agent69
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Post by agent69 on May 6, 2018 17:46:07 GMT
If you meet the correct criteria the only place to put the first £40k of your spare cash is in a final salary pension scheme. Instant returns of 25%
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ozboy
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Mine's a Large One! (Snigger, snigger .......)
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Post by ozboy on May 6, 2018 19:33:13 GMT
I've already invested quite a bit in whine on here, along with many others. We still have no return yet.  |
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ceejay
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Post by ceejay on May 7, 2018 7:36:24 GMT
If you meet the correct criteria the only place to put the first £40k of your spare cash is in a final salary pension scheme. Instant returns of 25% This is the line frequently peddled by those selling pension products, but it is rarely true. Remember that the money will be subject to income tax on the way out, so the extent to which you gain depends on your marginal tax rate now and your marginal tax rate when you draw on the pension. You will only get the full benefit if you will be a non-taxpayer when you draw on the pension. Otherwise you will pay tax on 75% of the value of the pension (because of the 25% tax free lump sum option). The best case, of course, is if you are a higher rate payer now and will be a lower rate payer in the future. In the worst case, if you saved assiduously and invested well, or if future governments change their minds about tax rates, you might end up being on a higher tax rate in retirement than you are when working, in which case you would lose out from this process.
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pom
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Post by pom on May 7, 2018 8:40:54 GMT
If you meet the correct criteria the only place to put the first £40k of your spare cash is in a final salary pension scheme. Instant returns of 25% This is the line frequently peddled by those selling pension products, but it is rarely true. Remember that the money will be subject to income tax on the way out, so the extent to which you gain depends on your marginal tax rate now and your marginal tax rate when you draw on the pension. You will only get the full benefit if you will be a non-taxpayer when you draw on the pension. Otherwise you will pay tax on 75% of the value of the pension (because of the 25% tax free lump sum option). The best case, of course, is if you are a higher rate payer now and will be a lower rate payer in the future. In the worst case, if you saved assiduously and invested well, or if future governments change their minds about tax rates, you might end up being on a higher tax rate in retirement than you are when working, in which case you would lose out from this process. Yeah - my IFA said it was only worth topping up if it didn't drop you into basic rate tax
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agent69
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Post by agent69 on May 7, 2018 9:11:33 GMT
If you meet the correct criteria the only place to put the first £40k of your spare cash is in a final salary pension scheme. Instant returns of 25% This is the line frequently peddled by those selling pension products, but it is rarely true. As I said in my original post, you have to meet the right criteria. If you do it's a no brainer. As a 40% tax payer sacrificing £100 of take home pay you get £200 contributed to your pension in the scheme I am in. If you are a basic rate tax payer in retirement (which I guess most people will be) the worst case scenario is you take it all as cash and end up with £165. Even if you are a basic rate tax payer paying into the scheme you still end up getting back nearly £150 for every £100 you sacrifice. So where can you put your money to do better than this? Guaranteed return, zero risk
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cb25
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Post by cb25 on May 7, 2018 9:16:21 GMT
This is the line frequently peddled by those selling pension products, but it is rarely true. As I said in my original post, you have to meet the right criteria. If you do it's a no brainer. As a 40% tax payer sacrificing £100 of take home pay you get £200 contributed to your pension in the scheme I am in. If you are a basic rate tax payer in retirement (which I guess most people will be) the worst case scenario is you take it all as cash and end up with £165. Even if you are a basic rate tax payer paying into the scheme you still end up getting back nearly £150 for every £100 you sacrifice. So where can you put your money to do better than this? Guaranteed return, zero risk re "Guaranteed return, zero risk" - not true, pensions funds can (and have) got bust.
Usually only government bonds of major nations are considered risk free (or as close as is achievable) and their returns are pretty dismal at the moment.
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bigfoot12
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Post by bigfoot12 on May 7, 2018 9:30:00 GMT
This is the line frequently peddled by those selling pension products, but it is rarely true. As I said in my original post, you have to meet the right criteria. If you do it's a no brainer. ... So where can you put your money to do better than this? Guaranteed return, zero riskAnd you don't think that there is any risk in the next few years that basic tax might increase (JC & JMcD), or that NI might be added to "unearned income" (JC & JMcD), or that pensions might be raided in some other way (every chancellor of the exchequer since and including Gordon Brown, perhaps except the current one)? Or that the minimum age at which you can take it out might increase (again)? And that is without considering the possible opportunity cost of having the money tied up in a restrictive wrapper.
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agent69
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Post by agent69 on May 7, 2018 11:07:01 GMT
As I said in my original post, you have to meet the right criteria. If you do it's a no brainer. ... So where can you put your money to do better than this? Guaranteed return, zero riskAnd you don't think that there is any risk in the next few years that basic tax might increase (JC & JMcD), or that NI might be added to "unearned income" (JC & JMcD), or that pensions might be raided in some other way (every chancellor of the exchequer since and including Gordon Brown, perhaps except the current one)? Or that the minimum age at which you can take it out might increase (again)? And that is without considering the possible opportunity cost of having the money tied up in a restrictive wrapper. My initial post contained a caveat regarding your circumstances meeting the necessary criteria (in terms of age and finances). If you do then I am waiting for somebody to say where is better for your money. My reference to guaranteed, no risk was referring to the initial uplift on your contributions (50 - 65% after tax depending on status). I accept that salary sacrifice refers to DC schemes, so the final value will depend on the performance of your underlying assets. Even if Tom and Jerry did get in at the next election it would take a major change in government policy to undo the benefits of SS (and historically the party of power has been reluctant to mess with pensioner benefits because they have a nasty habit of turning out to vote on election day). The fear of what a labour government might do is all the more reason to make hay now.
