|
|
Post by skint4achange on Feb 11, 2018 10:38:57 GMT
I am in my late 40's but like many others have only just really started thinking about planning for my retirement which I hope will take place around my 55th birthday. THe main reason for my being so late to the pension party was because I did not trust pension providers in the early 2000's
I want to point out that all opinions expressed by any member of this forum WILL NOT be considered as financial advice in any way whatsoever other than to provide me with some answers that I am lacking.
Looking at my finances, I have just over 6 years left to get everything in place to allow me to retire at 55. I have my armed forces pension (Not full 22 years but approximately £7200 per annum from age 60) and have my full UK pension (If it still exists by then!) which currently stands at about the same as my armed forces pension. My armed forces pension will become index linked at 60.
My quandary is that I have a 6 figure sum invested in various P2P platforms, ISA's, IFISA's etc. but I have just started working for a large multi-national company who will match my pension contributions up to 8%. I also have the option to buy shares in the company in a tax free wrapper and get 25% of my share holding for free.
I do not like having all of my eggs in one basket but would like to get some other investors opinions of what I intend to do. Again, I will not consider anything you say to be taken as legal advice.
My thoughts were:
1. Invest in my company pension at 8% as even if the fund does not perform too well I will get 100% free money from the company and my tax and NI will reduce as I will use a salary sacrifice scheme.
2. My wife will also increase her pension to the maximum value of employers contributions. She will pay 8%, her employer will pay 6%. Again, 75% free money and tax reduction.
3. The buying of shares in my company as I said has the benefit of being tax free when I retire if I sell them (I can continue to hold and may do so depending on dividends but these would be taxed??). 25% extra free sounds like free money, but only if the company continues to do well ( I work there now so that may be a factor in their downfall!  )
4. My issue now comes with my ISA's. I currently have 1 cash ISA, 1 IFISA and my wife has the same. I will continue to hold these and will even open a further S/S ISA for each of us. I obviously have the option to top up my pension pot to £40k per year but as my state pension and my armed forces pension will be above the tax free allowance (Probably) my thought was that any further investment in my pension will just be taxable? Whereas interest and drawings from an ISA would be tax free?
5. Our property in the UK will be rented out as we are heading off travelling for a couple of years, but even on our return we will continue to rent the house in the UK as we have a second home in Spain which we will live in. We will probably have to pay tax on some of that income as my wife will have her pension and state pension too.
Am I correct in what I have said above about drawdowns from ISA's all being tax free (As tax has already been paid on what was invested?). I will be able to get all our savings into ISA's by around my 55th birthday.
Any thoughts would be most welcome.
|
|
stub8535
Member of DD Central
personal opinions only. Not qualified to advise on investment products.
Posts: 1,447 
Likes: 945
|
Post by stub8535 on Feb 11, 2018 11:26:58 GMT
I am in my late 40's but like many others have only just really started thinking about planning for my retirement which I hope will take place around my 55th birthday. THe main reason for my being so late to the pension party was because I did not trust pension providers in the early 2000's
I want to point out that all opinions expressed by any member of this forum WILL NOT be considered as financial advice in any way whatsoever other than to provide me with some answers that I am lacking.
Looking at my finances, I have just over 6 years left to get everything in place to allow me to retire at 55. I have my armed forces pension (Not full 22 years but approximately £7200 per annum from age 60) and have my full UK pension (If it still exists by then!) which currently stands at about the same as my armed forces pension. My armed forces pension will become index linked at 60.
My quandary is that I have a 6 figure sum invested in various P2P platforms, ISA's, IFISA's etc. but I have just started working for a large multi-national company who will match my pension contributions up to 8%. I also have the option to buy shares in the company in a tax free wrapper and get 25% of my share holding for free.
I do not like having all of my eggs in one basket but would like to get some other investors opinions of what I intend to do. Again, I will not consider anything you say to be taken as legal advice.
My thoughts were:
1. Invest in my company pension at 8% as even if the fund does not perform too well I will get 100% free money from the company and my tax and NI will reduce as I will use a salary sacrifice scheme.
2. My wife will also increase her pension to the maximum value of employers contributions. She will pay 8%, her employer will pay 6%. Again, 75% free money and tax reduction.
