kennyjoede
New member
A person who already has over 75k per annum in passive income, relatively inflation proofed and indefinite (mix of dividends and rent). Running a business that creates surplus cash.
If they invest the surplus business cash in a pension, basically the upside is;
- premiums can avoid 12.5% corporation tax
- can pull out 20% tax free at the end
So assuming say 500k company cash surplus, comparing (a) leaving it in company and taking as a final dividend and (b) paying it into a pension.
Assuming no fees or returns, and 51k marginal personal tax forever,
(A) you get 214k after tax whenever you want (500k x 0.875 x 0.49)
(B) you get 100k after tax immediately at retirement (20% of fund) and 196k after tax over time during retirement (ie income you drawdown 400k x 0.49)
So all things being equal you get 38% more using a pension as a vehicle.
Is that correct?
If they invest the surplus business cash in a pension, basically the upside is;
- premiums can avoid 12.5% corporation tax
- can pull out 20% tax free at the end
So assuming say 500k company cash surplus, comparing (a) leaving it in company and taking as a final dividend and (b) paying it into a pension.
Assuming no fees or returns, and 51k marginal personal tax forever,
(A) you get 214k after tax whenever you want (500k x 0.875 x 0.49)
(B) you get 100k after tax immediately at retirement (20% of fund) and 196k after tax over time during retirement (ie income you drawdown 400k x 0.49)
So all things being equal you get 38% more using a pension as a vehicle.
Is that correct?