Pensions for locums running ltd companies.

Re: Pensions for locums running ltd companies.

Anthony Dennison — Mon, 23 Feb 2015 16:17:07 GMT

[quote user="Deborah Anwyl"]

Try talking to Lloyd and Whyte. They have always given me great advice and helped me to set up my pension when I first started working. They specialise in helping vets, dentists and drs as far as I can remember.

[/quote]

Second this - and you get a free appointment through BVA.

I've just had a self investment pension portfolio (SIPP?) set up, currently I can't afford to put much into it a month but hopefully the value will increase and increase as I get older. Unfortunately I wasn't particularly moneywise until I graduated and realised how bad I had been, so taking me longer to be where I want to be.

Re: Pensions for locums running ltd companies.

Robin Grimmer — Mon, 23 Feb 2015 15:53:38 GMT

[quote user="Clive Ansell"]

[quote user="Robin Grimmer"]

Invest in property.

[/quote]

Ok until or unless it goes wrong. Someone I know bought a buy to let property, on a 120% mortgage, squandered the extra money on a fast motorbike, got tenants that didn't pay the rent and were eventually evicted after causing £1000's of damage. He has had a run of similar nightmare, mostly benefit claimant, tenants and the property has since lost value and he is now left with negative equity and unable to sell it.

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Everyone knows someone with a horror story like this. I don't have DSS tenants. I always get references, not foolproof but if you can then get rent guarantee insurance which is worth having and includes legal cover in case you needed to evict a tenant. The worst problem I had was a tenant who left my flat in a bit of a state. Mildew everywhere, carpets ruined. He lost his deposit, I got my flat redocarated and new carpets at his expense. Other than that it's general day to day maintenance etc. I did my homework very carefully when buying my flat. Good area, high employment, lot of people come to work from out of the area so rental market strong. Similarly my house which I used to live in and now rent, I bought it with a view to possibly renting it in the future. Makes more financial sense to keep it on to rent.

Re: Pensions for locums running ltd companies.

ChrisBVSc — Sun, 22 Feb 2015 18:55:45 GMT

[quote user="Neil Wheadon"]

Veterinary Graduates with a £60.000 debt and then trying to buy a nice house on an income of £40.000

[/quote]

Those veterinary graduates are on a good salary!!

Re: Pensions for locums running ltd companies.

ChrisBVSc — Sun, 22 Feb 2015 18:07:07 GMT

Look into stocks & shares ISAs too, you can invest your money the same way as in a traditional pension without the government dictating when you can access it, and there's no tax on your money when you take it out (plus no tax on capital gains). Pensions give you tax relief (definitely worthwhile if you're a 40% tax payer, but this doesn't apply to me!) but apart from the first 25% they are then taxed as income. Currently (I'm 30) I'm sticking with the DIY stocks & shares ISA route as I enjoy learning about it, but if that's not for you talk to a good adviser.

Re: Pensions for locums running ltd companies.

Hannah Wynne Richards — Fri, 20 Feb 2015 08:38:06 GMT

Martin's agreeing with me on tax!

Wynne

Re: Pensions for locums running ltd companies.

Neil Wheadon — Thu, 19 Feb 2015 17:17:41 GMT

[quote user="Robin Grimmer"]

[quote user="Richard Carter"]

I think the best projection I was given when I last looked into pensions was 2% (and real inflation not the government numbers is closer to 5-7% when factoring in housing) - so losing 5% per year. So I bought a buy-to-let - so far so good

[/quote]

I'm with you there. I've got 2 btls. Well one flat was specifically bought as a btl, then when I moved a couple of years ago I couldn't sell my house for what I wanted so remortgaged, kept it on to rent and moved to the new house. I've got a steady income from them, and capital growth.

[/quote] Interesting quote here 'I couldn't sell my house for what I wanted' so rented it. There is an assumption that house prices will rise and rise and indeed the government encourage high house prices as this value is used to measure a nations net worth and so maintain international credit ratings. The thing is that at some point it has just got to go 'bang' hasn't it? with student debt and static wages, who can afford a decent house now and with so many people sitting on inflated values that they think their house is worth and no-one selling it's perpetuating the problem. London prices have risen but this is because with unstable currencies throughout the world, housing is seen as a safe haven (Hollywood is 10% Russian owned, so we're not unique. We had our house valued a few months ago and I said to the estate agent, 'that's all very well but who's got over £300.000 and he agreed, saying that any property over £270.000 in the South West was very hard to shift. OK I'm digressing here but I genuinely worry for future Veterinary Graduates with a £60.000 debt and then trying to buy a nice house on an income of £40.000, that's 6 times income and would anyone get a mortgage for that now? Neil

Re: Pensions for locums running ltd companies.

Robin Grimmer — Thu, 19 Feb 2015 16:15:13 GMT

[quote user="Richard Carter"]

[/quote]

Re: Pensions for locums running ltd companies.

Clive Ansell — Thu, 19 Feb 2015 16:12:00 GMT

[quote user="Robin Grimmer"]

Invest in property.

[/quote]

Re: Pensions for locums running ltd companies.

