Pension for dummies
Discussion
Ok - so i recently (about a year ago) started a Pension plan (Scottish Widows)
My banker geezer said it was shocking I hadn't done it sooner - and so I went for it, along with peer pressure of people I know.
Now then........I'm struggling to see the point..........
Surely, with the various fees other people mention on other threads here, and the fact that you pay income tax on it when you get it in later life..........surely its nothing more than a restrictive savings account?
Wouldn't it be better to put that money into property?
Or am i being stooopid?
My banker geezer said it was shocking I hadn't done it sooner - and so I went for it, along with peer pressure of people I know.
Now then........I'm struggling to see the point..........
Surely, with the various fees other people mention on other threads here, and the fact that you pay income tax on it when you get it in later life..........surely its nothing more than a restrictive savings account?
Wouldn't it be better to put that money into property?
Or am i being stooopid?
A pension plan is there to provide you with an income when you're no longer able to earn money from employment. How you go about providing that pension is entirely up to you as there are a number of methods. You have elequently described one, highlighting it's drawbacks, but obviously you've missed the pro that it is also tax efficient. You could invest your money in any number of ways in order for you to provide the income you feel you need, but your appetite to risk is what may drive you down any particular route. The route you seem to have chosen could be described by some as low risk. An Independent Financial Advisor who specialises in pensions would be worth chatting too if you're concerned. Good luck!
rog007 said:
A pension plan is there to provide you with an income when you're no longer able to earn money from employment. How you go about providing that pension is entirely up to you as there are a number of methods. You have elequently described one, highlighting it's drawbacks, but obviously you've missed the pro that it is also tax efficient. You could invest your money in any number of ways in order for you to provide the income you feel you need, but your appetite to risk is what may drive you down any particular route. The route you seem to have chosen could be described by some as low risk. An Independent Financial Advisor who specialises in pensions would be worth chatting too if you're concerned. Good luck!
Thanks Rog007 - I think the bit that gets me........is it really tax efficent? I suppose in that i'm not paying tax on the interest.......but I still have to pay tax when I pay it to myself - thus me thinking there could be better ways!Oh, also - currently my Ltd company is paying 100% of it........if i was to close my Ltd company, can i just swop it to be a personal one?
Well you're getting tax relief on what goes in which makes it pretty tax efficient and you can take up to 25% of your fund as a tax free lump sum when you take your pension (or before you actually take your pension if your pension plan allows it or you transfer into one that does).
Personally, depending on how much you've got to save, I would be looking at having a spread of pension, ISA's, property, equities and a bit of cash to give as much flexibility as possible whilst taking advantage of any tax breaks going.
Probably a good idea to speak to an IFA to make sure you're doing the right thing for your own situation.
Personally, depending on how much you've got to save, I would be looking at having a spread of pension, ISA's, property, equities and a bit of cash to give as much flexibility as possible whilst taking advantage of any tax breaks going.
Probably a good idea to speak to an IFA to make sure you're doing the right thing for your own situation.
You mention the fact you have to pay tax on the income from a pension so may be better buying a property, the income from property rentals is also liable to income tax.
Pension is very tax efficient on the way in, 20% basic rate upto max 50% depending on your earnings.
People often confuse pensions and property as part of their retirement planning. Pensions are usually self funded with a good tax break vs property is usually leveraged by the way of a mortgage.
Not many people would borrow money to put into a pension but most would borrow to buy a property, this to me means it's not comparing like for like.
Pension is very tax efficient on the way in, 20% basic rate upto max 50% depending on your earnings.
People often confuse pensions and property as part of their retirement planning. Pensions are usually self funded with a good tax break vs property is usually leveraged by the way of a mortgage.
Not many people would borrow money to put into a pension but most would borrow to buy a property, this to me means it's not comparing like for like.
Edited by Shadow62 on Friday 17th August 19:53
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