The 3 Big Tax Mistakes EVERY Retiree Makes (Real world examples)
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- Опубликовано: 19 май 2024
- Financial Planning
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00:00 Intro
01:08 Pre-Retirement Mistakes
07:11 Drawdown Mistakes
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CORRECTION: The ISA allowance was less than £20,000 before 2017.
This means that if Lois started with £40,000 in her ISA in 2010, and maxed out her allowance every year since, she would have contributed ~£290,00 in total.
Which suggests investment growth of £210,000.
If Lois has instead invested in an index fund tracking the MSCI World index (assuming 0.5% fees):
Investment growth of £396,544.
Again, as I said in the video, this might not be a perfect benchmark to use, but it's an interesting data point.
Is there a tool, where user can enter drawdown from each bucket and it gives a projection. you did something like in an eralier video i think.
This is way more complicated than I expected!
Adding a GIA confused the example- perhaps that was intentional 😉
@@user-fv1576 The whole video was freakily near perfect for me. I'm 53, with predominantly a pension and then ISAs. We're also (unfortunately) inheriting money which will need to go into something like a GIA as well, as we've maxed the ISAs for this year. Well, maxed barring any Brit ISA £5k uplift that may or may not be worth doing. Let's see after the govt info due in June.
@@Dunk1970 I haven't (yet) inherited anything, but apart from that I'm also in a similar situation. If you have kids and there is the possibility of them going to university, one option, rather than keeping a potentially large amount in a GIA, you could pay some into Junior ISAs for your kids.
Obviously this is giving your money away, which you might not want to do, but if they are going to Uni, you'll probably end up paying later anyway. Using a Junior ISA would allow you to tax protect some of the GIA money.
@@MartynThomas1 Yes, my 3 have all been through uni and come out the other end now, though #2 is finishing her PhD. Support if needed, is and has been provided. Two got on the housing ladder in their mid 20s and #3 is a recent graduate, so we're working on that. Still not sure how #2 managed to buy when she's never had a full time job (due to her PhD course). All media outlets keep saying it is impossible. LOL
You might consider a deer of variation to move some of all of the inheritance to the children, delivering them money when property buying or their own investing might deliver greater benefit.
This channel is amazing. You explain things so very well, I appreciate that..
This information is golden. Out comes my spreadsheet again😂
As Sherlock Holmes said...This is a two pipe problem.....going to need to watch this again with one finger on pause to allow it to sink in.
Thanks James. A really good video and a lot to think about. I'll probably need to watch it several times to fully understand every nuance, but I get the overall gist of it. Please keep doing these videos. Your time and effort is very much appreciated. All the very best.
Glad to see you've posted another video. They are very useful thanks.
Thanks James, really appreciate these videos, if only to get me thinking about my own strategy. Definitely no one size fits all approach but it's important to continue re-evaluating your own personal circumstances and adjust accordingly!
Great video demonstrating the earlier the better in tax planning. In this example after using up the GIA I would use up the personal allowance using ufpls. Then top up to level needed with isa. Apart from inheritance mentioned the other reason is that our expenditure tends to reduce as we get older in real terms. This means although we would be kicking the tax can down the road less expenditure later means less tax and I think you would never be paying more than 20% tax. Other reason is that the pension tax free allowance is also allowed to grow since you are pulling a relatively low % of pension portfolio. Just some thoughts.
This information is useful and well communicated. But also it's a subtle pitch for why you need a financial planner to work this stuff out for you because holy heck it's complicated.
Thanks for another helpful video. The more we know, the better decisions we can make.
All this information is so valuable. Thanks for sharing
Thank you James for another great video. Very useful and informative. I've just turned 55 and have prioritzed saving into my DC pension rather than paying into ISAs, so hearing your perspective and advice has validated my strategy, which is helpful. I had sometimes thought I should be doing more with ISAs etc. but kept coming back to paying as much as possible into my pension was the best, most tax efficient strategy for me.