3. The buying of shares in my company as I said has the benefit of being tax free when I retire if I sell them (I can continue to hold and may do so depending on dividends but these would be taxed??). 25% extra free sounds like free money, but only if the company continues to do well ( I work there now so that may be a factor in their downfall! )
4. My issue now comes with my ISA's. I currently have 1 cash ISA, 1 IFISA and my wife has the same. I will continue to hold these and will even open a further S/S ISA for each of us. I obviously have the option to top up my pension pot to £40k per year but as my state pension and my armed forces pension will be above the tax free allowance (Probably) my thought was that any further investment in my pension will just be taxable? Whereas interest and drawings from an ISA would be tax free?
5. Our property in the UK will be rented out as we are heading off travelling for a couple of years, but even on our return we will continue to rent the house in the UK as we have a second home in Spain which we will live in. We will probably have to pay tax on some of that income as my wife will have her pension and state pension too.
Am I correct in what I have said above about drawdowns from ISA's all being tax free (As tax has already been paid on what was invested?). I will be able to get all our savings into ISA's by around my 55th birthday.
Any thoughts would be most welcome. What you are asking for is based on incomplete data @skintforachange Some cannot be answered yet e.g. the impact of brexit on your isa holding tax status. What are the payment terms and type of your company pension? Final salary 60ths or 80ths paid for by the company or do you need to find an insurance company to provide fixed income from an annuity? As for the company shares at 25% discount from presumed salary sacrifice, once again, it depends on the scheme rules. The overarching thing to consider is what sum will provide the comfort and ambitions you and your better half hold for your retirement? Only you can answer that. You have a small investing window left. Good luck.
|
|
|
|
Post by skint4achange on Feb 11, 2018 11:50:10 GMT
My main concerns were not my pensions as the armed forces one is out of my control (As you well know) and is final salary, the state pension again is out of my control and the goalposts will probably move again for that one. The company pension is not a final salary, it is a defined contribution whereby I can take 25% tax free from age of 55 (Not that I will, but I can). The remainder I can draw an income from, but I assume any money from my combined pensions above my tax code will result in tax being paid (Hence why I don't want to put any lump sums into my pension).
This was why I was more drawn towards getting my money into ISA's in the hope of not paying tax when I drawdown from them. This does of course rely on how the government treat income from ISA's in the future, but at the moment it would appear to me that if I can get the same (Or more) return from an IFISA/S&S ISA as I can from a pension investment fund, why would I want to invest in a fund where I would pay tax if I need my money? What I am really asking is "Does anyone see an obvious flaw in what I am saying that I can't see?"
My wife and I are simple creatures and to be honest, our pensions and income from renting our property will probably more than suffice our everyday needs in retirement (Assuming I have calculated our tax free allowance correctly!  ). But, if needs be I would like to be able to have instant access to our money (Especially living in the EU when we will not be a part of it!). Brexit will probably make things clearer about how we will be treated in the future, but I will deal with that when it comes to it and make changes where needed. My wife only has a small pension so if the income from the house is put into her name, we shouldn't end up paying tax there either? Again, I am not sure if we can do that as the house is in my name only!
For the first 2 years while travelling, the income from the house coupled with interest from the ISA's will keep us going. At 60 I get a lump sum from the Navy so that will keep us going for another couple of years.
The underlined is my main area of concern.
|
|
macq
Member of DD Central
Posts: 1,934
Likes: 1,199
|
Post by macq on Feb 11, 2018 12:15:35 GMT
You seem to be doing pretty well so advice should come from you  but can't see a flaw but when reading about Pensions V ISA before the advice tends to be look at the ISA after you have used your pension allowance for this year (and previous if not used and you have earned enough)and explore if your new company scheme allows you to "buy" extra contributions.(the lifetime allowance is above my pay grade & thinking) Did find the Pensions Advisory Service helpful a couple of years back for free advice which could be worth a look |
|
|
|
Post by skint4achange on Feb 11, 2018 12:30:11 GMT
The lifetime allowance is somewhat above my pay grade too!
