pension so there is best of both worlds as you said!
It sounds like you should look into a SSAS (Small Self Administered Scheme). This is a type of occupational pension scheme that would give you all the flexibility you need.
You can place company money (and other assets) within the scheme tax free and these are offset against corporation tax. You can invest these asset in the same way as with a SIPP (though your company can also borrow part of them back, if it needs to) and you can make yourself, family and future shareholders/etc.) the beneficiaries of the scheme.
So the company saves all the tax and the scheme members take all the benefits.
One point, like any other occupational scheme, these are not FCA regulated. But if you are running it you can only lose out to your own actions.
I would recommend having a separate (independent) trustee and there are multiple companies that will carry out the administration with HMRC for you, but pick an FCA regulated provider to do this (there are some SIPP companies that also offer SSAS's)
Have a look into it. I think it ticks all your boxes (and more) and am happy to answer any further questions. Do make sure the charges are fixed and low though. You shouldn't be paying more than £2k a year (if that) for what you need.
trowelhead said:
Main reason is that i'd ideally like to semi retire at an early age (40 ish ideally) (i'm 29 now) so have always steered away from locking cash away until 55 years old.
Pension age for you is currently 58 not 55. Its not going to get any lower either.As everyone else has said there are pension benefits but in lots of ways you are just deferring the tax. You are right to think about all the options and there isn't going to be a right answer as such.
trickywoo said:
trowelhead said:
Main reason is that i'd ideally like to semi retire at an early age (40 ish ideally) (i'm 29 now) so have always steered away from locking cash away until 55 years old.
Pension age for you is currently 58 not 55. Its not going to get any lower either.As everyone else has said there are pension benefits but in lots of ways you are just deferring the tax. You are right to think about all the options and there isn't going to be a right answer as such.
For the time being, i'll likely stick with what i'm doing.
If i ever face the problem of having too much cash around, i'll look at putting some in closer to pension age - or buy some silly cars (more likely
)Don't forget under current rules you can use previous years pension allowance so you can always put a good chunk into a SIPP just before you retire (up to £120k per person IIRC (rules depending) so a married couple can SIPP almost £250k overnight (in addition to that years too)).
The moving of the goal posts is very annoying and makes me wish I had never bothered with a SIPP as I reckon it will be 60+ for me. As I plan to retire in my 40s that's a big gap to bridge.
The moving of the goal posts is very annoying and makes me wish I had never bothered with a SIPP as I reckon it will be 60+ for me. As I plan to retire in my 40s that's a big gap to bridge.
JulianPH said:
No problem!
It sounds like you should look into a SSAS (Small Self Administered Scheme). This is a type of occupational pension scheme that would give you all the flexibility you need.
You can place company money (and other assets) within the scheme tax free and these are offset against corporation tax. You can invest these asset in the same way as with a SIPP (though your company can also borrow part of them back, if it needs to) and you can make yourself, family and future shareholders/etc.) the beneficiaries of the scheme.
So the company saves all the tax and the scheme members take all the benefits.
One point, like any other occupational scheme, these are not FCA regulated. But if you are running it you can only lose out to your own actions.
I would recommend having a separate (independent) trustee and there are multiple companies that will carry out the administration with HMRC for you, but pick an FCA regulated provider to do this (there are some SIPP companies that also offer SSAS's)
Have a look into it. I think it ticks all your boxes (and more) and am happy to answer any further questions. Do make sure the charges are fixed and low though. You shouldn't be paying more than £2k a year (if that) for what you need.
Blimey.It sounds like you should look into a SSAS (Small Self Administered Scheme). This is a type of occupational pension scheme that would give you all the flexibility you need.
You can place company money (and other assets) within the scheme tax free and these are offset against corporation tax. You can invest these asset in the same way as with a SIPP (though your company can also borrow part of them back, if it needs to) and you can make yourself, family and future shareholders/etc.) the beneficiaries of the scheme.
So the company saves all the tax and the scheme members take all the benefits.
One point, like any other occupational scheme, these are not FCA regulated. But if you are running it you can only lose out to your own actions.
I would recommend having a separate (independent) trustee and there are multiple companies that will carry out the administration with HMRC for you, but pick an FCA regulated provider to do this (there are some SIPP companies that also offer SSAS's)
Have a look into it. I think it ticks all your boxes (and more) and am happy to answer any further questions. Do make sure the charges are fixed and low though. You shouldn't be paying more than £2k a year (if that) for what you need.
