Good timing for this post. I am considering opening a self-funded pension, i.e the max I can pay in is £2880 a year under current regulations. I have little idea what I am doing, but given the government add 25% onto my pay-ins every year, even if the pension fund underperforms somewhat I am still making (hopefully) a decent amount with the government mark up? Is this correct or am I talking rubbish?
Apart from that I am buying Bitcoin, Tesla stock and opening a 1 year bank savings bond at about 4.5% APY.
The annual allowance is currently £40,000 for most people.
However, you can also only receive tax relief up to 100% of your earnings.
So if your earnings are lower than £40,000 you'll be entitled to tax relief only up to the amount you earn. If you earn less than £3,600, you can pay in up to £2,880 and still get tax relief.
The annual allowance is currently £40,000 for most people
plus you can also use any unused allowance from the last 3 years
Pensions can be a bit of an exercise in positive thinking at the Mo. I’m a financial moron, so I try hard to keep things simple.
Like many folks, the past few months have been shockingly terrible. But then again, the past few years seem to have generally seen pretty good returns.
Anyway, what I wanted to say was that, providing you’re not looking to retire right now, I’m hopeful that now is a good time to be paying into a pension - since the shares the funds are buying should be quite good value for money at the Mo. So hopefully that will pay off in the next few years when (hopefully) share prices recover.
(Apologies to the financially educated among you who may find my simplistic approach too ignorant).
Pensions can be a bit of an exercise in positive thinking at the Mo
They’re a long term thing. Well, unless you’re in what appears to be the late middle aged IT singletrack demographic in which case it’s all looming fairly close!
In the long term a passive tracker index-based equity investment will work out. Especially with the generous tax relief the U.K. government affords many of us.
I’m reminded of sharesave schemes back in the day: the shares had to lose 40% to break even on the deal.
unused allowance
as before, unless it’s for fast access or ‘rainy day’ any thought of putting money into savings other than a pension if there’s any allowance left seems…suboptimal.
Apart from that I am buying Bitcoin, Tesla stock and opening a 1 year bank savings bond at about 4.5% APY.
Why are you buying Tesla stock out of interest?
..as I think it will go up considerably in the longer term, and I generally prefer disprutive investments.
Good timing for this post. I am considering opening a self-funded pension, i.e the max I can pay in is £2880 a year under current regulations. I have little idea what I am doing, but given the government add 25% onto my pay-ins every year, even if the pension fund underperforms somewhat I am still making (hopefully) a decent amount with the government mark up? Is this correct or am I talking rubbish?
Apart from that I am buying Bitcoin, Tesla stock and opening a 1 year bank savings bond at about 4.5% APY
25% return immediately on standard rate income tax if you pay in to a pension and you’re putting money in a 4.5% bond from net income?
Bitcoin? You’re trolling right?
Tesla stock? If you like a gamble…
Parrot
There is a max. I can pay into a pension so with some of the leftover yes I am putting some into bonds.
Tesla - yes it's a risk but based on my research I think a worthwhile one.
Bitcoin yes - why would I be trolling?
25% return immediately on standard rate income tax if you pay in to a pension
You only keep that 25% if you're not paying income tax when you draw the pension. You gain 6.25% because 25% of the pension is tax free though.
25% return immediately on standard rate income tax if you pay in to a pension
You only keep that 25% if you’re not paying income tax when you draw the pension. You gain 6.25% because 25% of the pension is tax free though.
But, if you have long enough to invest, you get to keep all of the additional earnings on the 25% which could be significant even after paying the tax when you cash it in.
If the timing suit, you can also retire a bit early and live off the £12K free per annum that most people are eligible for.
you get to keep all of the additional earnings on the 25%
Since you get taxed on the increase when you pay it out, you are no better off than if it was in an ISA.
live off the £12K free per annum
Agreed - that's where you gain. If your marginal income tax rate when you take the pension is lower than the tax you would have paid if you hadn't put it in the pension, you gain. Plus the 6.25% (12.5% if your marginal rate in retirement is 40%) because 25% is tax free. In return for that gain you lock it up until you're 55. Not saying it's a bad idea, just that there's not necessarily quite the gain that people think.
Lost £80k in last few weeks, thanks Liz ☹️
Not retiring for another 10years so hopefully it will recover when the brexit boom finally hits and the uk prospers after ditching all the EU red tape. 😉
As a glass half full type person I’m thinking that considering the last 3 years or so my pensions haven’t done all that badly. Sitting about at zero return between mid 2019 and now, which considering everything seems not all that bad. Kwasi Kwarteng lost me about £30 grand in a day though….
As a glass half full type person
Same here.
I'm still at the level I was as 2020.
My money is going further currently in the number of stocks I am buying.
I'm in it for another 25-20 years.
I'm still 15 years from retirement so have stopped checking my pension as it's just depressing. There's a good argument for investing in property for part of your pension but then you end up making the housing crisis worse
I’m still 15 years from retirement so have stopped checking my pension as it’s just depressing.
Same here - i'm 50 in a few weeks so just leaving the pension to do its thing.
Currently i pay in 8% and the company matches it, not sure what else i should be doing.
Just changed next month's contribution to 40%!
Just hope I make it to 55
Received annual statement from Scottish widows today, down just 2.9% compared with 20% uplift last year.
putting money into savings other than a pension if there’s any allowance left seems…suboptimal.
Unless you're in danger of exceeding the lifetime allowance.
Eh?
That's what he said " if there's any allowance left"
Same here – i’m 50 in a few weeks so just leaving the pension to do its thing.
Currently i pay in 8% and the company matches it, not sure what else i should be doing.
Aye that, although ours puts in 12% for my 6
I'm not brave enough to move it, risk it etc, I think the fund now I've passed 50 is actually self moving towards safer options than I used to have. But mostly, I'm waiting it out.
FYI (*apologies)
Remember your pension is not part of your estate/will and you need to do an expression of wish for each pension.
https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-problems/pensions-after-death
