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Starting a pension

Including Financial Independence and Retiring Early (FIRE)
melonfool
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Starting a pension

#144185

Postby melonfool » June 6th, 2018, 6:06 pm

Hi

My sister is 58 and has no pension at all, and not even a full state pension (she is making up the NI contributions gradually).

She is currently going through a divorce so should get 50% of her ex husband's pension.

She has no income though will have spousal maintenance.

Once she is a bit more settled, will she still be able to make the £2,880pa contribution to a pension in order to get the tax rebate? Assuming she can, and she will not want to be thinking about this at all - how long can she do it for, can she continue once she draws the other (DB and DC) pensions, where might she think about putting it that is very straightforward?

I know my parents used to do it with Standard Life (think they are too old for it now).

Thanks

Mel

Chrysalis
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Re: Starting a pension

#144189

Postby Chrysalis » June 6th, 2018, 6:36 pm

I am pretty sure the answer is yes, until she is aged 75 (and beyond, but she won’t get the 20% uplift after 75).
I also think she can continue even if she draws other pensions.
As for a simple option. For my kids I opened personal pensions with Aviva via Cavendish online, which is a simple and cost effective approach. SIPPs are generally not cost effective until the sums invested exceed around £50k.

PinkDalek
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Re: Starting a pension

#144190

Postby PinkDalek » June 6th, 2018, 6:37 pm

I ended up here when I fairly recently started my SIPP (already drawing an early occupational pension):

https://www.youinvest.co.uk/sipp/tax-benefits-sipp

Those with no UK earnings at all can make contributions up to £3,600 a year including tax relief, so you would put in £2,880 and HM Revenue & Customs (HMRC) would add a further £720 directly into the SIPP.

There's plenty more in Key Features https://www.youinvest.co.uk/sites/defau ... atures.pdf and I haven't read it recently in detail. It isn't c&pable but includes contributions can't be made after reaching the age of 75 (unless by an employer).

melonfool
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Re: Starting a pension

#144193

Postby melonfool » June 6th, 2018, 6:58 pm

Thank you both - good to know she can do it, it's the best return she's going to get on any of her money!

I use YI for my SIPP, but she'd never cope with a SIPP - so an online pension portal and buy Aviva through it seems fine (ooh, I just thought, I've got a Virgin one knocking around that I pay £50pm to, I might get a referral fee!).

I'm hoping she'd keep it up for about 10 years really, so not a massive investment window but hopefully just enough so it gets some investment increase to it.

I doubt she'll save at all otherwise, people get so scared when you mention pensions!

Mel

uspaul666
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Re: Starting a pension

#144653

Postby uspaul666 » June 9th, 2018, 8:01 am

melonfool wrote:Thank you both - good to know she can do it, it's the best return she's going to get on any of her money!

I use YI for my SIPP, but she'd never cope with a SIPP - so an online pension portal and buy Aviva through it seems fine (ooh, I just thought, I've got a Virgin one knocking around that I pay £50pm to, I might get a referral fee!).

I'm hoping she'd keep it up for about 10 years really, so not a massive investment window but hopefully just enough so it gets some investment increase to it.

I doubt she'll save at all otherwise, people get so scared when you mention pensions!

Mel

When I had a virgin money pension, it was charging 1%pa for the only fund available which was a U.K. tracker. I hope that’s changed.

TheRIT
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Re: Starting a pension

#144664

Postby TheRIT » June 9th, 2018, 9:39 am

uspaul666 wrote:When I had a virgin money pension, it was charging 1%pa for the only fund available which was a U.K. tracker. I hope that’s changed.


Nope that tracker is still 1%.

Meanwhile VUKE can be had for 0.09% and VMID for 0.1%.

melonfool
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Re: Starting a pension

#144698

Postby melonfool » June 9th, 2018, 1:08 pm

You are both right, I need to stop paying into it and transfer it into my SIPP, that was always the plan, so thank you for reminding me!

I only opened it cos there was a £50 gift after you'd paid £50pm into it for 9m. Which is well past now.

Mel

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Re: Starting a pension

#147886

Postby UncleEbenezer » June 25th, 2018, 1:14 pm

melonfool wrote:Once she is a bit more settled, will she still be able to make the £2,880pa contribution to a pension in order to get the tax rebate?
Mel

Yes, but bear in mind that's not really a rebate, rather a deferral: you pay tax on your pension income when you draw it. It only really works for you at face value if you're taxed at a lower rate in retirement than when paying in. So the crucial question is, once you add up the state pension and the husband's pension, will that bring her above the tax threshold?

melonfool
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Re: Starting a pension

#147901

Postby melonfool » June 25th, 2018, 2:03 pm

UncleEbenezer wrote:
melonfool wrote:Once she is a bit more settled, will she still be able to make the £2,880pa contribution to a pension in order to get the tax rebate?
Mel

Yes, but bear in mind that's not really a rebate, rather a deferral: you pay tax on your pension income when you draw it. It only really works for you at face value if you're taxed at a lower rate in retirement than when paying in. So the crucial question is, once you add up the state pension and the husband's pension, will that bring her above the tax threshold?


Well, what she can pay in now plus the OAP will not put her into the tax theshhold, no.

It's as yet unknown what the ex's pension will offer (and she may not need to take it all at the same time?). She has a good case to get more than 50% actually, as women live longer, though conversely, she is older than him.

It will likely push her over the £11kpa, which is fine, but it's very unlikely to push her over any higher rate tax band. And spousal maintenance is not taxable as he will have already paid tax on it.

I guess it's the ability to put it in, get the 25% tax free lump sum and also capitalise on any growth on the higher rather than the lower sum that is key.

Mel

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Re: Starting a pension

#149293

Postby TheMotorcycleBoy » July 1st, 2018, 3:33 pm

Jabd2001 wrote:SIPPs are generally not cost effective until the sums invested exceed around £50k.

Hi Jabd2001,

(I apologise if this derails the OPs thread too much!)

But why exactly do you say that? Is it because the standing charges are a bit high and will eat a lot of your return if the pot is too small?

I'm umming and ahhing some pension scheme consolidation ideas right now. My biggest old pension I'll merge into my current works DC pension. However I have 3 smaller pensions totalling 48-50k or thereabouts. I am toying with the idea of putting them into a SIPP....so I'd really appreciate if you could elaborate upon what I quoted above.

Matt (and Mel)

melonfool
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Re: Starting a pension

#149352

Postby melonfool » July 1st, 2018, 11:53 pm

All SIPP providers have different fee structures so it's a broad statement that isn't necessarily correct.

It also depends what you hold in them.

You need to do your own research on how the fees would work for whatever type of holding you might want to put in.

Mel


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