Pension help please....

[beechcustom]

On the advice of my accountant I saw an IFA recently with z view to reduce my tax liability. The IFA suggested setting up a pension as its mega tax efficient. If I've got this correct, £10k per annum into a pension will cost me £500 per month after factoring in the tax relief. No brainer!

The IFA is looking to charge me £780 to effectively set up the pension. All the tax stuff will be dealt with by my accountant. I don't mind paying people to do a job but £780 seems steep. Is setting up a pension something I can do relatively easily myself or should I stop moaning and pay the IFA?

Any help from the wise much appreciated.

[craig1912]

On the advice of my accountant I saw an IFA recently with z view to reduce my tax liability. The IFA suggested setting up a pension as its mega tax efficient. If I've got this correct, £10k per annum into a pension will cost me £500 per month after factoring in the tax relief. No brainer!

The IFA is looking to charge me £780 to effectively set up the pension. All the tax stuff will be dealt with by my accountant. I don't mind paying people to do a job but £780 seems steep. Is setting up a pension something I can do relatively easily myself or should I stop moaning and pay the IFA?

Any help from the wise much appreciated.

Yes a pension is tax efficient and you get tax relief at your marginal rate

https://www.gov.uk/tax-on-your-priva...ion-tax-relief

Your IFA doesn’t work for nothing and as well as his charges there will probably be others (fund, platform).

You can set up a pension yourself but it sounds as though you need some help. Only you can judge if £780 is good value as it won’t just be for setting up a pension but assessing your attitude to risk, recommending investments etc etc

[jukeboxs]

Might also be worth contacting Pension Wise (a free government-funded pension advice service) - more useful perhaps for over 50s, but they do advise all ages.
https://www.moneyhelper.org.uk/en/pe...t/pension-wise

[Reviews seem to be mixed, which surprises me, but my attitude would be there's no harm in trying it out.]

[noTAGlove]

Save your £780. YouTube is your friend. Just type into how to set up a pension into YouTube, e.g.

https://youtu.be/gWT5kOppMhA?feature=shared

[craig1912]

Anyone can set up a pension in a couple of minutes. It’s where to go from there, investments, how much,claiming tax relief etc.

Worth looking at Pensionwise as said above.

Also perhaps look here

https://www.ajbell.co.uk/pensions-an...for-retirement

As that’s probably the cheapest platform to have your pension on.

[cbh]

On the advice of my accountant I saw an IFA recently with z view to reduce my tax liability. The IFA suggested setting up a pension as its mega tax efficient. If I've got this correct, £10k per annum into a pension will cost me £500 per month after factoring in the tax relief. No brainer!

Not sure how you get to £10k from £6k invested?

[jukeboxs]

Not sure how you get to £10k from £6k invested?

40% higher-rate tax relief might do it.

[M1011]

Not sure how you get to £10k from £6k invested?

It's quite clearly explained in the statement you quoted to be fair!

[nickk]

Anyone can set up a pension in a couple of minutes. It’s where to go from there, investments, how much,claiming tax relief etc.

Worth looking at Pensionwise as said above.

Also perhaps look here

https://www.ajbell.co.uk/pensions-an...for-retirement

As that’s probably the cheapest platform to have your pension on.

Not as cheap as (though there's not much in it)...

https://www.businessexpert.co.uk/pensions/best-sipps/

I have my own SIPP with Bestinvest. That 0.2% is for their ready-made portfolios, so you effectively get the 'which investments/management' bit for free.

[beechcustom]

UPDATE: The financial year end is closing in and I need to put some money into a pension fund to try to reduce my tax liability which for 23/24 is going to be horrendous. As a member of the Musician's Union I can pay into their pension fund. No set up fees and you can choose from hundreds of different funds based on risk etc. The pension scheme is provided by Aviva and administered by Hencilla Canworth. My accountant is crunching the numbers regarding how much to put in and what the impact will be on tax liability. She will also be dealing with claiming the higher rate tax relief at the self assessment stage.

The annual charge is 0.7%. Does that sound ok or is it higher than one might usually expect?

Many thanks.