As a higher rate tax payer, using salary sacrifice to save into my company group personal pension, then regularly transferring my fund into my SIPP has worked well. My SIPP is currently worth about 800K GBP and is invested in 100% equity funds. 50% is in high risk funds and 50% is in medium risk funds across a diversified portfolio of 16 funds across different markets. Listening to your videos on retirement planning and the tools you have provided have also been very helpful, so thank you again. You make complex subjects very easy to understand with how you deliver your content.
I'm glad it's been helpful, best of luck!
Great video! I'm coming up to retirement in a few months and the last part is very interesting! I've chosen to move around 3 years of living expenses into high interest accounts - instant access and different fixed term bonds, just in case of a market downturn. Tax efficiency is important in drawdown and you present the different strategies really well. Thanks for that.
While I'm sure most people know that investing into your pension is likely the best option. But back in 2010 with Lois being 39 the safety of investing in the ISA give you more flexibility when retirement seems a long way off.
Its all about a happy balance but the most importantly she has invested.
ISA allows you to retire before 55 too….
It makes no sense for ISA to be larger than pension as you miss 40% tax relief. James calculated how much better off she would have been in a DC.
@@porschecarreras992cabriole8 it's worth remembering that until Alternatively Secured Pensions were introduced by the 2004 Finance Act it was compulsory to buy an annuity with pension pots. Even then it wasn't until 2015 or so that the two subsequent changes broadening it caused mass market notice to be taken. I avoided pensions until 2004 changes, to avoid the costs and limitations of lifetime annuities.
Even with ASPs there was then introduced in a later freedom the GAD limit which restricted the amount you could take out of a pension to such an extent that it largely barred pension use for very early retirement on a level income. In the consultation before the 2015 freedoms I submitted feedback the gist of which was "to get me using pensions more, stop forcing me to use non-pension investments to get a level income throughout retirement".
Ignoring that, early retirement and contingency early retirement could and still can make ISA beat pension initially, accompanied by a switch from these other things into the pension as pension access age approaches. For some, a fair bit of VCT use can also be preferable. Still, the 2015 pension changes were a huge improvement.
Lois would also possibly have been well advised to limit pension contributions because of the possible impact of the Lifetime Allowance Charge. It can be surprising just how little regularly invested can take a pension pot over the former lifetime allowance and cause a switch of some would-be pension money somewhere else. This could be particularly beneficial if much early income was taxable at 20% and later much 40% band income was anticipated, potentially favouring parking money outside a pension until then.
Yes. I had to buy a house in 2011 aged 48. My pension pot wasn't of any use for that back then.
Excellent show. A lot more to consider that what I had planned ...
One important factor you didn't mention: Once you take your first taxable income payment from drawdown, the amount you can pay into money purchase (e.g. personal, self-invested) pensions will be limited to £10,000 each tax year. This is called the Money Purchase Annual Allowance. So this would greatly restrict any future contributions to your pension if you have another source of income in the future.
I thought the MPAA was £10K if you are still earning from employment when you go into drawdown, but £2,880 if you have left work (or also earning less than the tax-free allowance, not sure...)? You can I suppose also come out of drawdown too and contribute up to your earnings (until you are 75?). Ooh, complicated.
James seems to think that everyone's ambition is to retire at 57. I'm watching younger colleagues retire, while with any luck £31K will go into my pension fund this year, at an outlay to me of less than half that. It will be going into a world tracker but the choices in the company scheme are very limited.
Is this still applicable if you have three different pension pots?
@@doriangray6985 I think so (assuming they are all the same type). It's really just the tax position that matters. So every time he says "pension" you can just think of as many pension accounts as you have I think.
Great video- much more complicated than I expected. Would have been interested in how a SIPP would fit into the scenario?
Hi James, as an NHS worker, would love to see some content with with examples of DB pension and retirement planning. Loving your work
Me too. Both for band 8 and band 2
DB can be harder to make tax efficient because much has to be paid as income & can't be moved into the ISA wrapper as pot-bassd pensions can. You might look into Venture Capital Trusts to see whether some limited use of their tax relief is useful. One of the main potential DB planning opportunities is taking it early to avoid 40% income tax at true retirement time.
