Age 43, no pension. What to do
Discussion
Ok,
Having spent most of my adult life living abroad I have no pension. I'm back in the Uk now, and I have a house value ~£500K with no mortgage.
I presume at my age starting a pension is pointless now and I'd be better to look at investing and future savings into something that can generate an income (business/property/other)
Any clarify my assumption or have ideas?
thanks
Having spent most of my adult life living abroad I have no pension. I'm back in the Uk now, and I have a house value ~£500K with no mortgage.
I presume at my age starting a pension is pointless now and I'd be better to look at investing and future savings into something that can generate an income (business/property/other)
Any clarify my assumption or have ideas?
thanks
You can back-pay the state pension. Whether it will be worth it or not is debatable, but it may be better than nothing.
£500k is more than most people's pension pots, though. You should be able to wait, downsize, and use the difference.
Carking it while you are 'young' is still just about possible.
£500k is more than most people's pension pots, though. You should be able to wait, downsize, and use the difference.
Carking it while you are 'young' is still just about possible.
Do you work/earn income?
43 is not too late to start a pension. Start a SIPP, the tax man will give you 25% in addition to what you contribute. Remember, you cannot get at the money until you're 55, this will increase to 57 a some point.
In addition I would also look at some long term stocks and shares ISAs, these are also tax efficient but you can get at the money if you need it.
I would suggest that the best advice would be to invest in another property if affordable, a buy to let seems the obvious choice. I started my pension 20 years ago if not longer and the amount I pay will not provide me with anything significant, but something is better than nothing. Had I invested the same money by using it to pay either a larger mortgage or my existing mortgage off more quickly than I suspect I would have done better. But like so many people in my age group at the time, I didn't properly understand the fact that the cost of living would effectively out accelerate any savings my pension was meant to offset.
I cant remember what the percentage is, but I recall seeing a programme where they stated that a personal pension would only really work for you if you saved between 25-30% of your income over the term. . . .like many I doubt that proposition is a practical one.
The property route gives you options, and it is a more likely to reward you thereafter, a pension plan with an affordable payment for you per month is not.
I cant remember what the percentage is, but I recall seeing a programme where they stated that a personal pension would only really work for you if you saved between 25-30% of your income over the term. . . .like many I doubt that proposition is a practical one.
The property route gives you options, and it is a more likely to reward you thereafter, a pension plan with an affordable payment for you per month is not.
Depends on your current employment position.
As a sole director Ltd Co, one of the few tax efficient methods I have of putting money away is a pension. Up to £40k pa can go in off the top line of my company income before tax, and being the same age as you, have only 12 years before I can take 25% of that tax free at 55 (changes to age 57 in 2028), so that element of it is tax free both on the way in and on the way out.
So, assuming maximum allowance use but no growth/charges (very simplistic, I know) you could salt £480,000 away tax free in 12 years then draw £120,000 out as a tax free lump sum at 55.
These figures assume no growth/charges for simplicity - you have to factor in charges, the value of your investment may rise as well as fall etc.
So, I wouldn't say "not worthwhile", but get professional advice.
For me it's a viable method of saving and reducing my higher rate tax bill. I'm fully aware that my pension could perform poorly, but it might perform brilliantly. It's the risk I'm prepared to take rather than give a sizeable chunk to the Treasury @40%
As a sole director Ltd Co, one of the few tax efficient methods I have of putting money away is a pension. Up to £40k pa can go in off the top line of my company income before tax, and being the same age as you, have only 12 years before I can take 25% of that tax free at 55 (changes to age 57 in 2028), so that element of it is tax free both on the way in and on the way out.
So, assuming maximum allowance use but no growth/charges (very simplistic, I know) you could salt £480,000 away tax free in 12 years then draw £120,000 out as a tax free lump sum at 55.
These figures assume no growth/charges for simplicity - you have to factor in charges, the value of your investment may rise as well as fall etc.