[ELD1970]

Sounds cheap to me


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[DONGinsler]

What about your local bank? My bank has financial advisors. They make suggestions to me and I decide after doing online checks on whether I want to put money there

Term deposit accounts in the UK. Problem is. Can't add to it. Best to save that $500/month and open at the end of each year - 1 - 5 years terms

Pay about 5%

Check with your bank

[craig1912]

What about your local bank? My bank has financial advisors. They make suggestions to me and I decide after doing online checks on whether I want to put money there

Term deposit accounts in the UK. Problem is. Can't add to it. Best to save that $500/month and open at the end of each year - 1 - 5 years terms

Pay about 5%

Check with your bank

In the UK the bank is probably not the best place to go for a pension

[westberks]

UPDATE: The financial year end is closing in and I need to put some money into a pension fund to try to reduce my tax liability which for 23/24 is going to be horrendous. As a member of the Musician's Union I can pay into their pension fund. No set up fees and you can choose from hundreds of different funds based on risk etc. The pension scheme is provided by Aviva and administered by Hencilla Canworth. My accountant is crunching the numbers regarding how much to put in and what the impact will be on tax liability. She will also be dealing with claiming the higher rate tax relief at the self assessment stage.

The annual charge is 0.7%. Does that sound ok or is it higher than one might usually expect?

Many thanks.

on your £10k that equates to £70; do you think that's toppy for the scheme set up and investment management?

fees vary depending on how much advice admin you want done by others. As others have stated a SIPP self managed is a good option but an industry based scheme like this Aviva is pretty damn close to as cheap as you'll find.

[beechcustom]

Sounds cheap to me


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on your £10k that equates to £70; do you think that's toppy for the scheme set up and investment management?

fees vary depending on how much advice admin you want done by others. As others have stated a SIPP self managed is a good option but an industry based scheme like this Aviva is pretty damn close to as cheap as you'll find.

Many thanks gents. I haven't got time right now to become an investment expert so I'm just looking to set up something quickly that is hands off so that I can park money to get the tax relief in this financial year. Obviously it needs to be competitive/fit for purpose as I'll be adding to it moving forward. I literally have no idea if 0.7% is a reasonable fee but it sounds like it very much is from your response so thanks for that and I'll go ahead with it. Just waiting to hear from my account re: amount to put in.

[NigeG]

0.7% I think is reasonable.

Obviously everyone has different circumstances but without too many numbers and factors etc:

I had one pension set up via an IFA which was amalgamating two personal pensions - 1% charge. My workplace pension he does not manage per se but will “offer some advice and thoughts”.

If I move my workplace pension into a new pension with my IFA I’ll have a charge of 0.75% across all pensions. I am retired btw - so nothing is going into my workplace pension any longer. I do still pay into my personal pension though.

Hope that helps you a little


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[j90rdn]

If it helps my IFA charges a flat rate of £60 per month to administer my SIPP, plus then there's the fund manager fees to consider (abrdn).

Martin Lewis did something on this recently with his weekly show - pensions vs ISA. Some good info in there for anyone looking at a pension to reduce tax liability.

As I've been seriously hammering payments into my SIPP now for some years it's also worth thinking about tax efficient ways of getting money OUT of a pension (not something people consider). There's some great youtube clips from a guy called James Shack which are well worth watching.

[beechcustom]

Quick update in case anyone's interested. My accountant made me aware of the tax benefits at different levels of pension contribution and it does make a difference to my tax liability, particularly cashflow as it reduces Jan 25 and July 25 payments by a fair bit. Bit of a no brainer. I'll be making similar contributions in 24/25 that will further reduce these payments.

Funds will be allocated to AVIVA's default fund (Fund 2, Series 6) which is relatively low risk with a 0.7% annual fee but I can move some or all of it and future contributions to different funds once I've got my head around the options. I may ask for further advice on this.

[j90rdn]

Quick update in case anyone's interested. My accountant made me aware of the tax benefits at different levels of pension contribution and it does make a difference to my tax liability, particularly cashflow as it reduces Jan 25 and July 25 payments by a fair bit. Bit of a no brainer. I'll be making similar contributions in 24/25 that will further reduce these payments.

Funds will be allocated to AVIVA's default fund (Fund 2, Series 6) which is relatively low risk with a 0.7% annual fee but I can move some or all of it and future contributions to different funds once I've got my head around the options. I may ask for further advice on this.

Your level of risk really depends on your appetite for risk (obvious) but also your current age, and projected age of retirement. The idea being the fund(s) you invest in should become less risky the closer you get to retirement.

Depending on your financial position, most people don't realise that you'll be paying 60% tax for earnings between £100k and £125k, as you loose £1 of your personal tax relief for every £2 over £100k. Using a pension deducted at source to bring down your taxable income really helps if your yearly income falls into this bracket.

[M1011]

Depending on your financial position, most people don't realise that you'll be paying 60% tax for earnings between £100k and £125k, as you loose £1 of your personal tax relief for every £2 over £100k. Using a pension deducted at source to bring down your taxable income really helps if your yearly income falls into this bracket.