Me too, as I am in receipt of a DB Pension and want to know how to most efficiently reinvest some of it
@@jamesday426Thanks James, very helpful tip about the avoiding 40% income tax
A key mistake so many make is to assume that their DB pension is all they need, perhaps it is for some, but there is usually optimisation possible. DB and DC are extremely complementary, as they are opposites in so many keys - DB has certainty, DC has flexibility, DB is guaranteed for life, DC can be taken however you like, DC has great tax-free benefits, the NHS pension has such a terrible commutation rate the lump is effectively heavily taxed, DB is poor for inheritance, DC is great. The DB is a great foundation to build upon, along with the State Pension.
Add to the DB pension some DC pension or LISA, and maybe enhance the DB with ERRBO or Faster Accrual options for more DB if desired. The DB pension can be flexed by early or late commencement (reducing or increasing annual pension respectively) - a very common error is that people are obsessed with Normal Pension age as they suffer from loss aversion from actuarially reduced pension, ensure you are making optimal decisions and not suffering from bias like that.
ISAs are good for pre-55. Borrowing and repaying debt with pension may be better for funding pre-55 retirement (eg 0% credit card debt, carrying a mortgage past age 55, etc). DC pension or LISA are probably going to be best to smooth income by enhancing or even replacing DB income between 55/57/retirement and starting State Pension. Given a DB pension, aiming to fund retirement income post State Pension age solely from DB and State Pension may well be optimal to avoid any stress of DC in later life.
If retiring pre 55, maybe taking time out of labour force earlier in life, eg to travel, may be very tax efficient (and can be a very good idea even if not retiring before 55) - take 6 months or so away across two tax years to avoid higher rates of income tax, as well as efficiently converting leave into cash through saving leave and using it in advance upon return. Perhaps even take a longer break of 20 months or so across two tax years and just use up Personal Allowance in those tax years. It is astonishing how much can be gained from saved leave, leave taken in advance, PAYE refunds, and rental income - quite possibly enough to cover all the travel costs and return with more than you left with.
Remember your spouse - you can choose to reduce your pension in return for higher survivor benefits in the NHS. And don't forget State Pension deferral as a way to enhance pension if desirable (eg that could be used to effectively convert remaining DC pension into State Pension). And don't forget to use kids' allowances, as well as the £3,600 that can be put into pensions for anyone even with no earnings and get basic rate relief. For cash needs and derisking funds needed in near future, Cash Isas and Premium Bonds may well be appropriate if paying higher rate tax, savings accounts can be used once retired if a none tax-payer. Building an untouched DC pot may be a good option for inheritance if that is a motivation. Or planning early gifting from DB pension receipt to optimise inheritance tax.
So many options to ensure HMRC get as little of the pie as possible!
Great video. Many of us have 1 or 2 DB pensions as well as DC pensions, which adds yetmore variation. Im currently thinking of postponing DB start and usung DC first, partly for tax and partly for growth teasons. DB have done relatively well during high inflation/low growth times.
So much good context in one video!
Good video that confirmed that my own retirement drawdown spreadsheet is correct. I’m planning to retire at 56 and according to my spreadsheet won’t pay any income tax until I’m 76.
Another mind blowing video. I've been watching James for some time now and I can actually feel my brain growing lol. I've been dumping £60k into my pension since we've been allowed. As well as hoping for a comfortable retirement I hope to have enough so that James can justify having me as a customer!
Great info yet again James 👍🏻
Thanks James, great video.
Good food for thought, thank you 🙏
Great video, needs a few watches to sink in! Just a suggestion for a future topic, maybe some guidance for parents/guardians what they can do for their children to get them ahead of the game. It might be a short one though, “as much in their pension as soon possible” 😂
Thanks for the video!
This is a challenge that many of us face, especially given the freezing of tax bands, which is pushing many retirees into the 40% bracket. I'm coming up to 60 and likely to retire in the next 18 months. Not looking forward to juggling all these, or indeed getting used to taking out not putting into a pension, and seeing the funds slowly reducing.
