Comments on: Is Pension better than ISA for Limited Company Directors?

By: Paul

Paul — Tue, 05 Nov 2024 09:59:42 +0000

This is a really good illustrative scenario for the pros and cons of each.

I would be interested in seeing an updated version and maybe a few various scenarios. I’m currently trying to place anything above £52k (high rate) into a pension to negate the high rate tax and any money left over from the £52k ‘salary’ is placed into the ISA which won’t attract any tax on earnings unlike the pension would. I believe, that’s surely the most efficient way as you’re getting the best of both worlds?

By: Axel

Axel — Tue, 11 Jul 2023 17:29:08 +0000

Would love to see this same study done but while in the basic tax band. Seems pretty clear that if you plan to pay yourself over £50k it’s worth getting that extra in the pension instead of the 19% Cotax + 32% div.

But what about while in the basic rate (19% cotax + 8.75% div)?
We currently pay ourselves (2 directors) all salary + div and have never contributed to Pension. But I’m starting to consider, and I at least want to see the actual numbers to see if I should split it (like minimising div just to cover life expenses and adding max to pension), or if it’s not worth doing while under £50k pp.

By: Michael

Michael — Fri, 01 Oct 2021 15:24:22 +0000

In reply to Rav. Glad you liked it, Rav, seems you have your finances sorted very well already!

By: Michael

Michael — Fri, 01 Oct 2021 15:23:38 +0000

In reply to Giorgos. That's a good one for unlocking the cash thanks for bringing it up Giorgo!

By: Giorgos

Giorgos — Fri, 01 Oct 2021 11:04:28 +0000

Thats a great article as always, very enlightening and very well researched.
One trick to access your pension money earlier, say at 45 or 50, is to borrow (or borrow more) on your primary residence. The interest rate is very low (can be even under 1% depending on your LTV and term). You can lock in your rate for up to 10 years. Then you can live off that money until you get to 55. At that age you can take the pension lump sum, use it to pay back the loan and start living off the pension money.

By: Rav

Rav — Fri, 01 Oct 2021 08:28:50 +0000

Perfectly illustrated Michael. I have both SIPP and ISAs for me and Junior ISAs for the children. Compounding interest and diversification are the game changers and the earlier you invest (no matter how small) the better.