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  • Tax

    Pension strategy for Director's lump sum

    I have been reading through the rules for pensions and extracting the lump sum

    a number of years ago I set up a Company to invest in property and Management

    Being a HRT payer I have been looking at ways of extraction profits from Company

    I chose to invest into a Directors pension

    Now I have a fund of cash in my pension and my company is still funding it further

    I am 59 years old and I have not touched any of my pensions so far But it is now my intention to remove the Tax free sum

    as I understand the rules as long as I don't take drawdown income which is Taxable my company can still fund my directors pension up to 40k a year

    so I have come up with this stratergy which I think is workable

    Just some Fag Packet figs

    I intend my company to pay £1666 per month into the pension which is £20,000 a year

    at the end of the year I will ask the pension company to pay me 25% of the fund £5000 which is tax free

    I will then leave the rest of the fund as a hedge against IHT which will be £15000 the fund on my death would go to my wife or if she passes before me it will go to my Grand Children They would then have control of my Pension fund and could then claim an income from the fund when they want it

    I intend to do the same thing year after year up to the age of 75 when I can no longer fund my Pension

    I think this is a super arrangement I get a Tax Free lump sum every year and I have money which is ring fenced from IHT

    Can I ask are other Landlords doing the same with Pension Freedom

    This ticks all the Boxes its very tax efficient

    what do others think

    C

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    Learn Change and Adapt ?????

    Hi, I used a pension strategy to  remove funds from my business over the years.

    I had an IFA consolidate my many pensions to one to get a lower average yearly 'fee/cost' plus a much healthier growth of the fund.

    This is working very well. Don't forget to ensure the fees/costs are low as they have a large impact especially if the pension growth is moderate.

    WRT to 25% tax free lump some, I am not sure if you can take it out so soon after the money has been put in. Again a good IFA is recommended.

    Good luck


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    I self invest with Fidelity and I have just spoken to them today and they confirm I could take out the Tax free sum  every year from newly invested funds

    Its would work well for me having a bit of Tax Free income

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    Learn Change and Adapt ?????


    I agree: my mother was able 15 years ago to put money into a personal pension, take out 25% immediately, and use the rest to buy an annuity. You can do this with a SIPP now provided you haven't entered drawdown.

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    I think you are right about the PCLS not triggerring MPAA, but

    I intend my company to pay £1666 per month into the pension which is £20,000 a year

    Theat would be £8 short of £20,000 so withdrawing £5,000 woukd be more than 25% and trigger MPAA.

    I would ask such questions on the MSE pensions forum.


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    This part is fag packet stuff peter as I said

    I would make sure I would only touch the Tax Free Lump sum

    If I did it would stop this strategy

    For me this would work a treat I am using the cash I would have used as deposits for more BTL in my own name in the past

    But with S24 its just not worth buying BTL if your a Higher Rate Tax payer

    hence this strategy

    when one door closes another opens this I think is my door

    I really like the thought that it avoids IHT its Brill


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    Learn Change and Adapt ?????


    This is so unfair as I’m to young Sad

    The old generation got property price growth, final salary pension, a free mortgage market were unemployed people could borrow money and no harsh taxation. 

    The young young population get free stamp duty, special mortgage deals and government incentives.

    Life is just not fair for us in the middle lol

    DC do not shout to much about this loophole as your dear friends in Westminster might just close it Smile

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    Hey I agree with you 100%

    The Baby Boom generation have had the best

    I really thought my saving into pensions were finished

    Like most Landlords I have been hit with S24 and this is one way I can avoid it


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    Learn Change and Adapt ?????

    Free mortgage market!!!!!!!!!!!!!!!?????????

    I think not

    We were paying very high interest rates

    After all my expenses I had £10 per month to spend.

    Don't delude yourself times were very tough back then.

    Property price appreciation has just been fortunate.

    I had colleagues who couldn't sell their property back in the early 90's and it took many quite a few years before they could sell.

    They became accidental LL.

    Times were tough for the past 40 years.

    Don't believe your own propaganda.

    It is simply wrong.

    It has always been tough to buy a house!!

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    I know I would not change places with the young today Paul

    Im glad I had the opportunity's when I had them even 15% interest rates


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    Learn Change and Adapt ?????

    I were referring to Self Assessed mortgages where you didn’t have to provide income verification etc.

    The mortgage market has changed a lot the last 7 years.

    And everything was said with a Smile

    i have heard about the crash back in the days and my parents had a mortgage on 25% rate. I’m not sure I would ever buy a house with that rate.

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