Also who knows what the next government will do, especially with the LTA and pension tax free allowances. Yet more of a worry after years of saving and investing..
A colleague retired last year, then despite not planning it earlier upsized his house. I guess the tax free lump sum was burning a hole in his pocket while any gains from it was being taxed.
You can invest in premium bonds and any prizes are tax free. Also the pension tax free cash can be use to reinvest in the GIA to get more dividends. There are also interest tax free threshold.
A cool video would be how to achieve a £50k income paying as little tax as possible, using ISA's, Pensions, GIA, dividends etc. Then we could have a blueprint to aim for.
Indeed. Just before you hit the 40% tax threshold
If you look further up you'll see a description of my nil tax on pension drawing via VCT use approach. Provided VCTs are suitable for you, income tax is optional & can be eliminated by buying them. In my case there's another circa £5,000 each of VCT dividends & IFISA peer to peer lending interest at about 10% yield. This thoroughly exceeds my spending with the excess ending up in the VCTs & ISAs with the VCT money eventually ending up in ISA equities. Some will have too much long term higher rate taxable income for it to be viable to use the VCT approach to get to nil.
@@porschecarreras992cabriole8it's not so much that tax threshold as arranging to get everything efficiently moved into tax free ISAs via a long term plan. In my case that temporarily uses VCTs to get money out of a pension with nil tax then eventually into the ISA wrapper.
It's likely to be poor planning but nil income tax from age 18 is possible with VCT use. At a minimum getting employer pension matching is likely to be good. It only takes recycling around £100k in VCT holdings to eliminate all basic rate income tax for those of us with no higher rate bill.
But you do need to be able to self-certify as a sophisticated investor to do it, possibly most easily done at present by joining a business angel network for £0 for six months, usually about £200 a year for that one. Or, assuming the old qualifying rules are back, 100k income or a quarter million in non-pension savings & investments will do it. Or in easier reach some unlisted company investing via assorted schemes, even more if loans rather than equity will do the job.
Another great explainer, cheers!
Great video James thank you.
The £16,760 is a gimme.
Get that lovely tax free pension income. After that, for me, it’ll be further pension withdrawals at 20%, bond ladder and ISA…
Right, so not only do I have to be a high earner and a diligent and responsible saver, I also have to have thorough tax system and accounting knowledge to be able to figure out the most tax effective ways for not just my savings and investments but how I draw them in retirement - Got it! The dream of retirement for most is dead.
For the buckets I would do this before watching that part.
Draw from isa, 20k per year, but also move 20k from the gia Per year back into it.
Then anything else required I'd take out the pension.
Hi James, Excellent content again. Would you consider a video on the USS hybrid pension scheme which includes a DB and DC element,
GEC had a similar scheme which some BAE Systems employees are still in.
Absolutely love these videos
Hi James, bring more content like this, I recently stopped working with about 10 years before I’ll get state pension, so will be using a mix of savings/ISA’s and personal pension. It remains unclear to me, whether to take as much as possible out of the pension tax free, i.e. £12570 personal allowance, plus the 25% that would be tax free, or take even more and pay 20% tax, but reduce the amount taken from ISA’s, key benefit would be to delay paying 40% tax in later years as cash dwindles.
Why pay any tax? I retired at 55 & last year made £3,600 in gross pension contributions, drew £53,070 at nil & basic rate from the pension, basic band increased to £53,870 by the pension contributions. Bought £27,000 of Venture Capital Trusts, gaining £8,100 tax relief & eliminating tax on the pension drawing. The pension tax free lump sum roughly matches the VCT buying cost. I expect to have emptied my pension before state pension age, leaving very little taxable income. Money moves from pension into VCT for 5+ years holding time & ISAs & ends up sheltered for the rest of life. Besides the typical 5% tax exempt VCT dividends you can sell after five years tax free when that's useful, say if you've finished moving your pension pot out. VCTs aren't suitable for everyone & around £100,000 will accumulate invested in smaller companies during the five year holding period before sales without tax cost are allowed.
