Pensions for small businesses
Discussion
I am director and sole shareholder of my ltd company. Myself and the missus are the only employees (at present, considering taking on another in the not too distant future).
I'm nearly 35 and have very little in the way of pension savings - about £5/week from a previous employer's pension fund and probably about 15 qualifying years of NI contributions. My business is now developed to the point where it seems reasonable to be looking at putting something aside for personal pensions. But where do I start?? I did get an email from the FSB about their auto-enrolment scheme. Is it any good/suitable for my situation?
Is it worth me trying to get something sorted out for the current tax year (is it as simple as putting some cash aside, putting the right numbers on forms, and dealing with it later, or do I need to have the whole thing setup properly before 5th April), or will it make no/little difference?
Any tips, and links to starting guides would be useful, or should I really be seeking professional help straight away?
I'm nearly 35 and have very little in the way of pension savings - about £5/week from a previous employer's pension fund and probably about 15 qualifying years of NI contributions. My business is now developed to the point where it seems reasonable to be looking at putting something aside for personal pensions. But where do I start?? I did get an email from the FSB about their auto-enrolment scheme. Is it any good/suitable for my situation?
Is it worth me trying to get something sorted out for the current tax year (is it as simple as putting some cash aside, putting the right numbers on forms, and dealing with it later, or do I need to have the whole thing setup properly before 5th April), or will it make no/little difference?
Any tips, and links to starting guides would be useful, or should I really be seeking professional help straight away?
I'm in the same situation as you - 25 or so years on
Talk to an IFA and find a pensions trustee who will help you set up a SIP ( Self Invested Pension)This would mean that you and your partner both have your own pension schemes with control over where the money is invested. Fees are a lot lower and you know the benefits are coming back to you.
PM me if you want a contact to get started
Talk to an IFA and find a pensions trustee who will help you set up a SIP ( Self Invested Pension)This would mean that you and your partner both have your own pension schemes with control over where the money is invested. Fees are a lot lower and you know the benefits are coming back to you.
PM me if you want a contact to get started
Another vote for the SIP.
Providing you have sufficient funds and the necessary skill it allows you to determine your own destiny without having to pay lots of other people. There are significant costs to administer the scheme and I wouldn't recommend the people currently administering our scheme but I am satisfied we have managed to out perform "bought into" investment schemes.
You will need a reasonable chunk of money in the pot to make it work though.
Henry
Providing you have sufficient funds and the necessary skill it allows you to determine your own destiny without having to pay lots of other people. There are significant costs to administer the scheme and I wouldn't recommend the people currently administering our scheme but I am satisfied we have managed to out perform "bought into" investment schemes.
You will need a reasonable chunk of money in the pot to make it work though.
Henry
I agree with the SIP suggestions above, but disagree about the complexity. I think it's been streamlined to be one of the simplest financial operations now as govt tries to encourage the highest possible takeup.
For a two man band like yours, it's just a few steps.
1. Pick a provider. Alliance, Hargreaves, Barclays, etc all get ok reviews. Fees are comparable, but customer service is the most important aspect here.
2. Open up a SIPP per person. This is a one time action. This is a personal account and is like opening a bank a/c with money laundering passport checks and so on. Obviously if you have a relationship with the provider already this is very quick.
3. Once a year, send a company contribution per person to the provider. This is very easy - it's a one page form with Hargreaves - and tax efficient if it is paid by the company directly rather than by the employee.
4. Invest that money in a low cost index tracker fund in an economy of your choice. Then leave it alone. You will outperform 50% of active fund managers.
5. On your 55th birthday, draw it all out and buy a Lamborghini*.
For a two man band like yours, it's just a few steps.
1. Pick a provider. Alliance, Hargreaves, Barclays, etc all get ok reviews. Fees are comparable, but customer service is the most important aspect here.
2. Open up a SIPP per person. This is a one time action. This is a personal account and is like opening a bank a/c with money laundering passport checks and so on. Obviously if you have a relationship with the provider already this is very quick.
3. Once a year, send a company contribution per person to the provider. This is very easy - it's a one page form with Hargreaves - and tax efficient if it is paid by the company directly rather than by the employee.
4. Invest that money in a low cost index tracker fund in an economy of your choice. Then leave it alone. You will outperform 50% of active fund managers.
5. On your 55th birthday, draw it all out and buy a Lamborghini*.
- The value of your Lambo can fall as well as rise. Past Lambo performance is not a guide to future performance
Right, I've been doing a bit of reading on these SIPP things. Came across HL, their website is quite comprehensive, also the one from Best Invest looks pretty good value too. Trying to get my head round how all the charges work, especially as some seem to credit the commission back to you, but others don't?
Stumbled across this article: http://www.telegraph.co.uk/finance/personalfinance... which gives a useful quick chart as to charges vs investment size (although I think it might be simplified, as there appear to be many variables). As I'm starting from scratch, the ones that are green on the left look more suitable to start with.
Am I right in thinking that:
Employer's contributions are paid gross (i.e. not subject to corp tax),
Employer's contributions don't then get the 20% tax rebate on top,
Employer's contributions aren't limited (except by the annual cap, which I am some way from!),
I don't have to make any personal contribution at this stage - it can all come from my business (used all my personal allowance this year now),
Employer's contributions are more significant around the business accounting year than the tax year (no point in me rushing to get something done before the end of this tax year),
Once I've made contributions, there is no way to get them out again until pensionable age, even by taking a big tax hit?
Only one SIPP per person is allowed?
