Hi all,
Thought I'd cast a net here as well as seeking advice from other areas, but I always value the experience and interesting history from forum members!
I've worked in an industry now for over 10 years after making a couple of career changes and at the beginning of this year secured a new role within that industry. The new role is a sales one, I've worked in presales earning small commissions for some years successfully, but this is a bigger role and more responsibility.
As such I will stand to potentially make large sums in commission every couple of years (long sales cycle) and was interested in how others in similar circumstances have approached this?
Let me be clear I want to pay the right amount of tax and personally feel morally and politically that is the right thing for me to do, but I also want to take advantage of ways to make the money work best for me and my family over the long term. I know there are myriad legitimate ways such as Cash ISA, S+S ISA, sharesave, pension, etc... but was hoping to understand if anyone else is in/has been in my shoes and would care to share experience or point me in direction of any useful resources/professionals worth speaking with.
As always, very grateful to our host and the good members of this forum! Any experiences shared will be taken in that spirit and rest assured I will not be taking any important financial decisions without conducting my own research independently so please don't feel guarded about sharing anything you think might be helpful.
John
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During my career any and all bonus was dropped into my pension. I could live comfortably on my basic. Effectively not paying tax on bonus and getting the additional 20% back was too good to ignore. It all depends on your circumstances, speak to a recommended IFA. I was fortunate to be able to retire at 55, mainly due to the extra dropped into my pension pot. Good luck deciding what you want to do with any extra you get.
As above it’s a no brainer. But also when I had good years, I would chip away at the mortgage, in the end I had it repaid 15 years early. There is no better feeling when that mill stone has gone, and with todays rates as they are it makes sense to reduce it.
Absolutely agree on the mental- financial benefits of being mortgage free, appreciate it´s a darn sight easier in some countries than others.Originally Posted by hilly10
Last edited by Passenger; 24th February 2024 at 11:20.
Commission so quite annoying vs annual bonus as one you can dump into a pension and the other you can’t.
If your salary is going up due to commission I’d take a fresh look at your pension contributions to make sure they’re what you think they are. As a crude example if someone is on 50k base and 50k commission with a basic pension of 5% you’re only really getting a 2.5% pension. No one wants to be working when they’re 75, let alone in sales.
If you work for a large corporate you might only be able to change your contributions once per year unless you have a life event mid-cycle.
Another thing to ask about is whether your employer offers a salary sacrifice pension scheme. If it's set up correctly, this is a tax efficient way of boosting your pension.
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Indeed, I was chatting to my daughter last night. She’s on a salary sacrifice pension and putting her bonus into her pension saves her paying over 50% tax.
You can do that with a bonus but not with commission
Have a look through Pete Matthew's excellent Youtube channel 'Meaningful Money' He is really good at simplifying financial decisions and what priority you might give different products. James Shack is useful too.
If I was working for an employer and they offered pension benefits i'd explore that option first as it offers good tax advantages. Then look at SIPPs in a low cost provider with possibly cheap global trackers to maximise growth. Funds in S&S ISAs for me are the gap between winding down work, taking the SIPP pension and then work / state pension - the 60/2 - 65/7 area, that way the pensions are left to grow as much as possible.
Last edited by vulcangascompany; 24th February 2024 at 15:34.
You might be able to make AVC although employer may or may not match.
To the OP make sure you know what is coming comossion wise so can watch timings with tax years.
I’ve never seen an AVC matched but that is something I didn’t think of and worth exploring for the OP.
Depends on scheme.
In our workplace scheme the employee can contribute what they like from their monthly pay be it bonus or commission etc as a one off additional contribution. Subject to limits etc as usual.
Although only base pay is pensionable.
Hope that makes sense!
Hadn’t realised that aspect! Can’t you put the commission into a personal pension and claim the relief through your tax return?
Thank you all for kind and considered responses, some really helpful stuff in here I shall look into more deeply.
Glad I asked!
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You can but I’ve never bothered. I usually go in for 15% contribution my side and hope for the best.
I think every reply has been pushing the "saving paying tax" angle... and clearly those making such replies already have much more money than most in this country so I find that quite a sad indictment of the times.
I read that the OP was looking at ways to maximise the money he had available through investing his abundance After paying the necessary tax (of which I applaud his sentiments)
Always makes me laugh when you ride into these threads on your high horse, redmonaco. I can only presume you’ve never saved into a pension? Or maybe you have, and then gifted the tax savings back to HMG? Whatever, your attempts to somehow shame those who plan their tax affairs within the bounds of the law is both quite amusing and a bit sad.
(1) you pay tax when you take the money out of your pension, potentially more tax after the capital appreciation that’s hopefully happened, so really it’s delaying taxation.
(2) it’s quite literally following the rules.
(3) folk who do utilise pensions to save for their future are presumably less of an expense to the state in retirement, so everyone wins.
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