For some, part of the reason to draw close to or at the basic rate limit is to reduce or eliminate the chance of future 40% tax & previously the lifetime allowance charges either initially or on growth between crystallisation (taking the 25% or various other things) & age 75. Basic rate maximising & VCT buying coupled with early retirement can make this work.
Hi James, thanks for all the great content - one thing I think not mentioned is state pension. Assuming Lois has been earning and saving as well as she has, likely she's got some sort of NI contribution. The state pension would more or less put her over the tax threshold already would it not?
Also £5000 Starting Rate For Savings and £1000 savings allowance. When retired, Take £12570 from pension to use income tax allowance. Put £120,000 from the lump sum into 5% interest savings account to get £6000 from savings interest allowances. Makes £18570 tax free income.
Or could keep the £120,000 inside the pension and invest it in a 5% gilt or money market fund, preserving the tax wrapper.
Although Lois would probably want to keep most of her pension invested for the longer term.
I made a similar decision in 2008 and took max drawdown in expectation of earning 5% from cash investments. Within two years, with interest rates depressed by BOE, this proved to be a huge mistake and drove our family investment strategy into Buy to Let. Many others did the same and successive chancellors hammered BTL investors and the Government are now reaping the reward of hideous inflationary pressure in the private rental sector. Whilst current 10 year swap rates suggest 4-5 percent bank interest rates will persist. Don’t put too much faith in the BOE not going down the quantitive easing route again. Split the risk by keeping a higher percentage invested. I did this with a second private pension and it has proven to outstrip all others by a huge margin. As James explains, how to draw on this pension without negating the tax advantages accruing the fund is tricky. However, it is a nice problem to have. Stay invested.
@@JamesShackthanks James, I’ve watched your video on the 2 money market funds. Do you have one on holding gilts in an ISA/SIPP?
ISA is way better when you are younger though, especially if you want to retire and you want control over the money i.e. the Government stops you taking your private pension until 55 (58) and they are locking this in 10 years behind the state pension, for me state pension age is probably going to be 70+ when I get there meaning I could have £1million in there at 50 but not retire until 60+ years because I cant access it... I just refuse to do this, cant buy time and the Government wants people to keep working and are likely to mess around with pension age/access in the future. Makes sense if you havent done anything until you are 40 and you crap yourself, pension makes more sense as if you dont start properly until 40 you probably wont have enough until you are 58+ anyway.. FYI its not all about tax avoidance its about what your goals and what you want to do in life, id happily skip some tax benefit of paying extra into a pension if it meant I can retire at 50 compared to 60+
Yeah, if you want to retire in your mid-40s you need about half in pension and half in ISA. To achieve that, you almost certainly have to pay some high rate income taxes, and so be it. But this case study was way too heavily invested in an ISA given they're now in their 50s.
@@rlamacraft Exactly this. Lois should now be going hard on the pension and only putting any excess that she can't get into the pension into her ISAs. I retired last month aged 53, so I'm bridging the gap for 21 months before I can touch my pension. Lois only needs £70k to bridge a 2 year gap, as her outgoigs are £35k a year. She certainly doesn't need £500k to bridge the gap. As a higher rate tax payer, she's missing out on a 67% instant rate of return on the pension investment more than she would get by putting that money in an ISA. She's throwing thousands of pounds of post retirement (after tax) income away. She can help to reduce the problem by throwing £60k into her pension each year she remains on that salary. She will also have 3 years of backdated allowance she can use to pay in even more. Sure, she'll then start getting only 25% instant RoI tax savings on some of that, but it is still better to invest in pensions as a basic rate tax payer before putting money into ISAs. That's the case in general and is certainly the case in her current situation where she is of an age that qualifies to get at her pension aged 55.
Minimum pension age is increasing to 57. There is no legislation for any increase beyond this. The Conservative Party said it planned to keep the minimum pension age 10 years behind State Pension age, but that will be irrelevant if they do not form the next Government. The State Pension age is legislated to increase to age 68 between 2044-46 with no further increase beyond that legislated for. The Labour Party has not announced any plans for State Pension age or Minimum Pension age so the future is unclear.
