Pension question - best option when self-employed
Discussion
Morning all
Just doing all my due diligence.
My current pension is a workplace scheme which both my employer and I contribute - held with NEST so growth is pretty low. Current value is about £48k and I am nearly 49.
Early next year I am planning to go self-employed and want to ensure I continue to contribute. This will be based on a monthly contribution, with possibly a lump sum contribution once taxes are paid every January, depending what's left over in my tax pot (plan is a separate account to squirrel away an amount for tax every month as well).
I will be a sole trader (driving instructor so don't believe there is any value in going limited).
1. Does this sound like a sensible approach?
2. What is the max that can be put away annually that is tax deductible?
3. Would tax relief be through self-assessment or does the provider claim it back?
4. (And I recognise this may be better to get proper advice on) Would you transfer the existing from NEST and look at an alternative fund? I think the plan is draw down when I get there, but plenty of time to decide on that.
Thanks in advance for any help that is offered.
Just doing all my due diligence.
My current pension is a workplace scheme which both my employer and I contribute - held with NEST so growth is pretty low. Current value is about £48k and I am nearly 49.
Early next year I am planning to go self-employed and want to ensure I continue to contribute. This will be based on a monthly contribution, with possibly a lump sum contribution once taxes are paid every January, depending what's left over in my tax pot (plan is a separate account to squirrel away an amount for tax every month as well).
I will be a sole trader (driving instructor so don't believe there is any value in going limited).
1. Does this sound like a sensible approach?
2. What is the max that can be put away annually that is tax deductible?
3. Would tax relief be through self-assessment or does the provider claim it back?
4. (And I recognise this may be better to get proper advice on) Would you transfer the existing from NEST and look at an alternative fund? I think the plan is draw down when I get there, but plenty of time to decide on that.
Thanks in advance for any help that is offered.
Pieman68 said:
Morning all
Just doing all my due diligence.
My current pension is a workplace scheme which both my employer and I contribute - held with NEST so growth is pretty low. Current value is about £48k and I am nearly 49.
Early next year I am planning to go self-employed and want to ensure I continue to contribute. This will be based on a monthly contribution, with possibly a lump sum contribution once taxes are paid every January, depending what's left over in my tax pot (plan is a separate account to squirrel away an amount for tax every month as well).
I will be a sole trader (driving instructor so don't believe there is any value in going limited).
1. Does this sound like a sensible approach?
2. What is the max that can be put away annually that is tax deductible?
3. Would tax relief be through self-assessment or does the provider claim it back?
4. (And I recognise this may be better to get proper advice on) Would you transfer the existing from NEST and look at an alternative fund? I think the plan is draw down when I get there, but plenty of time to decide on that.
Thanks in advance for any help that is offered.
I'd definitely move from NEST - I moved my small NEST pot to Vanguard last year. Lower fees, way more choice - It's a no-brainer. Just doing all my due diligence.
My current pension is a workplace scheme which both my employer and I contribute - held with NEST so growth is pretty low. Current value is about £48k and I am nearly 49.
Early next year I am planning to go self-employed and want to ensure I continue to contribute. This will be based on a monthly contribution, with possibly a lump sum contribution once taxes are paid every January, depending what's left over in my tax pot (plan is a separate account to squirrel away an amount for tax every month as well).
I will be a sole trader (driving instructor so don't believe there is any value in going limited).
1. Does this sound like a sensible approach?
2. What is the max that can be put away annually that is tax deductible?
3. Would tax relief be through self-assessment or does the provider claim it back?
4. (And I recognise this may be better to get proper advice on) Would you transfer the existing from NEST and look at an alternative fund? I think the plan is draw down when I get there, but plenty of time to decide on that.
Thanks in advance for any help that is offered.
Have you got any other pots? as I'd be a little concerned at the size of the pot and the age that you mention - My first thought is that you need to grow this as fast as possible in the next 10 years if not.
In terms of the contribution plan, definitely start as you mean to go on - i.e pay in monthly as much as you can afford / reduce the tax that you pay..
In terms of the tax situation - It's fairly simple through SA to claim the tax back -I do this every year.
Might it be better though to increase contribs now (while you are still PAYE) especially if they will sal sacrifice (potentially pay the NI saving in) and grow the pot before you jump into the world of the self-employed.
Have you got any savings that you can turn into pension before you leave that enables you to shovel more into the pot now and get the tax back before you no longer have a steady income?
I'd definitely move from NEST - I moved my small NEST pot to Vanguard last year. Lower fees, way more choice - It's a no-brainer.
Makes sense. As my employer pay into this pot it seems logical to leave as is for the time being until I "take the plunge" (probably jan/feb 2024)
Have you got any other pots? as I'd be a little concerned at the size of the pot and the age that you mention - My first thought is that you need to grow this as fast as possible in the next 10 years if not.
No other pots. I've merged them all already. I agree that it needs aggressive intent - a combination of past financial issues and divorce
In terms of the contribution plan, definitely start as you mean to go on - i.e pay in monthly as much as you can afford / reduce the tax that you pay..
Agreed. The plan is to put in as much as possible, and then once tax is paid yearly, to contribute the difference straight into the pension
In terms of the tax situation - It's fairly simple through SA to claim the tax back -I do this every year.