They are relatively transferable from one provider to another?
Whilst I can probably migrate my existing pension from previous employer into a SIPP (?), it doesn't look like it's worth bothering (I was only in it for a few months, and only has a value of a couple of hundred pounds)?
I have to balance all this pension stuff off against trying to get on the property ladder as well - if I put too much into a pension it will reduce the deposit and income that could be paying towards a mortgage.
Stumbled across this article: http://www.telegraph.co.uk/finance/personalfinance... which gives a useful quick chart as to charges vs investment size (although I think it might be simplified, as there appear to be many variables). As I'm starting from scratch, the ones that are green on the left look more suitable to start with.
Am I right in thinking that:
Employer's contributions are paid gross (i.e. not subject to corp tax),
Employer's contributions don't then get the 20% tax rebate on top,
Employer's contributions aren't limited (except by the annual cap, which I am some way from!),
I don't have to make any personal contribution at this stage - it can all come from my business (used all my personal allowance this year now),
Employer's contributions are more significant around the business accounting year than the tax year (no point in me rushing to get something done before the end of this tax year),
Once I've made contributions, there is no way to get them out again until pensionable age, even by taking a big tax hit?
Only one SIPP per person is allowed?
They are relatively transferable from one provider to another?
Whilst I can probably migrate my existing pension from previous employer into a SIPP (?), it doesn't look like it's worth bothering (I was only in it for a few months, and only has a value of a couple of hundred pounds)?
I have to balance all this pension stuff off against trying to get on the property ladder as well - if I put too much into a pension it will reduce the deposit and income that could be paying towards a mortgage.
The points you've raised are just about what I also understand of the current situation.
This is something I've been thinking about though and mentioned the same in the pensions thread but being a sole director like yourself I'm yet to be convinced that the answer is to throw, say, £250 a month into a SIPP. Realistically come retirement age the amount accrued will be fairly small.
My current thinking is to take a smaller div out of the company and potentially have the business buy a few investment properties to act as a future pension. I really need to speak to an IFA though.
This is something I've been thinking about though and mentioned the same in the pensions thread but being a sole director like yourself I'm yet to be convinced that the answer is to throw, say, £250 a month into a SIPP. Realistically come retirement age the amount accrued will be fairly small.
My current thinking is to take a smaller div out of the company and potentially have the business buy a few investment properties to act as a future pension. I really need to speak to an IFA though.
CRB14 said:
The points you've raised are just about what I also understand of the current situation.
This is something I've been thinking about though and mentioned the same in the pensions thread but being a sole director like yourself I'm yet to be convinced that the answer is to throw, say, £250 a month into a SIPP. Realistically come retirement age the amount accrued will be fairly small.
My current thinking is to take a smaller div out of the company and potentially have the business buy a few investment properties to act as a future pension. I really need to speak to an IFA though.
£250/month would get me to £75k by the time I reach 60, and that's before any returns on the investment. Is £75k worth of contributions a reasonable amount to aim for? Frankly, I wasn't expecting to be investing that much per month at this stage (£100/month is probably just about affordable).This is something I've been thinking about though and mentioned the same in the pensions thread but being a sole director like yourself I'm yet to be convinced that the answer is to throw, say, £250 a month into a SIPP. Realistically come retirement age the amount accrued will be fairly small.
My current thinking is to take a smaller div out of the company and potentially have the business buy a few investment properties to act as a future pension. I really need to speak to an IFA though.
I'd feel happier investing in bricks and mortar, but there's a fairly big first rung on the ladder. If you do it within the business, won't you be paying corp. tax on profits before you make the investment? Employers pension contributions come off before tax, and a SIPP seems like a good way to 'prove' to the tax man that it is definitely a pension contribution.
Jockman said:
Have a serious look at your shareholding too - any reason why your wife doesn't have a small shareholding, say 10% ??
We're not actually married, and yes there is a reason why she doesn't have any shares. 
Still looking at this, need to make a decision asap. I've pretty much narrowed it down to either HL, BestInvest, or Close Brothers SIPPs. They all have a similar annual charge rate (around 0.3%), but HL and Close brothers don't charge for on cash in the account, Best Invest charge 0.3% on that as well. HL and Close Brothers actually pay interest on cash (a whopping 0.1%), but BestInvest don't mention if they do. Am I right to anticipate that a significant proportion of my SIPP will be held in cash whilst I build up it's value (starting from £0/initial investment of £1000).
Best invest has the lowest share dealing fee (£7.50) per trade though. HL is £12.95 for less than 10 deals per month (I seriously doubt I'll ever go above that in the short/medium term, if ever). Close Brothers is £8.95 per trade, regardless of quantity.
Am I missing any other differences between them? HL seems to be quite a polished/comprehensive product. They've sent me a few mailshots/newsletters already (since I registered interest on their website a couple of months ago). That sort of thing could be invaluable to keep me up to date with news/thinking about investments etc.
Are there any other SIPP providers that I should be considering?
Best invest has the lowest share dealing fee (£7.50) per trade though. HL is £12.95 for less than 10 deals per month (I seriously doubt I'll ever go above that in the short/medium term, if ever). Close Brothers is £8.95 per trade, regardless of quantity.
Am I missing any other differences between them? HL seems to be quite a polished/comprehensive product. They've sent me a few mailshots/newsletters already (since I registered interest on their website a couple of months ago). That sort of thing could be invaluable to keep me up to date with news/thinking about investments etc.
Are there any other SIPP providers that I should be considering?
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