Carrying debt past age 55/57, eg, mortgage or 0% credit card borrowing that gets repaid from a pension can be a tax-efficient way to finance retirement prior to age 55 but keep the tax benefits of a pension.
@@hugheskevi when looking at any legislation it can change tomorrow, however when looking at pretty much all western economies they have ageing populations, combined with increased life expectancy and increased demand in care costs (this has skyrocketed and will continue to grow) and increased welfare payout in the state pension as people live longer, in the meantime you have a shrinking working age population who has to pay for it all, the maths dont work out and any future Government in 20+ years will have pressure to cut spending and knocking back the pension age saves a hell of a lot of money so personally I find it highly unlikely in 30 years that the age will still be at 57. Can I tell you when, no but it will. The Government has already tried to get all of those early retirees from Covid back who are in their 50s and not working to boost the economy and fill job shortages but its not working but if you stop those people from accessing their largest asset then its a mighty motivator to continue working well beyond you need to. David Willets did a very interesting talk about future Governent spending and the outlook due to ageing population in the UK, very interesting watch.. In any case I am pro pensions but not beyond the employer match, my bulk will be in ISA and I will be sipping my cocktail on the beach to celebrate my early retirement (hopefully..)
@@Chills124 There is of course the fact that with each year going forward, the number of retired people with decent private pensions will rise higher and higher and the taxes raised by them paying income tax and VAT will help support the country spend. And these will be people that the government will not need to provide jobs or unemployment benefits for. And the number of people paying higher and higher inheritance tax will also rise. This will be because of all the people who entered the housing market from the 80s onwards when the huge shift from renting to buying kicked in. If the average age of those buyers was 30 around 1984, then they are hitting 70 now.
It is still monetarily better for anyone looking to retire before the age that they can draw down a pension to invest in pensions more than ISAs. I've just retired at 53 and have more than enough non-pension savings to bridge a ten year gap.
I would recommend working out your target retirement age, focus on predominantly pension saving to get all that income tax back and working for you. As you get closer to that date, you'll have an even higher salary (usually), with lower costs and will be able to schedule the ISA build up to hit the target retirement date.
I invest heavily into my SIPP the way I see it is that in order to build wealth I need to let compound interest do its thing, which needs time. So i am happy to lock that away until I am 57 years old.
Hi James. Do you see a possibility that the tax thresholds may shift significantly enough over the next 15-20 years and perhaps the affect these projections?
James could you possibly make some videos on retirement plans for those of us with Defined Benefit pensions. For example, I'm 35 year old NHS GP. 90k salary. DB pension is worth about 10k per year currently and increases by 1/54th of my yearly salary each year. But not accessible without charges until 68( probably later once i get there). I am currently trying to build up a pot in a S&S Isa to cover my spending from 55/60 until the pension is accessible. Currently, i have 74k. Any thoughts on this kind of situation would be great. Keep up the good work.
Well explained and goes beyond the usual "save towards a pension if high tax payer"...its all good but what about political risks...whats the point planning when the government keeps changing the system. With Labour coming there are rumours of more pension taxation changes : IHT on pension, flat tax, LTA ...etc..
If i made 90k a year i assure you i could save 20k a year.....
Great content as always James.
Would you be able to do a more detailed video of Junior SIPP and what the tax benefits of these are?
We have two daughters (3 and 6). My wife and I also invest i to a Junior ISA for them but we often think that maybe we should invest in a Junior SIPP too.
Would appreciate some information about tax relief, expected growth, how long can we as parents contribute. Is it one off or regular monthly up to age 18? Can we invest beyond them reaching 18?
Thanks
This was great, thanks. I'd love to see if/what/how things might change if you're a couple with one higher (>100k) and one modest earner (
That makes it a little more complicated!
@@JamesShack I know, but it's a very common set up. Even some broad brushstrokes advice of common things to look at might be useful.