If I had of enrolled in the pension when I was offshore for 11 years I might have put a "Dent" in it, but still wouldn't have been anywhere near maxed out. Interestingly enough, the armed forces pension does not count towards your lifetime allowance which I found bizarre.
Think I may contact the pension advisory at some point just to clarify some sticking points.
I hear what you are saying about the saying was use all your pension allowance first before investing in ISA. Here is my problem, I can't see any advantage to doing it that way. In fact, in my position of armed forces pension and state pension for both me and my wife taking up all our tax free allowance, I actually see it as a definite disadvantage considering my wife and I do not require a lump sum. Even if we did, we could just remove it out of one of the ISA's.
I must be missing something and this is why I posted on here. I don't want to go to see an IFA for him/her to look at me like I am stupid (Which I probably am being!)
|
|
macq
Member of DD Central
Posts: 1,934
Likes: 1,199
|
Post by macq on Feb 11, 2018 12:46:24 GMT
the Pensions service is free and was quite good - do the armed forces not offer access to free financial advice?(i know some unions do or can get a discount)but you would probably find the likes of Hargreaves Lansdown & fidelity may be able to give free basic advice as they are trying to sell both products.
Forum wise on the MSE site there is a savings & investment section but also a Pension sub board which may have had the same sort of questions before if nobody on here can help
|
|
|
|
Post by skint4achange on Feb 11, 2018 12:51:22 GMT
The navy do offer an advice service, but that kind of runs out after you have left and I left 13 years ago!
Funnily enough, H&L offer a SIPP with my new employer who will match up to 8%. Might be worth dropping them a line to get some advice even if I don't invest with them! 
|
|
JamesFrance
Member of DD Central
Port Grimaud 1974
Posts: 1,323
Likes: 897
|
Post by JamesFrance on Feb 11, 2018 12:53:20 GMT
If you are resident in Spain it will be their tax system which applies. ISA income will likely be taxable.
|
|
|
|
Post by skint4achange on Feb 11, 2018 13:01:02 GMT
If you are resident in Spain it will be their tax system which applies. ISA income will likely be taxable. Not intending to be resident in Spain for tax purposes. Sorry, forgot to state that.
Intention is not to be in Spain for more than 180 days per year. By having our boat moored in the local marina we will be able to just float off down the Med for a couple of months every now and again as we have friends in Croatia, Italy and Greece. As long as we stay out for long enough, it shouldn't be an issue (I hope!)
But, that could all change depending on the terms of Brexit. Currently they have a 180 day rule, but maybe not for too much longer.
|
|
|
|
Post by Deleted on Feb 11, 2018 14:31:20 GMT
I would look closely at the redundancy options with your wealthy company. I joined one, they agreed to match contributions to my pension but failed to cap it, hence I did a few years at 100% contribution, followed by a redundancy at another 100% (much of which is tax free). Important to not base yourself at HQ, but at least 10 minutes away so if they ask you to move back to base you can claim redundancy. If you are in a position of responsability start to get them to rent a satellite office for some spurious reason. "greenwash" is always good. My sister did the same some years back, they had an HQ in London and she set up the overflow office that morphed into the new HQ while she managed to move back to the old office (to help tidy up) and picked up a wodge. Once you have an exit date in your mind you "own the plan".
Should make you think ;-)
The timing might work out well for this idea. As the bond market begins to recover, you'll find undated PIBS begin to become cheaper so you'll be able to buy say 9% interest at something like 90p for a £1 unit. Very dull old style investing but a good core to an income,makes P2P wildly exciting. Timing is everything on Bonds.
|
|
|
|
Post by dan1 on Feb 11, 2018 19:20:15 GMT
In terms of tax, estimate your marginal rate now and when you retire. If you don't need access to the cash before 55, your tax rate now is 40/45% but expect it to be 0/20% in retirement, and you haven't reached the annual or near lifetime limit then it's difficult to argue against a pension (+ you'll benefit from IHT advantages).
Employer matches are a no brainer but you'd be surprised how many people on decent incomes can't afford it.