Yea it's pretty much essential in that income bracket I think. 62% saving if you're able to contribute to your workplace pension via salary sacrifice and avoid NI too. Considerably more if you've got young children due to the support that stops at £100k taxable income, meaning potentially greater than 100% saving (i.e. folk can actually end up with more money in their pocket today as a result of contributing more to their pension for the future - big win!).

Your level of risk really depends on your appetite for risk (obvious) but also your current age, and projected age of retirement. The idea being the fund(s) you invest in should become less risky the closer you get to retirement.

Kind of debateable. It is the traditional way and gears you up for buying an annuity, but if you don't intend to buy an annuity and are keeping your funds invested to keep generating returns throughout your retirement then this may not be a winning strategy. Of course, crystal ball stuff really, who knows what will happen!

[westberks]

Yea it's pretty much essential in that income bracket I think. 62% saving if you're able to contribute to your workplace pension via salary sacrifice and avoid NI too. Considerably more if you've got young children due to the support that stops at £100k taxable income, meaning potentially greater than 100% saving (i.e. folk can actually end up with more money in their pocket today as a result of contributing more to their pension for the future - big win!).



Kind of debateable. It is the traditional way and gears you up for buying an annuity, but if you don't intend to buy an annuity and are keeping your funds invested to keep generating returns throughout your retirement then this may not be a winning strategy. Of course, crystal ball stuff really, who knows what will happen!

both very good points and a big area for basic pension advice. The derisking as you approach retirement (lifestyling) is less relevant now with flexible pensions in retirement; if you are likely to be retired for 30 years and don't buy an annuity then you are probably better off maintaining a similar level of risk. You just need a strategy whereby you have some cash element to cover income in shorter periods and not deplete funds when markets do fall.

the indirect tax regime by stealth using loss of personal or child allowance really boils my piss as its so underhand and people can easily overlook it if they don't get advice.

[ryanb741]

Gents I've got a question. Long story short I've moved into a role at a company that uses Aviva for its pensions scheme. I got the auto enrollment email from Aviva, it said pension contribution would be deducted after tax (therefore I assume relief at source) with 80% of the gross amount to be deducted, HMRC top up of 20% and a tax code change to make up the rest of the tax efficiency. Simple right?

Well maybe not.

I got my payslip with my 1st pension contribution in. The full gross amount seems to have been deducted before tax and my YTD earnings shows my full cumulative salary and a second line saying 'taxable earnings' which is lower than the full cumulative salary by the amount of the pension contribution deduction. My assumption here therefore is no government 20% top off and change of tax code because essentially my taxable earnings are going to decrease by the amount of pension paid in, and therefore not taxed. Almost like salary sacrifice right?

But surely that's different to what Aviva say, I.e contributions taken after tax/NI etc. Obviously I'll speak to the scheme administrator but it would be good to get someone's view on this. Net net I don't think it makes any difference right?

[Bondurant]

We use Aviva and it is the same as what you describe as actually happening rather than what Aviva has told you i.e. pension contributions taken off the gross and thus getting tax taken off a smaller amount of income. Ours is a salary sacrifice scheme.

It does seem odd that they have told you one thing and are doing another.

[ryanb741]

We use Aviva and it is the same as what you describe as actually happening rather than what Aviva has told you i.e. pension contributions taken off the gross and thus getting tax taken off a smaller amount of income. Ours is a salary sacrifice scheme.

It does seem odd that they have told you one thing and are doing another.

Thanks for that, yes it looks the same as you've said and I'll clarify with the administrator tomorrow.

[Halitosis]

The net result is the same Ryan, and actually appears easier too. Maybe speak to your employer’s payroll team first to clarify the process. Aviva’s leaflet may be out of date.

[the.admiral]

Thanks for that, yes it looks the same as you've said and I'll clarify with the administrator tomorrow.

As has been said, it's a Salary Sacrifice. This works very well for anyone who has to claim Higher Rate and/or Additional Rate Tax Relief because it's already been accounted for, in full.

The secondary benefit is you don't pay NI contributions on that element. The final benefit is that your employer also does not pay NI on that element so the norm is to pass on some of that saving by increasing their own contribution.

If you go on to pay further contributions from your net pay, the the pension provider will gross the contribution up, leaving you to then claim any further relief due via Self Assessment etc.

[M1011]

Net net I don't think it makes any difference right?

Salary sacrifice is better (which it sounds like it is), so this is a good result. It's pretty much the norm now. Less faffing about with tax codes, more tax saving (due to NI as mentioned above), win-win.