Interesting video James. Isn’t it worth withdrawing from the pension pot up to the 40% tax bracket and putting any excess you don’t spend in to the ISA? That way future income from a growing ISA will be tax free? So in effect deplete the pension pot before using the ISA (ignoring inheritance tax implications)
James, love your videos. However, there are other factors. I am watching my fathers savings disappear at about £7.5K a month in care home fees. My planning spreadsheet needs an extra column on how to end up with "only" £23,250 by the time I am gaga. I am not seeing the benefit in being tax effecient and my pension pot paying for care home fees versus "pissing it against a wall" and getting the same care in a care home for free.
Pick a care home in a different country. 👍
Rip off Britain I’m afraid.
Sorry that he needs such support.
Focus on health to ensure you don't end up in a care home
You might want to consider care need due to infirmity that can last much longer than the two to three years commonly needed in the dementia case. Of sound mind in the cheapest place isn't such a nice prospect. An alternative investigation is how you can retain enough capital to cover say five to seven+ years of good sound mind care.
Aim to spend it all by 85 if you are lucky enough to live that long. After 85, if you are still around, you won't need much more than the state pension to cover a day of day-time telly + reading the papers. If you start losing your marbles and if we've not yet brought in a right to assisted end of life, then your dodgy balance might lead to an accident at the sea cliffs!
@@mkdons22found the cure for dementia have you?
Another great video, James. Yes it probably raises many questions as you said at the end of the video, but that's no bad thing. A few personal observations - food for thought: Lois may have prioritised her ISA because she had little faith in what future governments will do with SIPPS, given the constant interfering and changes that we've endured over the past 20 years. I sympathise and know a number of people who think this way - with good reason! With regard to the State Pension I'm going to address the elephant in the room: It's unaffordable and unsustainable, but no Government will address this because of the political implications. At some point however, it will need to be confronted and I think means testing is the least unpleasant option. I'm not saying I agree with this, I'm simply stating it as a possible outcome. Therefore I personally don't include the state pension in my strategy - even though I've paid NI all my life.
I don't think they would dare change the state pension. However, we could soon get to the point where the state pension exceeds the personal allowance. Give with one hand and take with the other.
great video , keep up the great work
Thanks, will do!
Last year I took money out of my ISA and paid it into my pension, in order to fully use the annual pension allowance for the past 3 years.
I'm planning to use my ISA to pay off my mortgage.
There is also the possibility that I will inherit a sizeable amount in the near future.
I'm trying to work out how much I should put into my pension.
I'm an upper rate tax payer and I'm hoping to retire in 3-5 years time (60ish - I'm 57).
What I don't know is if there is any merit in leaving SIPP annual allowance unused, in order to retain some money in my ISA.
I have a feeling that there isn't, but James, your videos have shown me that there is a lot of complexity, a lot of traps and it is very easy to get things wrong.
Your pension tax free cash is available. There's no merit in not using ISA money to help fully use pension allowances to get extra tax relief. If you still can't fully use pension allowances consider three small lot pension withdrawals and/or some PCLS recycling.
One reason to use pension last is that it will pass to your beneficiaries free of tax. ISAs become part of the estate so you pay inheritance tax.
As someone else said on comments, these numbers are extreme for 90% of people and so is the headache of IHT.
@@terrybrown3486 at £500,000 IF your house goes to your children, the inheritance tax thresholds can be easily breached by a house alone in much of the UK. Any money you have beyond that is taxed at 40%. The pension is the exception.
@@terrybrown3486 I have seen people I know receive large unexpended amounts from a range of sources, so you can end up in the 10%. An unexpected inheritance, a medical negligence claim or fortunate investment gains and before you know it IHT is a serious problem. I guess that this becomes a nice problem to have.
You never pay inheritance tax and your estate can avoid it if you do good planning. Pensions can be one part. Taking out a lifetime mortgage and making potentially exempt transfers can be another part, even tally removing the borrowed part & accumulated interest from the estate.