One point, apart from your diagnosis of needs based on a few paragraphs by a retail client, you say (of the SSAS) “..like any other occupational scheme, these are not FCA regulated".
It’s true that SSAS are not regulated by the FCA (which supervises companies), but they are regulated by The Pensions Regulator and to a certain extent by HMRC. HMRC has upped its game in recent years, putting in more stringent processes for the registration of new SSAS. And rightly so. They have become the scammers’ weapon of choice. Given the targeting of unwary owners of SSAS (I can think of about twelve business owners who were duped into buying a holiday appertment in Cape Verde and who carry much of the responsibility), there is a compelling case to bring back ‘pensioneer trustees’ and to bring SSAS into the regulatory remit of the FCA.
Ginge R said:
Blimey.
One point, apart from your diagnosis of needs based on a few paragraphs by a retail client, you say (of the SSAS) “..like any other occupational scheme, these are not FCA regulated".
It’s true that SSAS are not regulated by the FCA (which supervises companies), but they are regulated by The Pensions Regulator and to a certain extent by HMRC. HMRC has upped its game in recent years, putting in more stringent processes for the registration of new SSAS. And rightly so. They have become the scammers’ weapon of choice. Given the targeting of unwary owners of SSAS (I can think of about twelve business owners who were duped into buying a holiday appertment in Cape Verde and who carry much of the responsibility), there is a compelling case to bring back ‘pensioneer trustees’ and to bring SSAS into the regulatory remit of the FCA.
Al, what on earth are you talking about? I think you are starting to lose the plot matey.One point, apart from your diagnosis of needs based on a few paragraphs by a retail client, you say (of the SSAS) “..like any other occupational scheme, these are not FCA regulated".
It’s true that SSAS are not regulated by the FCA (which supervises companies), but they are regulated by The Pensions Regulator and to a certain extent by HMRC. HMRC has upped its game in recent years, putting in more stringent processes for the registration of new SSAS. And rightly so. They have become the scammers’ weapon of choice. Given the targeting of unwary owners of SSAS (I can think of about twelve business owners who were duped into buying a holiday appertment in Cape Verde and who carry much of the responsibility), there is a compelling case to bring back ‘pensioneer trustees’ and to bring SSAS into the regulatory remit of the FCA.
You focus on (and repeat) my quote saying SSAS are not FCA regulated, then say "It's true that SASS are not regulated by the FCA.
So "Blimey" what?
All pensions should be regulated by the FCA as far as I am concerned BTW. I also recommended the OP put in place an independent trustee, in case you missed that.
Also, what does your infatuation with scammers have to do with this thread? And I thought you considered SIPPs were their weapon of choice. Make your mind up!
As for your twelve business owners who were duped, how on earth were they targeted? There is no published list of SSAS schemes I am aware of.
You realise you are one step away from saying the internet/phones are bad - as these can be used by internet/phone scammers?
I've had both SSAS and SiPPs. There are pros and cons to either.
Gearing up can be attractive in one type, so can lending to the Employer in the other (we used our SSAS for this in 2001).
Notional earmarking can also add benefit to a Family arrangement, though with a SSAS there were extra annual account requirements.
Good to have the choice tbh but OP should do his homework and review Providers.
Some SiPP Providers are feeling a lot of heat at the moment for some crazy investment decisions.
Gearing up can be attractive in one type, so can lending to the Employer in the other (we used our SSAS for this in 2001).
Notional earmarking can also add benefit to a Family arrangement, though with a SSAS there were extra annual account requirements.
Good to have the choice tbh but OP should do his homework and review Providers.
Some SiPP Providers are feeling a lot of heat at the moment for some crazy investment decisions.
JulianPH said:
Al, what on earth are you talking about? I think you are starting to lose the plot matey.
You focus on (and repeat) my quote saying SSAS are not FCA regulated, then say "It's true that SASS are not regulated by the FCA.
So "Blimey" what?
All pensions should be regulated by the FCA as far as I am concerned BTW. I also recommended the OP put in place an independent trustee, in case you missed that.
