Alternative pension
Discussion
Having turned 30 not long ago I need to think about pensions. I have written off my state pension, I am 99% sure a Labor government will raid peoples pensions especially those with assets, to pay for DHS / NHS / Immigrant needs.
I need a private pension.
But I notice they only give you something like 1/30th of your total in annuity.
Wouldn't I be better off forming a LTD company (like a holding company), and just paying in a directors loan of X per year and then paying corporate tax on the interest? Then when I retire (doubtful) I would have the full sum which I can repay back to myself? On top of this I can use that money to invest as the company to grow my own pension.
Thanks
I need a private pension.
But I notice they only give you something like 1/30th of your total in annuity.
Wouldn't I be better off forming a LTD company (like a holding company), and just paying in a directors loan of X per year and then paying corporate tax on the interest? Then when I retire (doubtful) I would have the full sum which I can repay back to myself? On top of this I can use that money to invest as the company to grow my own pension.
Thanks
It's good to be considering pensions at this point in your life. I'm not quite sure what to make of your second sentence though, other than to say that all visible assets (pension, savings, property, ltd co) are potentially subject to taxation one way or another. I could probably make a case that pension assets being used for their intended purpose of providing an income in later life may actually be one of the harder categories for elected governments to target since there is no "mis-use" excuse for them to make. Look at the ongoing changes in the taxation of contractors and on buy-to-let property for examples of how the tax net is being extended. Perhaps a spread of assets across the different categories is the safest legal way to proceed?
Within this, maximising the tax breaks available seems sensible.
Contributions into a pension can attract immediate tax relief such that you effectively make them out of your gross (ie untaxed) earnings, thus reducing the income tax you are paying now. These contributions can then grow tax free over many years also. The good news is that rules changed a few years ago, so you no longer have to buy an annuity when you have finished saving/growing your pension pot. You can take 25% of the accumulated pot tax free, with the remainder then subject to income tax alongside any other earnings you have. If your earnings permit you can contribute up to £40k pa to such a pension.
Another option to consider is ISAs. Here you make contributions out of your taxed income. Growth in the accumulating assets is tax free, and you can have all of the money back tax free at any point. This sounds a little like what you are trying to achieve with your limited company idea. You can contribute up to £20k pa to an ISA.
In summary: I don't think that your ltd co idea is better than these as a "retirement" saving vehicle because:
1) You'll miss out on the up front tax relief available on pension contributions
2) You'll miss out on the tax-free growth available within a pension or ISA
3) I'm not sure that it will provide any more protection from potential state expropriation than the conventional options.
Within this, maximising the tax breaks available seems sensible.
Contributions into a pension can attract immediate tax relief such that you effectively make them out of your gross (ie untaxed) earnings, thus reducing the income tax you are paying now. These contributions can then grow tax free over many years also. The good news is that rules changed a few years ago, so you no longer have to buy an annuity when you have finished saving/growing your pension pot. You can take 25% of the accumulated pot tax free, with the remainder then subject to income tax alongside any other earnings you have. If your earnings permit you can contribute up to £40k pa to such a pension.
Another option to consider is ISAs. Here you make contributions out of your taxed income. Growth in the accumulating assets is tax free, and you can have all of the money back tax free at any point. This sounds a little like what you are trying to achieve with your limited company idea. You can contribute up to £20k pa to an ISA.
In summary: I don't think that your ltd co idea is better than these as a "retirement" saving vehicle because:
1) You'll miss out on the up front tax relief available on pension contributions
2) You'll miss out on the tax-free growth available within a pension or ISA
3) I'm not sure that it will provide any more protection from potential state expropriation than the conventional options.
twoblacklines said:
I need a private pension.
But I notice they only give you something like 1/30th of your total in annuity.
It sounds like a good low cost managed SIPP might be what you need. Full tax relief on contributions, tax free returns and no need to buy an annuity when you retire (you just take an income from your fund (quarter of it tax free).But I notice they only give you something like 1/30th of your total in annuity.
An ISA is another option but not quite as tax efficient and you can access whenever you like (so may be tempted!).
With both a SIPP and an ISA remember these are only tax 'wrappers'. It is what you invest in inside them that counts. SIPPs have greater investment flexibility (commercial property, land, etc.).
WindyCommon said:
It's good to be considering pensions at this point in your life. I'm not quite sure what to make of your second sentence though, other than to say that all visible assets (pension, savings, property, ltd co) are potentially subject to taxation one way or another. I could probably make a case that pension assets being used for their intended purpose of providing an income in later life may actually be one of the harder categories for elected governments to target since there is no "mis-use" excuse for them to make. Look at the ongoing changes in the taxation of contractors and on buy-to-let property for examples of how the tax net is being extended. Perhaps a spread of assets across the different categories is the safest legal way to proceed?
Within this, maximising the tax breaks available seems sensible.
Contributions into a pension can attract immediate tax relief such that you effectively make them out of your gross (ie untaxed) earnings, thus reducing the income tax you are paying now. These contributions can then grow tax free over many years also. The good news is that rules changed a few years ago, so you no longer have to buy an annuity when you have finished saving/growing your pension pot. You can take 25% of the accumulated pot tax free, with the remainder then subject to income tax alongside any other earnings you have. If your earnings permit you can contribute up to £40k pa to such a pension.
Another option to consider is ISAs. Here you make contributions out of your taxed income. Growth in the accumulating assets is tax free, and you can have all of the money back tax free at any point. This sounds a little like what you are trying to achieve with your limited company idea. You can contribute up to £20k pa to an ISA.