Clive Ansell — Thu, 19 Feb 2015 15:55:38 GMT

To describe pension plans as a tax fee way of saving is a little miseading.

True, you can pay money before tax is taken in the case of a Ltd company or tax is reclaimed if employed or self-employed, so the money you save is in effect untaxed.

However, when you come to cash in and use the money it is treated as taxable income except for 25% which can be taken as a lump sum.

For example; if you earn £1000 it is taxed at 20% so you get £800. If you pay that £800 into a pension the tax is reclaimed and you actually invest £1000. When you cash in that £1000 it is taxed, so at todays rates you'll be left with £800. Of course rules or rates may change in the next 30 year. If tax rate rise, you could finish up paying more tax.

There is a tax advantage in that you an take 25% of a pension fund tax free as a lump sum. Also a benefit if you're currently a 40% tax payer so can reclaim the 40%, but only have to pay 20% when you cash in.

Re: Pensions for locums running ltd companies.

Bibs — Thu, 19 Feb 2015 14:37:58 GMT

The moneysavingexpert.com website describes a pension as a tax free wrapper for money which is quite a good description. I think ideally I'll get a pension and try to keep on the flat I've got to rent out when me and the other half get a house eventually.

Re: Pensions for locums running ltd companies.

Martin Atkinson — Thu, 19 Feb 2015 14:12:35 GMT

[quote user="Richard Carter"]I think the best projection I was given when I last looked into pensions was 2% (and real inflation not the government numbers is closer to 5-7% when factoring in housing) - so losing 5% per year. So I bought a buy-to-let - so far so good[/quote]Your still forgetting the tax allowance here, that's what makes it so attractive not fund projections.

And a lot of buy to-letters have had their fingers burned. Still need eggs in several baskets. I'll be more likely to be doing retire-to-let with the surgery property at least. It is probably worth more in the long term turned into flats and letting them than it is selling or leasing to another vet.

Re: Pensions for locums running ltd companies.

Richard Carter — Thu, 19 Feb 2015 13:42:37 GMT

Re: Pensions for locums running ltd companies.

Deborah Anwyl — Thu, 19 Feb 2015 13:29:20 GMT

Re: Pensions for locums running ltd companies.

Bibs — Thu, 19 Feb 2015 12:29:24 GMT

Thanks this is all very helpful. I am going to get some professional advice but I just want to get my head around how things work before I start seriously talking to someone. Until I started looking into it I didn't have a clue how pensions work. There are lots of "stupid questions" that I want to clear up.

Re: Pensions for locums running ltd companies.

Martin Atkinson — Thu, 19 Feb 2015 12:05:02 GMT

[quote user="Elizabeth Billimore"]Is there any reliable way of working out what your pension will be worth when you retire based on how much you put away per month? [/quote]If only, that's why you spread the risk. When I took out my first pension at the age of 30 (yup that's 35 years ago) the interest rates were sky high the markets were full of confidence and I was heading to be a pension millionaire and retiring at 60.

How things have changed. I wouldn't say that I'm having to work because I can't afford to retire but I wouldn't be living the life to which I would like to have become accustomed on a pension only, my property investment will give me that. Get some professional advice.

Re: Pensions for locums running ltd companies.

Clive Ansell — Thu, 19 Feb 2015 11:59:37 GMT

What you will get back from a personal pension in 30+ years time is really guesswork and a gamble, and many financial advisers who are on commission to sell products will have you believe you will be a millionaire when you retire. Various projections are given, but of course not guaranteed. I started my pension in my 20's back in the 1980's, put on hold when I returned to study, then resumed it when I qualified in 1996. Various projections along the way have been way off the mark. The economic and political climate could change vastly over the next 30 yearstoo which will also influence things (- and sorry Wynne it is inevitable taxes will go on rising)

I pay what I can comfortably afford, around £500/month, without really noticing it or having to struggle to find the money. If I accumulate a surplus of cash (rare) I tend to buy shares or put it in an ISA. (or take a holiday, buy a bike, buy a camera etc). I also take the line that I want to enjoy life now and do the things I want, rather than being a wage slave and beavering away paying into a pension fund that I may not even live to see. It's about striking a balance I guess.

I'm not saying I would, but I can see an argument for not having a personal pension at all unless it is a very good one. A friend of my mothers relies on the state old age pension only, and along with state benefit top ups has almost as much disposal income as my mother with her 4 good pensions. Maybe spend the cash and enjoy life, and let just nanny (state) pick up the tab when you get old, because with a very small pension it will just be taken pound for pound off any state benefits.

Re: Pensions for locums running ltd companies.

Bibs — Thu, 19 Feb 2015 11:03:50 GMT

I think spreading the risk is good advice. Is there any reliable way of working out what your pension will be worth when you retire based on how much you put away per month? Or is it a case of just working out how much you can afford to put away and then just hoping for the best? I'm guessing you are asked about how the money is invested and about levels of risk? Also it must depend on whether you buy an annuity or take out a chunk. I was playing with an online pension calculator yesterday and it said that for a retirement income of about 25k a year I'd need to start putting away £600 a month from now (I'm 32 now). Also it seems tricky to know how much of what you can afford to put away should be put into a pension vs a high interest savings account. I feel like a need to educate myself a fair bit and massively tighten my belt (or started becoming a workaholic) if I want to seriously start saving!

