[EvilDrPorkChop]

Final Salary pensions, oh I wish! Don't think they'll be many of those going about when I come to retire.

Self Employed like teaston so if I was going to do something it'd have to be private. I'm sure they'd be some sort of tax fiddle somewhere but unlike others if the company were to match what I put it i'd be affectively paying for it myself.

I'd like to pay the mortgage off early and don't think I could invest a decent amount into a pension and do that at the same time. So it'll have to be a toss up between the two more than likely.

The thing that worries me about pensions is that your stashing your money away into a pot that is locked in till you're 55/60. I might be dead by then and have never benefited from that money, not married to my partner so I don't know if she'd benefit from it

[teaston]

Originally Posted by EvilDrPorkChop

Final Salary pensions, oh I wish! Don't think they'll be many of those going about when I come to retire.

Self Employed like teaston so if I was going to do something it'd have to be private. I'm sure they'd be some sort of tax fiddle somewhere but unlike others if the company were to match what I put it i'd be affectively paying for it myself.

I'd like to pay the mortgage off early and don't think I could invest a decent amount into a pension and do that at the same time. So it'll have to be a toss up between the two more than likely.

The thing that worries me about pensions is that your stashing your money away into a pot that is locked in till you're 55/60. I might be dead by then and have never benefited from that money, not married to my partner so I don't know if she'd benefit from it

Two good points there

1. Is the money to go into a pension better off going into something else, whether it be paying off your mortgage sooner, buying another house to rent out, or maybe something else?

2. Which is more important, enjoying your young life while you’re fit and healthy and have a young family to enjoy it with, or put the money away for your retirement when you’ll have less energy and could even be physically impeded or even dead!

Life makes my head hurt sometimes!

[rosstin]

Originally Posted by teaston

Two good points there

1. Is the money to go into a pension better off going into something else, whether it be paying off your mortgage sooner, buying another house to rent out, or maybe something else?

2. Which is more important, enjoying your young life while you’re fit and healthy and have a young family to enjoy it with, or put the money away for your retirement when you’ll have less energy and could even be physically impeded or even dead!

Life makes my head hurt sometimes!

Lads, start a private pension..

Even if a small amount, it's something solid for the future. You'll get income tax relief which is a pretty good incentive.
Markets are generally cyclical so I wouldn't be too concerned by the 'low returns' argument - no one can predict the next 10, 20, or 30 years.

[MashinBenzin]

Originally Posted by rosstin

Lads, start a private pension..

Even if a small amount, it's something solid for the future. You'll get income tax relief which is a pretty good incentive.
Markets are generally cyclical so I wouldn't be too concerned by the 'low returns' argument - no one can predict the next 10, 20, or 30 years.

Good advice right here.

The tax relief is the key. For every £1000 of income that you 'sacrifice', £1400 goes into your pension fund (if in the 40% income tax bracket). That's a 40% instant gain that any other form of investment vehicle has to catch up to become as lucrative.

And remember that, if markets fall, your regular contribution is buying you more, ready to leap in value in the next cycle. If you are years from retirement and still contributing, a fall in the markets is no bad thing.

[teaston]

Originally Posted by rosstin

Lads, start a private pension..

Even if a small amount, it's something solid for the future. You'll get income tax relief which is a pretty good incentive.
Markets are generally cyclical so I wouldn't be too concerned by the 'low returns' argument - no one can predict the next 10, 20, or 30 years.

When you say small amount how much are we talking about?

[Scoobyd]

Originally Posted by EvilDrPorkChop

The thing that worries me about pensions is that your stashing your money away into a pot that is locked in till you're 55/60. I might be dead by then and have never benefited from that money, not married to my partner so I don't know if she'd benefit from it

Fortunately under the new pension freedom legislation that came into force in 2015 this is no longer an issue. With modern personal pension plans you can nominate literally anyone to be the beneficiary of your pension if you die. So in your case it would be your partner, regardless of the fact you're not married.

If you die before you're 75 they receive your whole pension pot completely tax free, still within the tax efficient wrapper, and can draw from it free of tax until the pot is exhausted. If you die post 75 they still receive the pot as a tax free lump sum but will be taxed at their own marginal tax rate on any withdrawals they make from it.