Remember that pensions and ISAs are just tax wrappers. If you don't like the funds offered by your employer scheme then it may be worth enquiring whether you can do regular transfers out to somewhere like HL whilst still an active member, it is possible in some schemes.
|
|
dc848
Posts: 150
Likes: 92
|
Post by dc848 on Feb 11, 2018 22:37:11 GMT
Are you sure that your state pension will be all you hoped for? Im no expert, but my Defined Benefit pension whilst generous, is going to have a large impact on my state pension when it eventually kicks in. So in my humble opinion, some solid advice from an expert there would be time well spent.
|
|
|
|
Post by skint4achange on Feb 12, 2018 22:30:44 GMT
Are you sure that your state pension will be all you hoped for? Im no expert, but my Defined Benefit pension whilst generous, is going to have a large impact on my state pension when it eventually kicks in. So in my humble opinion, some solid advice from an expert there would be time well spent. This was one of the reasons why I was also looking to put more into ISA than pension. If I don't have too much in pension it may not affect my state pension too badly. But from what I can gather, a defined benefit pension will not adversely affect my state pension (I stand by to be corrected here).
ISA, while I get no free money, it is tax free and I don't see how any government can change tack on that without committing political suicide in the long run. So many people now have ISA's that any change to the detriment of the low level investor would be catastrophic.
I will look to get some advice from an IFA but it is always good to get advice from a forum like this. Forearmed is forewarned as they say.
|
|
|
|
Post by skint4achange on Feb 12, 2018 22:39:34 GMT
Just some notes. Dividends inside an ISA are not taxed nor drawdowns from an ISA - could be good if the company pays a good dividend. Any “yield” above 4% is probably “good”. HL are a good provider. As long as you avoid funds your charges are capped at £200. you don’t mention children or dependants. If you have some then you should realise that pensions still in “drawdown” fall outside your estate so could be passed on tax free. the option to acquire cheap shares in your employer shounds good but can be a problem with baskets and eggs. How long do you you have to hold them before you can sell or buy something else outside your employers market sector ? if you are going to be spending time abroad, it might be investigating if it would be possible to open an offshore account, have interest/growth/dividends grow without being taxed then withdraw it while you are in the most tax efficient country. (Really not sure about that one!) might be worth basing your your plans on ISA more than pensions since fewer voters have pension and thus pension tax perks are more likely to be attacked by the government retrospectively than ISAs or at least planing to get cash out of the pension sooner rather than later. further, you might want to consider taking your pensions at different times (even the state one can be delayed with a comesurate increase in payout). Then you could draw more out of the pension currently in drawdown (for the same amount of tax). Then when that one runs out, start drawdown on the next one. hope that helps. Many thanks. Some very good points and well worth giving some thought to. Who would have known that being "Tax efficient" was so difficult for Joe average?
The shares I only have to hold for 2 years for them to be tax free. Don't ask me how they do it, I really don't know.
I have 7 children (In my will, 4 natural and 3 step children, but my wife precedes them all). In all honesty, I do not think what I leave will be above the threshold anyway (I intend to enjoy what I worked for before they do!). But I do understand what you mean about the pension being outside of inheritance tax.
My armed forces pension has to be taken at 60 (No option on that, if I don't claim it I lose it!), State pension the same, at 65 but I may delay it depending on how I stand financially and the company pension will be delayed as long as possible. The company pension one a 1:1 basis to 8% is a no brainer as I am up 100% without any return on the investment trust/bond.
I really do appreciate all your advice guys. Maybe not all of it is relevant but it gives me food for thought. Thank you all
|
|
macq
Member of DD Central
Posts: 1,934
Likes: 1,199
|
Post by macq on Feb 12, 2018 22:47:05 GMT
will you need a pension with your crypto empire? |
|
)
). But, if needs be I would like to be able to have instant access to our money (Especially living in the EU when we will not be a part of it!). Brexit will probably make things clearer about how we will be treated in the future, but I will deal with that when it comes to it and make changes where needed. My wife only has a small pension so if the income from the house is put into her name, we shouldn't end up paying tax there either? Again, I am not sure if we can do that as the house is in my name only!
but can't see a flaw but when reading about Pensions V ISA before the advice tends to be look at the ISA after you have used your pension allowance for this year (and previous if not used and you have earned enough)and explore if your new company scheme allows you to "buy" extra contributions.(the lifetime allowance is above my pay grade & thinking)