Also, what does your infatuation with scammers have to do with this thread? And I thought you considered SIPPs were their weapon of choice. Make your mind up!
As for your twelve business owners who were duped, how on earth were they targeted? There is no published list of SSAS schemes I am aware of.
You realise you are one step away from saying the internet/phones are bad - as these can be used by internet/phone scammers?
Are you familiar with Product Inherent Risk? The risk of a material loss as a result of factors other than the failure of controls, and generally considered to be higher where a high degree of judgment and estimation is involved or where transactions of the entity are highly complex. A SSAS, as we both know, appeal more to pension liberators, than, for instance, a bog standard personal pension. You focus on (and repeat) my quote saying SSAS are not FCA regulated, then say "It's true that SASS are not regulated by the FCA.
So "Blimey" what?
All pensions should be regulated by the FCA as far as I am concerned BTW. I also recommended the OP put in place an independent trustee, in case you missed that.
Also, what does your infatuation with scammers have to do with this thread? And I thought you considered SIPPs were their weapon of choice. Make your mind up!
As for your twelve business owners who were duped, how on earth were they targeted? There is no published list of SSAS schemes I am aware of.
You realise you are one step away from saying the internet/phones are bad - as these can be used by internet/phone scammers?
You don’t read of many scammers targeting folk and advising them to start a Personal Pension or go into NEST. Similarly, you don’t read of liberators suggesting savers switch from a SSAS to a PP, but you do the other way. Suggesting that someone you don’t know, needs a SSAS based on three paragraphs, well.. let’s just say I was having a coffee when I read it and almost invoiced you for a new keyboard.
It’s all relative, but still like telling a teenager to learn to drive in a Bugatti.
“For example, the inherent risk in the audit of a newly formed financial institution which has a significant trade and exposure in complex derivative instruments may be considered to be significantly higher as compared to the audit of a well established manufacturing concern operating in a relatively stable competitive environment.”
Ginge R said:
JulianPH said:
Al, what on earth are you talking about? I think you are starting to lose the plot matey.
You focus on (and repeat) my quote saying SSAS are not FCA regulated, then say "It's true that SASS are not regulated by the FCA.
So "Blimey" what?
All pensions should be regulated by the FCA as far as I am concerned BTW. I also recommended the OP put in place an independent trustee, in case you missed that.
Also, what does your infatuation with scammers have to do with this thread? And I thought you considered SIPPs were their weapon of choice. Make your mind up!
As for your twelve business owners who were duped, how on earth were they targeted? There is no published list of SSAS schemes I am aware of.
You realise you are one step away from saying the internet/phones are bad - as these can be used by internet/phone scammers?
Are you familiar with Product Inherent Risk? The risk of a material loss as a result of factors other than the failure of controls, and generally considered to be higher where a high degree of judgment and estimation is involved or where transactions of the entity are highly complex. A SSAS, as we both know, appeal more to pension liberators, than, for instance, a bog standard personal pension. You focus on (and repeat) my quote saying SSAS are not FCA regulated, then say "It's true that SASS are not regulated by the FCA.
So "Blimey" what?
All pensions should be regulated by the FCA as far as I am concerned BTW. I also recommended the OP put in place an independent trustee, in case you missed that.
Also, what does your infatuation with scammers have to do with this thread? And I thought you considered SIPPs were their weapon of choice. Make your mind up!
As for your twelve business owners who were duped, how on earth were they targeted? There is no published list of SSAS schemes I am aware of.
You realise you are one step away from saying the internet/phones are bad - as these can be used by internet/phone scammers?
You don’t read of many scammers targeting folk and advising them to start a Personal Pension or go into NEST. Similarly, you don’t read of liberators suggesting savers switch from a SSAS to a PP, but you do the other way. Suggesting that someone you don’t know, needs a SSAS based on three paragraphs, well.. let’s just say I was having a coffee when I read it and almost invoiced you for a new keyboard.
It’s all relative, but still like telling a teenager to learn to drive in a Bugatti.
“For example, the inherent risk in the audit of a newly formed financial institution which has a significant trade and exposure in complex derivative instruments may be considered to be significantly higher as compared to the audit of a well established manufacturing concern operating in a relatively stable competitive environment.”
You never do though, you just move on to your next statement. Try engaging in the discussion, rather than interrupting it to make your point of the day.
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