Pensions really are a good place to be putting away for retirement now. If you're fortunate enough to be able to max the £40,000 annual contribution allowance then you've your £20,000 ISA allowance to make use of too.

The worst thing you can do is do nothing! Hope that helps.

[rosstin]

Originally Posted by MashinBenzin

Good advice right here.

The tax relief is the key. For every £1000 of income that you 'sacrifice', £1400 goes into your pension fund (if in the 40% income tax bracket). That's a 40% instant gain that any other form of investment vehicle has to catch up to become as lucrative.

And remember that, if markets fall, your regular contribution is buying you more, ready to leap in value in the next cycle. If you are years from retirement and still contributing, a fall in the markets is no bad thing.

I think it's even better than that.

If my maths are right £1000 net salary would be £1666 paid into pension as a higher rate tax payer. £1000/60 *100

[Scoobyd]

Originally Posted by rosstin

I think it's even better than that.

If my maths are right £1000 net salary would be £1666 paid into pension as a higher rate tax payer. £1000/60 *100

Correct. If a higher rate tax payer a £1,000 contribution grosses up to £1,666.

For higher rate/additional rate taxpayers it's pretty much a no brainer.

[MashinBenzin]

Originally Posted by Scoobyd

Correct. If a higher rate tax payer a £1,000 contribution grosses up to £1,666.

For higher rate/additional rate taxpayers it's pretty much a no brainer.

Thanks guys, I had a feeling I had it wrong as I typed it. It's £600 take home lost means £1000 into pension - which is the numbers you state.

We don't get much in life for free, this is the nearest thing to a gift horse imho and the recent changes in how you can take it out are terrific.

[Techno 9000]

How much to put in a pension? Whatever you can afford to lock away for your future, could be a throwaway answer.

When to start? Now. Don't put it off. The sooner the better, as the first payments you put in have the longest to grow.

Review your payments every year or so, to see if an increase (over and above a straightforward inflation based rise) is possible.

Those who see state retirement age heading upward and don't want to wait that long should be considering if they can bridge the gap with larger payments into their personal pension. The younger you are the more decades there are for the pension to grow.

[....,,,,..,,..]

Anyone know the rules on cashing out a pension, taking a lump sum from it?

only been with my current employer since 2012 and as I plan on to retire early (4 years to go) it's never going to amount to much when compared to our other pensions, investments.

[JustChris]

Originally Posted by Brigand

Anyone know the rules on cashing out a pension, taking a lump sum from it?

only been with my current employer since 2012 and as I plan on to retire early (4 years to go) it's never going to amount to much when compared to our other pensions, investments.

Brigand....and others retiring in less than 5 years or so....do you plan monitor the annuity markets, eg if you're choosing to retire and not forced and it's a bad year for annuities ... would it be better waiting another couple?

I'm. It sure it's not that simple but you get what I'm thinking. A lucky bit of timing could make 10-20% difference to your salary for 20-30 years. Hmmm.

Christ I'm such a planner....this is 25 years away for me...but as per the thread I'm curious how others are approaching this.

[rosstin]

Originally Posted by teaston

When you say small amount how much are we talking about?

Originally Posted by Techno 9000

How much to put in a pension? Whatever you can afford to lock away for your future, could be a throwaway answer.

When to start? Now. Don't put it off. The sooner the better, as the first payments you put in have the longest to grow.

Review your payments every year or so, to see if an increase (over and above a straightforward inflation based rise) is possible.

Those who see state retirement age heading upward and don't want to wait that long should be considering if they can bridge the gap with larger payments into their personal pension. The younger you are the more decades there are for the pension to grow.

Techno is bang on. Something is better than nothing, so whatever you can afford pal.

But some example sums;
£200 saved a month is £333 after tax relief (if higher rate), or £4k per year.

£4k sat in a fund for 30 years becomes something like £10k if it achieves low average growth of 3% a year. At 5% it's more like £17k. You have to think about any fees and inflation but you can see how even 'modest' monthlies set you up well. If you can afford more, do it.

You don't want to have to drop to a 1 series in retirement do you?!

