#PensionPlanning #MaximiseSavings #TaxRelief
Hey everyone! 💭 I’ve been thinking about maximising my pension contributions recently, and I wanted to get some input from all of you. As a contractor with a decent salary but high taxes, I’m wondering if there’s any reason not to contribute around 20% of my salary towards my pension. 🤔
Here’s what I’ve found so far:
– Net pay only reduces by about half of my contribution amount due to tax relief.
– Overall hit on take-home pay is manageable.
– Seem like a smart financial move…unless I’m missing something?
Any thoughts or experiences to share? Is there a downside I haven’t considered? I’d love to hear from you all! 💬
Possible Solution:
– Considering opening a Self-Invested Personal Pension (SIPP) account for greater control and flexibility in managing investments within the pension. 📈
Let’s discuss! 🌟
Only that if you’re 50 and ill you can’t work, and you still can’t take your pension.
I’d consider making sure your ISA or savings are large enough to allow you to leave work if needed. Once that is covered or over time as you are closer to retirement then scale up the pension.
If you are a contractor, and run a Ltd, your company can pay into your SIPP directly and save on corporation tax. You don’t get personal tax relief, but it is a cheap way to top up your pension.
The only downside is that it is locked away.
There is a slight over obsession with pensions, primarily as a lot of discussion here focuses on the tax traps that really do make a heavy pension strategy advantageous.
However, I pay 45% tax (for context), my wife is also >10 years younger than me. Our pension strategy is adapted because of that. I choose to pay some more tax now in order to have access to tax free ISA growth in the future.
It is also likely, if you are a high earner, that you will pay income tax on the way out of your pension in the future, so also make sure to model that.
TLDR: For probably 90% of people, whack it in your pension is never going to be wrong/bad.
Withdrawals from your pension are taxed as income. If you end up a higher rate tax payer as a pensioner than at the margin it’s more tax efficient not to pay into your pension.
Yep, it’s a no brainer, max out pension !
If an outside IR35 contractor, then gross company contributions from your Ltd. Co. are a business expense and pre Corporation Tax, no National Insurance or Income Tax involved.
If an inside IR35 contractor, then use an Umbrella which supports employer contributions to your SIPP, they are pre Employer and Employee NI and Income Tax.
Both mean you can see 90%+ of your day rate go into pension.