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ceejay
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Post by ceejay on May 7, 2018 11:31:37 GMT
... The fear of what a labour government might do is all the more reason to make hay now. Except that you're not making hay now: the hay comes much later, if all goes according to plan. It's easy to be misled by a large number on a financial statement, and the bottom line on a pension pot is especially uncertain in its real value.
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bigfoot12
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Post by bigfoot12 on May 7, 2018 11:44:11 GMT
My initial post contained a caveat regarding your circumstances meeting the necessary criteria (in terms of age and finances). If you do then I am waiting for somebody to say where is better for your money. So " if you meet the correct criteria" is short for you are already very close to 55, preferably older; are currently a higher rate taxpayer; will soon be a lower rate tax payer; have a current pension provision significantly below the current and future cap (and will remain below that when projected forward to your crystallisation events); know that any income from the pension won't have an impact on state benefits; and are happy with the investments available in the pension now and when drawdown begins, then perhaps you have a point! ..and historically the party of power has been reluctant to mess with pensioner benefits... They may have messed with pensions reluctantly - I don't know, but they (both parties) have messed with them; and nearly always worse. Gordon Brown and co removed the dividend tax credit, and introduced the lifetime allowance, pushed the pension age from 50 to 55, and then reduced the lifetime allowance. George Osborne pushed the minimum age to 57 (in 2027) and further reduced the lifetime cap maybe twice (or maybe the previous guys dropped it twice can't remember).
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macq
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Post by macq on May 7, 2018 12:46:50 GMT
maybe it would be fair to say its free money at the start i.e starting with the max level for a non tax payer £2880 turning into £3600 invested after that its down to luck  |
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james100
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Post by james100 on May 7, 2018 13:11:16 GMT
I see Turks are reported to be making major gold investments as a hedge against continuing rampant inflation. On an individual level this is not so new, though. It's long been customary to exchange Lira for gold coins/bars on pay day at one of the ubiquitous gold shops (plenty of shops selling high-security safes for this reason too), to have part salary payments made in USD cash or to swap Lira for USD at the bank for tax-declared salary deposits at the bank. High value goods sourced internationally (think anything from high-end jewellery to private school fees) are mostly priced in USD. But the gold accumulation trend has accelerated recently for a number of additional reasons including the reported government inflation figures (which are bad enough) being apparently less than 50% of the actual rate and Erdogan has been directly instructing people to buy gold instead of USD due to increasing animosity with US (as well as accumulating on behalf of the state himself for the same reason, plus anticipated degenerating relationship with rest of the west). So do that. Because everyone knows what happens when a Turkish person disagrees with Erdogan these days...although unbiased info is in short supply these days what with him locking all the good journalists in jail and torturing them. And the last point is a very valid reason to consider Gold IMHO. Erdogan after all has the NATO nukes and doesn't really get on with the rest of NATO for now. Just done a deal with his best mate Putin on a shiny new surface-to-air missile system and is ready to seal his dictatorship with yet another general election in 6 weeks' time, allegedly to cement stability for the coming conflicts ahead. I'm not suggesting he's about to kick of WW3, but I'm happy to be holding a bit of gold right now too (albeit a lot less than that Egyptian Billionnaire  ).
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carolus
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Post by carolus on May 7, 2018 15:18:59 GMT
maybe it would be fair to say its free money at the start i.e starting with the max level for a non tax payer £2880 turning into £3600 invested after that its down to luck But don't forget that, for a non- (or basic-) taxpayer, putting money in an ISA actually gives you pretty much the same boost when you decide to withdraw money, so if you haven't already used your entire ISA allowance it's well worth considering whether you should use that first. The SIPP boost if you are a non- or basic-rate taxpayer gives you a 5/4 boost when you pay in, but this is precisely cancelled by the 1/5 you would lose to tax assuming you will be a basic rate taxpayer when you draw down (if you expect to be a higher rate pensioner then the situation is worse!). In contrast for an ISA you won't get any boost for paying in, but will also be tax free when you withdraw from the ISA. The fact that you can pull 25% out of the SIPP tax free is a benefit, but still only works out to a 1/16 boost. This has to be weighed against the fact that you can't access the money in the SIPP until you reach 55, and will be at the mercy of any changes to pension regulations between now and then. In broad terms I'd suggest an ISA is often better if you expect your tax band in retirement to be equal to or higher than your current one, and an SIPP if the other way round.
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macq
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Post by macq on May 7, 2018 16:51:21 GMT
agree it is horses for course's and company payments and tax rate may sway.But it still looks good when doing your own pension and you pay into a fund/tracker etc and the money is added up front £2880 in my example becomes £3600 worth of units straight away and could then with luck be growing and compounding for many years
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agent69
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Post by agent69 on May 7, 2018 17:43:16 GMT
So " if you meet the correct criteria" is short for you are already very close to 55, preferably older; are currently a higher rate taxpayer; will soon be a lower rate tax payer; have a current pension provision significantly below the current and future cap (and will remain below that when projected forward to your crystallisation events); know that any income from the pension won't have an impact on state benefits; and are happy with the investments available in the pension now and when drawdown begins, then perhaps you have a point! Regarding the criteria: - Being close to or over 55 obviously helps, as you can have your hay anytime you like
- No need to currently be a higher rate tax payer - salary sacrifice benefits from savings in NI (in my case 25.8%)
- I suspect most people will be lower rate tax payers in retirement
- Not too many people going to get near the £1m pension cap, so no issues there
- It also helps if you have a separate stash of cash to help with the cost of living (this helps to maximise the amount you can sacrifice).
If you were approaching retirement and had £40k a year spare, where would you put it if you don't like SS?
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