So, I wouldn't say "not worthwhile", but get professional advice.
For me it's a viable method of saving and reducing my higher rate tax bill. I'm fully aware that my pension could perform poorly, but it might perform brilliantly. It's the risk I'm prepared to take rather than give a sizeable chunk to the Treasury @40%
benters said:
I would suggest that the best advice would be to invest in another property if affordable, a buy to let seems the obvious choice.
Your income tax rate makes a big difference.If you in the 40/45%, pension (particularly via salary sacrifice) looks good. Your effective marginal tax rates can be well above 60+% when considering NI and child benefit removal (if it applies to you). This effectively drops to 15% when you retire due to the 25% tax-free lump sum and basic rate tax of 20%. (0.2 * 0.75 = 0.15).
Buy to Let works when house prices are rising. The recent budget changes to interest deductions seem to make it a loser if you are a 40/45% tax payer.
You might be well advised to pocket the front-end tax relief while you can. Once it's gone it's gone!
Front end tax relief should, over time, be more valuable to you because the investments bought with tax relief "gross up" at the same rate as investments bought with your own cash. For many people (depends on circumstances) there is also the chance to,
Front end tax relief should, over time, be more valuable to you because the investments bought with tax relief "gross up" at the same rate as investments bought with your own cash. For many people (depends on circumstances) there is also the chance to,
- get tax relief at 40% going in
- effectively pay only 15% tax coming out. (That's 20% income tax less 25% of your fund being completely tax free)
Work backwards
What age do you want to retire?
What lifestyle do you want/would like? How much does that cost in today's money?
State pension - without question get the back payment on that sorted it will be around £7.5k in today's money not huge but not bad. Sure starting age could slip back but it's a nice safety net.
Does your company contribute towards a pension/company pension? If so do that to the max where they match plus you get the HMRC higher tax rate rebate (for now)
ISA - fully utilise this every year £15k - cash or stocks and shares. Frankly if you can do company pension and the £15k a year until you want to retire and state pension back pay the come retirement age you'll be sitting very pretty.
Certainly you'd have £15kx20-25years pot plus it's growth
State pension £7.5k per year
Company pension assume it's a defined contribution so whatever that will buy.
Next.
What age do you want to retire?
What lifestyle do you want/would like? How much does that cost in today's money?
State pension - without question get the back payment on that sorted it will be around £7.5k in today's money not huge but not bad. Sure starting age could slip back but it's a nice safety net.
Does your company contribute towards a pension/company pension? If so do that to the max where they match plus you get the HMRC higher tax rate rebate (for now)
ISA - fully utilise this every year £15k - cash or stocks and shares. Frankly if you can do company pension and the £15k a year until you want to retire and state pension back pay the come retirement age you'll be sitting very pretty.
Certainly you'd have £15kx20-25years pot plus it's growth
State pension £7.5k per year
Company pension assume it's a defined contribution so whatever that will buy.
Next.
Ginge R said:
Everything about the latest consultation suggests the removal of tax relief at the point of contribution is a foregone conclusion.
Are they suggesting that there would be relief at the point of withdrawal instead then?Can't see anyone trusting whoever will be in government in decades to come with that promise.
But even if it's just moved, it's a nifty way of bringing forward tax receipts.
L555BAT said:
Are they suggesting that there would be relief at the point of withdrawal instead then?
Can't see anyone trusting whoever will be in government in decades to come with that promise.
But even if it's just moved, it's a nifty way of bringing forward tax receipts.
It could become what's known as TEE (taxed, exempt, exempt) instead of a EET system. Yes, you're right - it'll save a lot right now, but in 20/30 years, where will the tax receipts come from?Can't see anyone trusting whoever will be in government in decades to come with that promise.
But even if it's just moved, it's a nifty way of bringing forward tax receipts.
Not only that, but heavily built, higher rate company directors on Pistonheads will lose out too - unless they're also higher rate tax payers in retirement.
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