Donate to Remove ads

Got a credit card? use our Credit Card & Finance Calculators

Thanks to Silverstar64,dave559,OLTB,eyeball08,wilbobob, for Donating to support the site

Increase by what rate?

joey
Lemon Pip
Posts: 61
Joined: April 27th, 2020, 8:27 pm
Has thanked: 94 times
Been thanked: 21 times

Increase by what rate?

#388854

Postby joey » February 22nd, 2021, 6:31 pm

Hello all. I’ve recently begun consolidating some old pension pots into a SIPP. I run my own company so will be contributing to the SIPP from my business. I had thought to increase my contributions by inflation each year by e.g. doing an annual review each January and making the adjustment on the basis of the rate for the preceding 12 months. However, it has been suggested to me that the average weekly earnings index might be a better yardstick by which to increase contributions. If there are any other people in the same boat as me (limited company director) then I’d be interested to know what you do. Thanks.

dealtn
Lemon Quarter
Posts: 3149
Joined: November 21st, 2016, 4:26 pm
Has thanked: 95 times
Been thanked: 1032 times

Re: Increase by what rate?

#389027

Postby dealtn » February 23rd, 2021, 8:56 am

joey wrote:Hello all. I’ve recently begun consolidating some old pension pots into a SIPP. I run my own company so will be contributing to the SIPP from my business. I had thought to increase my contributions by inflation each year by e.g. doing an annual review each January and making the adjustment on the basis of the rate for the preceding 12 months. However, it has been suggested to me that the average weekly earnings index might be a better yardstick by which to increase contributions. If there are any other people in the same boat as me (limited company director) then I’d be interested to know what you do. Thanks.


I doubt it will make any practical difference. They are likely to be closer to each other than doing nothing. The first step is to recognise, and then do something. Which you are doing. Seeking perfection is unnecessary and impractical precision I would say.

joey
Lemon Pip
Posts: 61
Joined: April 27th, 2020, 8:27 pm
Has thanked: 94 times
Been thanked: 21 times

Re: Increase by what rate?

#389068

Postby joey » February 23rd, 2021, 10:12 am

dealtn wrote:I doubt it will make any practical difference. They are likely to be closer to each other than doing nothing. The first step is to recognise, and then do something. Which you are doing. Seeking perfection is unnecessary and impractical precision I would say.


Yeh fair point. It’s easy to get the figures so I may just take the higher % each time. That covers any shenanigans with either low wage growth vs. inflation and/or the RPI vs CPI debate.

xxd09
2 Lemon pips
Posts: 175
Joined: November 19th, 2016, 2:44 pm
Been thanked: 99 times

Re: Increase by what rate?

#389095

Postby xxd09 » February 23rd, 2021, 11:12 am

Aged 74 so a long time since I ran my own business
I used to fill my SIPP with as much as I could especially in good years-£40000 pa is the current limit I think?
Take advantage of the tax breaks which may be removed at any time
40% tax relief is hard to beat as a savings incentive
Watch out for the Life Time Allowance limits as an eventual problem
xxd09

joey
Lemon Pip
Posts: 61
Joined: April 27th, 2020, 8:27 pm
Has thanked: 94 times
Been thanked: 21 times

Re: Increase by what rate?

#389208

Postby joey » February 23rd, 2021, 2:56 pm

xxd09 wrote:Aged 74 so a long time since I ran my own business
I used to fill my SIPP with as much as I could especially in good years-£40000 pa is the current limit I think?
Take advantage of the tax breaks which may be removed at any time
40% tax relief is hard to beat as a savings incentive
Watch out for the Life Time Allowance limits as an eventual problem
xxd09


All good points xxd09. I am intending to use the full £40k in "good years" but also at the back of my mind is the idea of having monies locked away until pension age. It may be that if I'm successful investing inside an ISA instead that it offers an earlier route to the money. Obviously one would forsake the tax advantage on the input to try and achieve that. Also, I need to investigate the LTA. It seems more involved than I first thought judging from some of the posts on this forum. More reading for me :)

taken2often
2 Lemon pips
Posts: 164
Joined: November 9th, 2016, 12:10 pm
Has thanked: 1 time
Been thanked: 14 times

Re: Increase by what rate?

#389667

Postby taken2often » February 24th, 2021, 6:16 pm

Another one bit the dust. I checked that my reply was there it has now disappeared

xxd09
2 Lemon pips
Posts: 175
Joined: November 19th, 2016, 2:44 pm
Been thanked: 99 times

Re: Increase by what rate?

#389674

Postby xxd09 » February 24th, 2021, 6:24 pm

I certainly used both ISAs and SIPPS
You are right -ISAs give you financial flexibility before 55 when SIPPs can be used
In an ideal world one would use both to the maximum possible
xxd09
PS -a refinement some use is to prioritise the equities part of your savings portfolio in the ISA and bond part in your SIPP
Bonds grow slower so LTA problems arise -if at all -at a later date helping you to plan your pension contributions in a more judicious manner

taken2often
2 Lemon pips
Posts: 164
Joined: November 9th, 2016, 12:10 pm
Has thanked: 1 time
Been thanked: 14 times

Re: Increase by what rate?

#389808

Postby taken2often » February 24th, 2021, 11:26 pm

The pension is your insurance if you go out of business, so you put in as much as you can afford. An ISA is good but if you were bankrupt it goes. We made sure that we paid no corporation tax, put the profits into the Pension.


Return to “Pensions - Practical Problems”

Who is online

Users browsing this forum: No registered users and 3 guests