Can you check my understanding please?
Discussion
I have 3 DB pension schemes, I also have a SIP which was built when we were advised to opt out of SERPS.
I am employed, aged 54 and my current salary and pension provision is good. 26k per year going into current pension. I have 50k in company shares, and 55k in an ISA.
I'm wanting to maximise my tax benefits by putting more money into pensions.
I can either:
Pay into SIP (sell shares or use money I have in savings account).
Pay into company scheme through my salary.
Am I right in thinking I should check the charges on the SIP and the company scheme and go for the best deal, is there anything else I should consider when choosing which pension?
Is there any other options that I haven't considered i.e. is it the right thing to do to put more into pension?
I am employed, aged 54 and my current salary and pension provision is good. 26k per year going into current pension. I have 50k in company shares, and 55k in an ISA.
I'm wanting to maximise my tax benefits by putting more money into pensions.
I can either:
Pay into SIP (sell shares or use money I have in savings account).
Pay into company scheme through my salary.
Am I right in thinking I should check the charges on the SIP and the company scheme and go for the best deal, is there anything else I should consider when choosing which pension?
Is there any other options that I haven't considered i.e. is it the right thing to do to put more into pension?
Horses for courses, everyone sees things differently - and within a tax wrapper, will do things that impact the validity of a suggested course of action.
But as a starting point: if it were me, i'd figure out what your tax position will be when you draw from those various pensions. At the very least you'll have an idea what you'll need to pull out gross to get the optimum amount in your hand after taxes.
From there i'd weigh up whether it's better to have the tax relief now in the form of more pension contribution, or more tax free money from isa's to balance against what you take out of pension.
To a huge degree though, that part will depend on how you invest in general terms, funds, shares, whatever......and over what period the extra monies have time to grow.
FWIW, i worked out what i was hoping to have as retirement income, which sounded fine, then saw the impact of tax. as someone who can't add ooodles to pension, it made more sense to beef up the isa's....and then, my choice was/is to go hard for a while on individual stocks; which i have for the past year since starting the isa's, and will do so again for the coming year. Beyond that i'll tone down the expsore. The idea will be to be able to blend pension & isa in the msot tax efficient way, to maximize spending when i start to draw from them in a few years.
But for everyone it's different....back to the top, i'd start with the likely tax expsoure, and then figure out what i'm comfortable with, tax relief or totally tax free along the line.
But as a starting point: if it were me, i'd figure out what your tax position will be when you draw from those various pensions. At the very least you'll have an idea what you'll need to pull out gross to get the optimum amount in your hand after taxes.
From there i'd weigh up whether it's better to have the tax relief now in the form of more pension contribution, or more tax free money from isa's to balance against what you take out of pension.
To a huge degree though, that part will depend on how you invest in general terms, funds, shares, whatever......and over what period the extra monies have time to grow.
FWIW, i worked out what i was hoping to have as retirement income, which sounded fine, then saw the impact of tax. as someone who can't add ooodles to pension, it made more sense to beef up the isa's....and then, my choice was/is to go hard for a while on individual stocks; which i have for the past year since starting the isa's, and will do so again for the coming year. Beyond that i'll tone down the expsore. The idea will be to be able to blend pension & isa in the msot tax efficient way, to maximize spending when i start to draw from them in a few years.
But for everyone it's different....back to the top, i'd start with the likely tax expsoure, and then figure out what i'm comfortable with, tax relief or totally tax free along the line.
rugbyleague said:
26k per year going into current pension.
I'm wanting to maximise my tax benefits by putting more money into pensions.
Is there any other options that I haven't considered i.e. is it the right thing to do to put more into pension?
Putting more into pension is the way to go given the tax relief available. I'm wanting to maximise my tax benefits by putting more money into pensions.
Is there any other options that I haven't considered i.e. is it the right thing to do to put more into pension?
Is your current pension DB or DC? If DB the £26k "going in" does not matter one bit in terms of what counts towards your annual allowance. If DB it's the "Annual Input Amount" that counts.
Thank you soooo much for this, PH continues to help with my thought processes and I really appreciate people taking time to share their thoughts too!
My pensions are all DB I have no DC pensions.
I was wondering about what amounts to put where and trying to think what I might need in the future and what I want now is very useful.
Would you sell shares to boost pension, I'm starting to think that apart from accessibility I'm going to struggle to get a better return?
My pensions are all DB I have no DC pensions.
I was wondering about what amounts to put where and trying to think what I might need in the future and what I want now is very useful.
Would you sell shares to boost pension, I'm starting to think that apart from accessibility I'm going to struggle to get a better return?
Congrats on your DB pensions.
How are you holding the company shares? In a Share Incentive Plan? Otherwise there may be capital gains tax to pay if the gain on any shares you sell is >£6k this tax year (reducing to £3k next tax year). By transferring some shares to your spouse to sell you have effectively 2 lots of capital gains allowances.
How are you holding the company shares? In a Share Incentive Plan? Otherwise there may be capital gains tax to pay if the gain on any shares you sell is >£6k this tax year (reducing to £3k next tax year). By transferring some shares to your spouse to sell you have effectively 2 lots of capital gains allowances.
You don’t say, which is fair enough.
But if you are in the 100 - 125k bracket then pensions makes sense to get your self into a sane tax rate.
As also said it depends on the tax treatment of the company shares. Is it CGT or income tax. The CGT limit is about to be a pittance.
Holding company share whilst potentially a good investment puts a lot of eggs in one basket.
I sold shares and put the proceeds into my pension, I paid income tax plus. I and employers Ni on them so to me this made sense.
But you do need to take into account the potential tax liability on the way out.
Also when you plan to retire and when you can take the benefits. So a putting into a sip now to access before the dB pensions kick in.
I built some spreadsheets so I could model it all.
But if you are in the 100 - 125k bracket then pensions makes sense to get your self into a sane tax rate.
As also said it depends on the tax treatment of the company shares. Is it CGT or income tax. The CGT limit is about to be a pittance.
Holding company share whilst potentially a good investment puts a lot of eggs in one basket.
I sold shares and put the proceeds into my pension, I paid income tax plus. I and employers Ni on them so to me this made sense.
But you do need to take into account the potential tax liability on the way out.
Also when you plan to retire and when you can take the benefits. So a putting into a sip now to access before the dB pensions kick in.
I built some spreadsheets so I could model it all.
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