Pension

ToneControl

Nitefly said:

Evilmags said:

Only if your dumb enough to buy an annuity. And if you want inflation protection and widow transfer the number is closer to 20k...

The problem for folks like me is that we have no choice BUT to buy an annuity.  Ah well, it seemed like a good idea at the time...

you should not have to buy one I thought, please explain, I thought you could always transfer your pension right up the day you retire, unless you have a company pension, in which case you are usually best not transferring

viz

ToneControl said:

OK the trick -

until recently, many high-rollers on 150k a year or whatever used to remortgage their house 2-3 years before retirement, and then basically live on the money released, and contribute their entire salary as a pension contribution for the last years of employment.

Result = zero tax on the last years' income, then as soon as they retire, they take 25% tax-free - they can then pay off the mortgage partly, and carry on paying it form their pension

 

Net result = at least £80k tax saving typically

 

the current government has cracked down on this, and now they can only contribute £40 or 50k a year, I forget which

But - for Mr normal, you can still use this idea - make sure your house is remortgaged to some extent a few years before retirement, and pay as little as possible in tax for  those years, and live off the pension money.

Have I explained this well enough?

 

Yes very clear and very clever! But then i gues your children inherit a house with a loan?

ToneControl

if it wasn't a good loop hole, they wouldn't have acted to close it - you could basically avoid paying full tax for the last few years of work (including getting on for 20% employers and employees NIC), then get 25% of your whole pension tax free in one lump on day 1 of retirement - with which you can pay a large chunk of the mortgage off, then with the large amount you have in your pension fund, and the lower tax rate you now pay compared to when in work, you pay the rest off. if you don't have an annuity, then the mortgage will always be paid off. This is not my idea, this is the advice rich people were getting from proper IFAs for the last 10 years, the new pension contribution limits will reduce the amount of tax that can be saved by top-earners, but anyone can save a bit by not doing what most people do (i.e. pay off mortgage ASAP and have low pension contributions - instead, do the opposite)

viz

Buggering tossers.

ToneControl

my advice is avoid on-going commission fees and annuities by shopping around, there are plenty of retired IFAs sitting pretty on their cut from those I should think

The other advice is don't be paying tax on your salary to allow you to pay off a mortgage now, before you retire when you can put more in your pension now,pay the mortgage off later and pay less tax. Mind you this won't work is interest rates are high of course

Rich people and G7 countries borrow cheaply and keep their debts running for as long as possible whilst they invest their cash in whatever way works. On a smaller scale, this is good practice for most people, but most people are dead-set on "paying off all their debts" before worrying about what happens next.

Nitefly

ToneControl said: Nitefly said: Evilmags said: Only if your dumb enough to buy an annuity. And if you want inflation protection and widow transfer the number is closer to 20k...
The problem for folks like me is that we have no choice BUT to buy an annuity.  Ah well, it seemed like a good idea at the time... you should not have to buy one I thought, please explain, I thought you could always transfer your pension right up the day you retire, unless you have a company pension, in which case you are usually best not transferring
Yes it's a company pension scheme.  The only good thing is that the company pays in as much as I do tax-free, but (the last time I checked at least) I have to buy an annuity.  

I don't have to buy it from the same company (Aviva) but I have to buy one with the fund (after taking my 25% tax-free lump sum).  Good, isn't it?

Nitefly

ToneControl said: Nitefly said: Evilmags said: Only if your dumb enough to buy an annuity. And if you want inflation protection and widow transfer the number is closer to 20k...
The problem for folks like me is that we have no choice BUT to buy an annuity.  Ah well, it seemed like a good idea at the time... you should not have to buy one I thought, please explain, I thought you could always transfer your pension right up the day you retire, unless you have a company pension, in which case you are usually best not transferring
Yes it's a company pension scheme.  The only good thing is that the company pays in as much as I do tax-free, but (the last time I checked at least) I have to buy an annuity.  

I don't have to buy it from the same company (Aviva) but I have to buy one with the fund (after taking my 25% tax-free lump sum).  Good, isn't it?

Nitefly

ToneControl said: Nitefly said: Evilmags said: Only if your dumb enough to buy an annuity. And if you want inflation protection and widow transfer the number is closer to 20k...
The problem for folks like me is that we have no choice BUT to buy an annuity.  Ah well, it seemed like a good idea at the time... you should not have to buy one I thought, please explain, I thought you could always transfer your pension right up the day you retire, unless you have a company pension, in which case you are usually best not transferring
Yes it's a company scheme - its main attraction is that the company pays in as much as I do - and I have to buy an annuity when I retire.  I don't have to buy it with the same provider, and I can take a 25% tax-free lump sum, but that's all the choice I have.

ToneControl

Nitefly said:

ToneControl said:

Nitefly said:

Evilmags said:

Only if your dumb enough to buy an annuity. And if you want inflation protection and widow transfer the number is closer to 20k...

The problem for folks like me is that we have no choice BUT to buy an annuity.  Ah well, it seemed like a good idea at the time...

you should not have to buy one I thought, please explain, I thought you could always transfer your pension right up the day you retire, unless you have a company pension, in which case you are usually best not transferring

Yes it's a company scheme - its main attraction is that the company pays in as much as I do - and I have to buy an annuity when I retire.  I don't have to buy it with the same provider, and I can take a 25% tax-free lump sum, but that's all the choice I have.

yes, a tough call, you have to be confident you will live long enough, I think you can always demand a cash transfer, but it's rarely the best deal. See this link

Probably worth asking for an assessment on this, just in case they are generous. is the annuity final-salary based or cash-sum based?

For anyone expecting a short retirement, a final-salary or any annuity is not going to look very attractive though

These are all very, very important and complicated decisions to take, and normally the only people offering help are vultures as far as I can see, I'd recommend to everyone buying books on it and reading around a lot, this affects a big chunk of everyones' lives, yet everyone (including me in the past) typically delegates the decisions to a salesguy. Not me anymore!!

CabbageCat

viz said:

 And why is it that the bottom 20% wealthy group of the population donate 4% of income to charity, while the top 20% pay 2% and they get 20% tax back on that?

Because lottery tickets count as giving to charity.

viz

Ah! Yes nice point!

Evilmags

Annuities are such bad value I'd seriously try and find a way round that. If you need inflation protection (government debt levels suggest you do) and want to transfer to your partner after death you get truly sodomised

ToneControl

Evilmags said:

Annuities are such bad value I'd seriously try and find a way round that. If you need inflation protection (government debt levels suggest you do) and want to transfer to your partner after death you get truly sodomised

yep, drawdown with or without commercial property in it is the only answer to that.