In summary: I don't think that your ltd co idea is better than these as a "retirement" saving vehicle because:
1) You'll miss out on the up front tax relief available on pension contributions
2) You'll miss out on the tax-free growth available within a pension or ISA
3) I'm not sure that it will provide any more protection from potential state expropriation than the conventional options.
Thank you, greatly Within this, maximising the tax breaks available seems sensible.
Contributions into a pension can attract immediate tax relief such that you effectively make them out of your gross (ie untaxed) earnings, thus reducing the income tax you are paying now. These contributions can then grow tax free over many years also. The good news is that rules changed a few years ago, so you no longer have to buy an annuity when you have finished saving/growing your pension pot. You can take 25% of the accumulated pot tax free, with the remainder then subject to income tax alongside any other earnings you have. If your earnings permit you can contribute up to £40k pa to such a pension.
Another option to consider is ISAs. Here you make contributions out of your taxed income. Growth in the accumulating assets is tax free, and you can have all of the money back tax free at any point. This sounds a little like what you are trying to achieve with your limited company idea. You can contribute up to £20k pa to an ISA.
In summary: I don't think that your ltd co idea is better than these as a "retirement" saving vehicle because:
1) You'll miss out on the up front tax relief available on pension contributions
2) You'll miss out on the tax-free growth available within a pension or ISA
3) I'm not sure that it will provide any more protection from potential state expropriation than the conventional options.
twoblacklines said:
I don't ever wish to retire BUT I doubt I will live to my death without ill health in the process at the end quarter of my life either. Ie I will probably be forced to retire.
Interesting. We're now entering the second iteration of retirement. The first was using the pension to induce workers to leave work at c.50 and eek out a few meagre years in the cottage before dying of tuberculosis. Jobs were scarce, and what few emerging employment opportunities there were in the fledgling industrial sector, required fit young men. We then saw a boom in the sale of linen shirts, golfing and marlin fishing as retirement was sold as the right of passage for baby boomers to enjoy life. All fine and dandy.
But I wonder if technology and automation won't see a re-emergence of the rational behind the first phase? Could fewer jobs mean we need to get people to retire earlier? There won't be any more money of course, so instead of the state pension age shuffling inexorably to the right, might it vector a little to the left? Poland, yesterday, asserted restoration of earlier retirement ages. I know that was just to wind up the EU, and not based on possible future sociological trends, but I wouldn't rule anything out.
The danger is, longer in retirement with less money = much more gloom.
twoblacklines said:
red_slr said:
What age do you want to retire?
I don't ever wish to retire BUT I doubt I will live to my death without ill health in the process at the end quarter of my life either. Ie I will probably be forced to retire. Ginge R said:
Interesting.
We're now entering the second iteration of retirement. The first was using the pension to induce workers to leave work at c.50 and eek out a few meagre years in the cottage before dying of tuberculosis. Jobs were scarce, and what few emerging employment opportunities there were in the fledgling industrial sector, required fit young men. We then saw a boom in the sale of linen shirts, golfing and marlin fishing as retirement was sold as the right of passage for baby boomers to enjoy life. All fine and dandy.
But I wonder if technology and automation won't see a re-emergence of the rational behind the first phase? Could fewer jobs mean we need to get people to retire earlier? There won't be any more money of course, so instead of the state pension age shuffling inexorably to the right, might it vector a little to the left? Poland, yesterday, asserted restoration of earlier retirement ages. I know that was just to wind up the EU, and not based on possible future sociological trends, but I wouldn't rule anything out.
The danger is, longer in retirement with less money = much more gloom.
Or the robots kill is in our sleep so they can take our jobs. We're now entering the second iteration of retirement. The first was using the pension to induce workers to leave work at c.50 and eek out a few meagre years in the cottage before dying of tuberculosis. Jobs were scarce, and what few emerging employment opportunities there were in the fledgling industrial sector, required fit young men. We then saw a boom in the sale of linen shirts, golfing and marlin fishing as retirement was sold as the right of passage for baby boomers to enjoy life. All fine and dandy.
But I wonder if technology and automation won't see a re-emergence of the rational behind the first phase? Could fewer jobs mean we need to get people to retire earlier? There won't be any more money of course, so instead of the state pension age shuffling inexorably to the right, might it vector a little to the left? Poland, yesterday, asserted restoration of earlier retirement ages. I know that was just to wind up the EU, and not based on possible future sociological trends, but I wouldn't rule anything out.
The danger is, longer in retirement with less money = much more gloom.
Have Poland really reinstated previous retirement ages. I can see this happening further down the line once the Tories have increased the age to 80 and people are dropping down dead on the checkout in Asda.
drainbrain said:
Not necessarily. Some people, no, many people especially older people can get by just fine with remarkably little income and have plenty of fun and quality in their lives.
Possibly, but it's still a danger. As we get older, we tend to diminish our materiel needs, but if we're retiring earlier, as I ventured, we probably won't be happy being relatively young and active.. and broke.BoRED S2upid said:
Have Poland really reinstated previous retirement ages. I can see this happening further down the line once the Tories have increased the age to 80 and people are dropping down dead on the checkout in Asda.
It might be posturing..https://www.reuters.com/article/us-eu-poland-pensi...
I am not a 9-5 person so I never really considered the outcome of robots. Robots cannot yet do what I do for a living and it is doubtful they ever will albeit algorithms are an important factor, robots simply cannot and never will write good copy because they are not human and therefore cannot and will not ever 100% empathise with a human.
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