Re: Pensions for locums running ltd companies.

Martin Atkinson — Thu, 19 Feb 2015 09:57:20 GMT

Your pension should be part of a balanced portfolio (the eggs in different basket scenario again). Take advantage of the tax breaks pensions give you but look for high interest bearing deposit accounts, ISAs. bonds and property. Even stick some cash under the mattress.

The trouble is as Clive intimates with his pension's experience we're all wiser in hindsight. Traditionally pension funds have done well and its no good looking at short term trends you're in for the long haul. My mortgages are paid off and I'm sitting on a pretty pile with home and practice properties but there is no guarantee that property prices will continue to rise albeit interest rates surely will.

Spread the risk.

Re: Pensions for locums running ltd companies.

Clive Ansell — Thu, 19 Feb 2015 09:07:23 GMT

[quote user="Martin Atkinson"]

[quote user="Clive Ansell"]I would have been just as well off putting the money in a savings account every month.[/quote]You do it for the tax benefits not because its a cast-iron investment. 40% saved for me is unbeatable.

[/quote]

Even factoring in the tax advantage, and the fact that when I come to draw the money it will be taxable, my personal pension plan has given very little advantage over and above regular savings accounts, although the last 2-3 years it has gained ground somewhat. If, or more likely when, we have another financial meltdown I could well be out of pocket. It matures when I reach 60, although I can delay that, but at the moment retirement annuity deals are notoriously poor. Although, under changes about to come in I could take the cash and run.

I think you advice in an earlier thread to spread money and "not put all eggs in one basket" is good. If I were younger I think I would look at alternative way of investing for my future; there are other means of building up a fund for retirement, be that property, stock and shares, regular savings etc

I think it is hard for our younger colleagues and the next generation who are in some cases graduating with very high levels of debt plus having to buy their first home, to be able to start putting very much in to pension plans. A new graduate I was working with recently has £80,000 of debt to pay off before he can start on anything else.

If you want a good pension become a state employee. My mother receives a good NHS pension, plus she still recives my late father's milk marketing board pension in full until she dies. My sister, a head of department teacher, will also be in line for a good thick wad when she retires.

Re: Pensions for locums running ltd companies.

Hannah Wynne Richards — Thu, 19 Feb 2015 08:09:06 GMT

You're all agreeing with me on tax! Wonders never cease!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Wynne

Re: Pensions for locums running ltd companies.

Robin Grimmer — Wed, 18 Feb 2015 23:27:34 GMT

Invest in property.

Re: Pensions for locums running ltd companies.

Neil Wheadon — Wed, 18 Feb 2015 19:27:24 GMT

Drip feed your payments, set up a monthly direct debit and forget about it. it'll become part of your natural outgoings and stats show that it's more reliable than a lump sum. I have no evidence, but if everyone lump summed at the end of the tax year, would you get worse value as after all your money has to buy something. The recent pension reforms are a game changer, as effectively you can cash it in like a savings account, remember this will count as taxable income, so if your pension goes above the personal allowance (See the Lib Dem's weren't all bad) you will be taxed, so it may be worth looking at ISA's in parallel. The only difference for those under the 40% is if you pay tax now or later. In regards who to invest with look at the charges, the English system is notorious for taking a small cut at source which adds up heavily over a period of time (My brother is a banker and will thank you for every penny) Far better the Dutch system where charges of 0.5% are considered acceptable. There are companies that sell you a pension but donate a percentage of the commission back, and over time this really adds up. (Chartwell may do this still). Neil

Re: Pensions for locums running ltd companies.

Martin Atkinson — Wed, 18 Feb 2015 18:50:56 GMT

[quote user="Elizabeth Billimore"] If you can put away a chunk at the end of year that would probably make more sense. Is that how it's generaly done?[/quote]I have several pensions as I didn't want to put all my eggs in one basket so it spreads the risk. Some were relatively small monthly contributions then at the end of the tax year when I saw how much I could afford to put in and to offset the income tax bill I put a lump sum into another. Over time I learned which were the best performers/lowest chargers and chose to contribute only to them. At some point soon they are all going to be put under an umbrella so I can start to draw down, only one has a guaranteed annuity rate. Still that is a long time in the future for you - most importantly start contributing whatever you can afford.

Someone earlier suggested a name for help on this, I would suggest Simon Varley at Dickenson's Financial Management.

Re: Pensions for locums running ltd companies.

Martin Atkinson — Wed, 18 Feb 2015 18:38:44 GMT

Re: Pensions for locums running ltd companies.

Clive Ansell — Wed, 18 Feb 2015 17:32:54 GMT

My private pension is flexible without any penalty charges, meaning I can deposit lump sums if I want, or can take a break from making contributions as and when I please.

I agree with what others have said; get the ball rolling asap, the longer money is in the fund the more (in theory at least) it will earn you.

My pension was performing reasonably well until the financial meltdown in 2007/8 when in lost £20000 in a week, since then it has just about caught up. In fact I would have been just as well off putting the money in a savings account every month.