Critique this idea £from house sale into pension, indirectly
Discussion
So let's paint the picture.
I'm 56. Really want to retire at 60 ish.
Selling a second home, and at the same time moving jobs.
New job pays £55k
Equity after fees will be about £90k
New job will match pension contributions to 12%, so was already planning to pay in the full amount.
Now I'm thinking that I could pay 43K into pension, and pay no tax.
Then I could live on the £90k which would last at least 3.5 years. Let's call it 4 years.
In 4 years the 43k becomes say £180k (ignoring the companies contribution for now)
In the 5th year I could have 25% tax free. £45k
Once gone, the rest could be taken over a few years paying 20% income tax on everything above £12.5k limit, so let's say £20k a year minus tax. The £135k end up as £114k after tax.
Add this to the £45k and that's £160k
So my £90k from the house sale becomes £160k spread out over 4 to 6 years.
Note that I have some other pension funds.
But fundamentally does that seem like an idea?
What has my simplistic mind missed. ?
I'm 56. Really want to retire at 60 ish.
Selling a second home, and at the same time moving jobs.
New job pays £55k
Equity after fees will be about £90k
New job will match pension contributions to 12%, so was already planning to pay in the full amount.
Now I'm thinking that I could pay 43K into pension, and pay no tax.
Then I could live on the £90k which would last at least 3.5 years. Let's call it 4 years.
In 4 years the 43k becomes say £180k (ignoring the companies contribution for now)
In the 5th year I could have 25% tax free. £45k
Once gone, the rest could be taken over a few years paying 20% income tax on everything above £12.5k limit, so let's say £20k a year minus tax. The £135k end up as £114k after tax.
Add this to the £45k and that's £160k
So my £90k from the house sale becomes £160k spread out over 4 to 6 years.
Note that I have some other pension funds.
But fundamentally does that seem like an idea?
What has my simplistic mind missed. ?
sleepezy said:
Abdul Abulbul Amir said:
How does the £43k become £160k?
Presume 4 lots of 43k per yearEdit - ahh beaten to it by seconds!
Presume then the 43k is 55k less 12k taken as income at zero tax gives gross contribution of 43k.
Edited by sleepezy on Wednesday 28th June 12:42
Pit Pony said:
Deesee said:
What about the tax relief on the pension contributions, even at 20%..
Isn't that what I'm getting? If I salary sacrifice £43k I dont pay 40% tax on £5k and don't pay 20% tax on the rest, plus won't pay national insurance on any of it.
Still might be worth dumping the lot in (3 yrs contributions) + tax relief (at applicable rate/s), then doing the 12% + 12%, as 12% was the mortgage you were paying.
MaxFromage said:
Bear in mind you won't be able to go below minimum wage with your salary sacrifice.
OP - is it SS or is it simply maxing out your contributionAIUI, you can indeed not go below minimum wage on a SS scheme, but there's nothing to stop you contributing 100% of your salary to your pension.
What other pensions do you have?
Would be a good idea if you're contribution via SS as you save the ~13% NI too. So saving 32% on the way in and you could get £115k out tax-free if you used the 25% and withdrew 6 year * £12.5k before the state pension kicks in and uses most your annual pa.
Would be a good idea if you're contribution via SS as you save the ~13% NI too. So saving 32% on the way in and you could get £115k out tax-free if you used the 25% and withdrew 6 year * £12.5k before the state pension kicks in and uses most your annual pa.
Edited by Abdul Abulbul Amir on Wednesday 28th June 14:12
Mr Hoops said:
Don't waste your personal allowances each tax year, but otherwise seems reasonable. No point in paying tax on the money you don't need.
This ^^^You’d be mad to put it all into your pension and not flex your personal allowance in any given year.
You should always take the £12,500 as tax free salary then if you feel you dont need it and want to invest it you can put it into an SS ISA. That way you’ll not have to consider tax later on when you wothdraw that part, whereas you would if you put it all into a pension now.
Pension contriubtion limit is 40K / year including employer contributions, although you can use unused allowance from previous years.
Bear in mind that your income will show as the reduced amount, so let's hope you don't want a loan / credit card / mortgage over that period.
I also wouldn't be surprised if your employer won't allow you to do this, but maybe you know better.
Bear in mind that your income will show as the reduced amount, so let's hope you don't want a loan / credit card / mortgage over that period.
I also wouldn't be surprised if your employer won't allow you to do this, but maybe you know better.
CharlesElliott said:
Pension contriubtion limit is 40K / year including employer contributions, although you can use unused allowance from previous years.
Bear in mind that your income will show as the reduced amount, so let's hope you don't want a loan / credit card / mortgage over that period.
I also wouldn't be surprised if your employer won't allow you to do this, but maybe you know better.
That changed this year, it's now £60kBear in mind that your income will show as the reduced amount, so let's hope you don't want a loan / credit card / mortgage over that period.
I also wouldn't be surprised if your employer won't allow you to do this, but maybe you know better.
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