Do I Start a Pension at 60

[gregs1959]

Hello

Just after a little advice :-

My circumstances are I don’t receive any income apart from rental property..

I currently put cash in to an isa for both me and my wife. We are both 40% tax payers.

Would it be even worthwhile diverting some of this and put in a sipp ?

I seem to recall even if I wished to I am limited to only a small amount ?

Thanks in advance for any suggestions

Mark

[rotarymazda]

gregs1959 said:

Hello

Just after a little advice :-

My circumstances are I don’t receive any income apart from rental property..

I currently put cash in to an isa for both me and my wife. We are both 40% tax payers.

Would it be even worthwhile diverting some of this and put in a sipp ?

I seem to recall even if I wished to I am limited to only a small amount ?

Thanks in advance for any suggestions

Mark

Look at salary sacrifice into a SIPP. You will save your 40% income tax rate, your NI contributions and potentially your employer contributions. Your effective tax rate is currently 40+2+13.8% => 56%. So for each £44 of net income you give up this way, you can get £100 in your pension.

When you draw it out again, a quarter is tax-free, the rest at your marginal rate (0 or 20% assumed in your case, lets say 10% average ).

So a £100 in pension can give you £25 tax-free and £67.50 net (assumed 10% average tax rate, no NI to pay on pension).

So by giving up £44 net now, you get 25+67.50 = £92.50 net later.

This works out as a much better deal than an ISA if your future marginal rate is likely to be 0% or 20%. If your future marginal rate will still be 40%, ISAs can work out better.

Plus pensions can be inherited tax-free (up to age 75), and are not considered part of your estate.

Personally, I prefer to max out SIPP, then max out ISA as my future marginal rate will be 20% and the inheritable benefits of a pension are very good. I use Hargreaves Lansdown with only shares, investment trusts and EFTs so don't have to pay the 0.45% fund charge. My charges are capped at £200 per year. This may not be suitable for you if you want someone else to choose your investments.

If you are saving as cash in your ISA every year, your are always losing money in real-terms. Some investment risk will need to be taken to get better returns.

[gregs1959]

I've just e mailed my accountant and asked how much I can contribute sue ro my income being soley from property.

Thanks
Mark

[thekingisdead]

I’m not an accountant, but I do have B2L income, I don’t think the government allows the tax relief on pension contributions from un earned income - which B2L is classed as. Your accountant will confirm tho.

If you’re LTD for the B2L you will be able to pay direct into a pension scheme as a company contribution.

[85Carrera]

You can pay in £2880 pa which will get tax relief at 20%.

[gregs1959]

Then it hardly seems worth it,........

Probably continue contributing to our Isa’s.

Once again thanks for you help and advice.


Mark

[JulianPH]

Hi Mark. I think the question you are really asking is whether your rental income qualifies for pension tax relief.

If you receive this income through a company then this can. If you receive it personally then Eric is far better placed to answer then me.

If you are paying tax at 40% or 45% then a pension/SIPP is going to make you far better off (assuming all other things are equal - which they can be) than an ISA.

However, an ISA if far more flexible.

Post further details (or PM me if you would prefer not to go fully public!).

Cheers

[Ginge R]

I hate to be negative, but it’s impossible to say. For instance, you could inherit a million quid, and lose all of your tax uplift, whereas instead, if your property was in an up and coming area, you might be better served by maximising kerb appeal instead.

The FCA is pretty hot on authorised and regulated individuals (advisers, financial business owners etc) making ‘value judgements’, which (to its mind) could constitute ‘advice’ - even though the person offering it may habitually preface the statement with “This isn’t advice, but..".

You don’t give your age, but you may be able to have a phone appointment with TPAS. It’s a great service. Or, why not get a free initial appt with a number of local financial advisers who can give you some genuine insight?

https://www.pensionsadvisoryservice.org.uk

gregs1959 said:

Hello

Just after a little advice :-

My circumstances are I don’t receive any income apart from rental property..

I currently put cash in to an isa for both me and my wife. We are both 40% tax payers.

Would it be even worthwhile diverting some of this and put in a sipp ?

I seem to recall even if I wished to I am limited to only a small amount ?

Thanks in advance for any suggestions

Mark

[Sheepshanks]

Ginge R said:

You don’t give your age,

I know one shouldn't jump to conclusions, but based on the thread title and the OPs user name, I think it's pretty reasonable to assume he's 60.

[Ginge R]

lol. Just reading it on a phone in a car park, I’m pleading lack of situational awareness.

((Doffs cap, very elegant response sir))