[JNW1]

Originally Posted by JustChris

Brigand....and others retiring in less than 5 years or so....do you plan monitor the annuity markets, eg if you're choosing to retire and not forced and it's a bad year for annuities ... would it be better waiting another couple?

I'm. It sure it's not that simple but you get what I'm thinking. A lucky bit of timing could make 10-20% difference to your salary for 20-30 years. Hmmm.

Christ I'm such a planner....this is 25 years away for me...but as per the thread I'm curious how others are approaching this.

If you go the drawdown route you don't necessarily have to use your pension pot to purchase an annuity (although you can of course use some or all of it to do that if you want).

However, the rules on pensions - and how you can use your pension pot - can and do change so if you're still 25 years from retirement I wouldn't get too hung-up on the detail of how you're going to take your pension just yet! I'd say just focus on maximising the size of your pot and supplement with other tax-efficient investments like ISA's if funds allow.

[rich100]

Originally Posted by Brigand

Anyone know the rules on cashing out a pension, taking a lump sum from it?

only been with my current employer since 2012 and as I plan on to retire early (4 years to go) it's never going to amount to much when compared to our other pensions, investments.

I believe that you can access 25% of your total pension schemes tax free so on that basis if this one represents only a small proportion of your total then you may be able to take all of this tax free.

Important point to note though is that it's not necessary to take that entire 25% in one go though and this can be staged over a period of time.

[rich100]

Originally Posted by MashinBenzin

Good advice right here.

The tax relief is the key. For every £1000 of income that you 'sacrifice', £1400 goes into your pension fund (if in the 40% income tax bracket). That's a 40% instant gain that any other form of investment vehicle has to catch up to become as lucrative.

And remember that, if markets fall, your regular contribution is buying you more, ready to leap in value in the next cycle. If you are years from retirement and still contributing, a fall in the markets is no bad thing.

Agree with the above two points and would add that the compounding effect of investment returns is something that also benefits greatly from a long time horizon.

Whilst stock returns clearly are achieved by raising prices it's the effect of reinvested dividends that's key.

I get your point Teston about enjoying liked now but I think it's about trying to find that balance. Really, even if it's small the earlier you can start with sort of thing the better.

[TodmordenLad]

Late fifties now. Last permanent role was IT Director for a well-known international organisation before being made redundant five years ago after a not-so-friendly takeover. No mortgage and pretty comfortable. Both kids have left home and are in gainful employment. Wife has a good job but has had enough now. Have several pensions, yet to be touched. Smug bit out of the way
Did some interim work during the first couple of years after redundancy, which was lucrative but boring. Don't work anymore now. Miss the companionship of the [permanent] workplace and regularly see former work mates who left at the same time as me. Don't miss the stress, the politics and the general bollox of working for a large organisation. Don't give work a thought from one day to the next.

[Soul_Glo]

- adjusts monocle -
when I was in the Crimean war... on the Russian side...

10 years to go then I plan to retire.
Private pension set up... estimated should be receiving around £1175 a month during retirement after tax. Not bad. Thinking of topping that up and making it £1500 a month.

[TouringPleb]

Question from someone who knows nothing about pensions..

Are pensions taxable? Ie if you are lucky enough to have a pension big enough to pay out say £20k a year, are you taxed on that?

[EvilDrPorkChop]

Originally Posted by LobB

Yes. Taxed as earned income.

So really the tax relief you receive now is going to be payable when you receive your pension. So you're only really gaining on the increased growth of the 'tax relief money' rather than it being free money as it's payable when you take it.

Not sure I've worded that well....

[TimMcC]

Originally Posted by LobB

No because you'll be getting tax relief on contributions at 40% plus. And paying tax on pension income at, most likely, 20%.

And, under current rules, you can take 25% of the pot totally tax free.

[teaston]

Originally Posted by Scoobyd

Correct. If a higher rate tax payer a £1,000 contribution grosses up to £1,666.

For higher rate/additional rate taxpayers it's pretty much a no brainer.

So how do you get that extra £666 into your pension pot, does the government automatically move it when you pay the tax or do you have to do it when you do your tax return?