Excuse my ignorance, presumably this means that you declare contributions and it reduces the tax to be paid on self-assessment
Might it be better though to increase contribs now (while you are still PAYE) especially if they will sal sacrifice (potentially pay the NI saving in) and grow the pot before you jump into the world of the self-employed.
It would make sense but have very little disposable income at the minute so not really viable within the 6 months available (presuming all goes to plan)
Have you got any savings that you can turn into pension before you leave that enables you to shovel more into the pot now and get the tax back before you no longer have a steady income?
Unfortunately not. As my wife is self-employed and did not qualify for SEISS, Covid hit us hard
Thanks for your input. Unfortunately due to previous divorce and the finances taking a dent this is as good as it gets. I've replied to your points above
Current income is not much over national average (£32k - giving a take home around £24k). By my reckoning once fully up to speed I believe I should be able to improve on this by a reasonable amount which will allow me to put more into the pension whilst reducing debt commitments (which will subsequently allow larger contributions in 2-3 years). Based in Yorkshire. Relatively sensible living costs, so i am aiming to try and have an income of approx £20k once retired, plus the wife's pension separately. Not planning to retire early as I don't see how I could make that viable - the only possible thing that could influence that would be inheritance, although I am not relying on that as you never know what could happen and I'd rather they both live into their 90s and beat me to it
Makes sense. As my employer pay into this pot it seems logical to leave as is for the time being until I "take the plunge" (probably jan/feb 2024)
Have you got any other pots? as I'd be a little concerned at the size of the pot and the age that you mention - My first thought is that you need to grow this as fast as possible in the next 10 years if not.
No other pots. I've merged them all already. I agree that it needs aggressive intent - a combination of past financial issues and divorce
In terms of the contribution plan, definitely start as you mean to go on - i.e pay in monthly as much as you can afford / reduce the tax that you pay..
Agreed. The plan is to put in as much as possible, and then once tax is paid yearly, to contribute the difference straight into the pension
In terms of the tax situation - It's fairly simple through SA to claim the tax back -I do this every year.
Excuse my ignorance, presumably this means that you declare contributions and it reduces the tax to be paid on self-assessment
Might it be better though to increase contribs now (while you are still PAYE) especially if they will sal sacrifice (potentially pay the NI saving in) and grow the pot before you jump into the world of the self-employed.
It would make sense but have very little disposable income at the minute so not really viable within the 6 months available (presuming all goes to plan)
Have you got any savings that you can turn into pension before you leave that enables you to shovel more into the pot now and get the tax back before you no longer have a steady income?
Unfortunately not. As my wife is self-employed and did not qualify for SEISS, Covid hit us hard
Thanks for your input. Unfortunately due to previous divorce and the finances taking a dent this is as good as it gets. I've replied to your points above
Current income is not much over national average (£32k - giving a take home around £24k). By my reckoning once fully up to speed I believe I should be able to improve on this by a reasonable amount which will allow me to put more into the pension whilst reducing debt commitments (which will subsequently allow larger contributions in 2-3 years). Based in Yorkshire. Relatively sensible living costs, so i am aiming to try and have an income of approx £20k once retired, plus the wife's pension separately. Not planning to retire early as I don't see how I could make that viable - the only possible thing that could influence that would be inheritance, although I am not relying on that as you never know what could happen and I'd rather they both live into their 90s and beat me to it
Sarnie said:
Mr Pointy said:
OP: when you say "self employed" do you plan to operate as a Sole Trader or as a Limited Company?
"I will be a sole trader"Pieman68 said:
Current income is not much over national average (£32k - giving a take home around £24k). By my reckoning once fully up to speed I believe I should be able to improve on this by a reasonable amount which will allow me to put more into the pension whilst reducing debt commitments (which will subsequently allow larger contributions in 2-3 years). Based in Yorkshire. Relatively sensible living costs, so i am aiming to try and have an income of approx £20k once retired, plus the wife's pension separately. Not planning to retire early as I don't see how I could make that viable - the only possible thing that could influence that would be inheritance, although I am not relying on that as you never know what could happen and I'd rather they both live into their 90s and beat me to it
Ta for the answers - In which case, I'd say it's a pretty good plan. You have nearly 20 years to build the pot to provide the gap between the 20K pa you want and the state pension that you will get (after everything goes up by inflation). A wild guess is that the pot needs to get to 250K+ to do this which is definitely achievable.
Important point - Make sure you (and the wife) also pay the NI contribs and have the full number of qualifying years - you can check this on the gov website when you login).
What is it they say though - the best time to pay as much in as possible is yesterday, the second best time is today! So I'd really prioritise getting the pension payments up and minimising the tax given to the gov (but that's probably just me!)
fat80b said:
Important point - Make sure you (and the wife) also pay the NI contribs and have the full number of qualifying years - you can check this on the gov website when you login).
What is it they say though - the best time to pay as much in as possible is yesterday, the second best time is today! So I'd really prioritise getting the pension payments up and minimising the tax given to the gov (but that's probably just me!)
Already up to date on that. Full contributions to date stand at 31 years, with this year to add as well.What is it they say though - the best time to pay as much in as possible is yesterday, the second best time is today! So I'd really prioritise getting the pension payments up and minimising the tax given to the gov (but that's probably just me!)
I get what you're saying on contributions and would push them up if I could, but I'm focussing on paying debt down as quickly as possible for the minute to free up disposable income to allow for this in future
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