@@jamesgatward1985the house can also be an exception because lifetime mortgages and potentially exempt transfers are available. So are lifetime annuities and gifts out of income. Closer to the end unlimited pension contributions into a pension at least two years old but without tax relief area available at any age & can allow you to retain control until just before death.
Brilliant James, the isa bucket may also be useful to reduce exposure to poor sequence of returns from Pension…. A tip from your other videos, also as I’m sure you have mentioned before it’s unlikely she will need a consistent £45k. Chuck in part DB pension and it’s a real maths challenge 😊. A topic you could maybe consider is, is it worth taking DB early ( at lower rate) in order to sustain a high salary sacrifice and enjoy that tax benefit … fairly close to retirement. Thanks for great and challenging content.
Yes, that's a good point. If you have the option of paying tax now or later, later is likely to be preferable if you're in a drawdown.
Good idea on the taking DB early content idea!
Another great video James, I like this reply as I’m sitting on a DB scheme and furiously paying into a DC workplace scheme as well as saving in the short term in an isa, with the hope that it will double up as tax free options come retirement. In short adding even more complication to your calculations would be great for the 50-somethings who have this hybrid pension pots/options. Keep it up, solid content as usual.
@@JamesShack I would also appreciate a video on investing a DB pension. ie can i take the money from my DB pension and reinvest it in a SIP? should i max my lump sum and put it in another pension or isa?
@@JamesShackI would also be interested in a video exploring the benefits/drawbacks of taking a DB pension early. And also whether to commute part of the DB pension to give a larger lump sum.
390%+ tax relief on the same money in VCTs seems to soundly beat pensions in the best tax relief game. Assuming 13 buy to get 30% initial relief and sell after five years cycles between ages 20 & 85 and ignoring tax exempt typically 5% dividends, no CGT & no clawback of the 30% if your estate is doing the selling. Also ignoring the usual rules changes to VCTs, income tax, NI & whatever else that affect comparisons. But not a mass market product even though anyone not otherwise classed as sophisticated can get six months membership of a business angel group free at the moment.
Great video. This begs quite a few questions for me (about to stop work at age 54).
Should I start my DB at age 55 even though I have enough DC and ISA savings to leave it until NRD of 60 and avoid the 25% actuarial reduction?
When I start my DB pension should I make use of the PCLS from the linked DC scheme even though I don't have use for the lump sum straight away? The total PCLS value is already slightly over the new LSA.
Should I drawdown from DC alongside DB to fully maximise the basic rate tax threshold even if I don't need the income yet?
What asset mix should I have across different taxable and non-taxable pots?
Happy you pass further details if you want to include in future video.
Correct me if I am wrong but I don't think you can start your DB pension until you are 56 (soon to be 57). After that it depends on what penalties your DB scheme applies.
On the plus side when a colleague took early retirement he had it all planned out to pay zero tax for the next three years.
Hi James, love your content but would be interested to hear about planning when you have a very short runway into retirement so not even a medium term investment horizon. Example, my plans see me working for 3-4 mos more, 4 months before I’m 55 with £420k split across2 pensions roughly 50/50 & £100k ISA, with some rental income. Confused over a go forward strategy & little time to plan. Thanks
James, how does this new information tie in with your retirement planner spread sheet (excellent tool, thanks) As I understand the tool only assumes draw down cash, then ISA, then pensions. Does the tool take into account these tax optimisation opportunities?. Thanks for the great videos
The tool does not optimise tax.
It draws down taxable > ISA > pensions.
Even the best software only has basic tax optimisation because to do it in any more detail, you need would need to go through year by year to choose your drawdown options.
Then every time you make a change, go back and change every single year!
That's why it's best to keep it simple.
Think I am going to have to watch this again when less sleepy and more awake! I think I observed that using your isa's to give income when you are in pension years between retiring and getting the state pension is very wise, which reduces capital gains tax exposure should you die. Then in state pension years you can then focus on drawing down pension to top up the state pension. This then keeps your pension intact for longer before being drawn down, and thus gives it more opportunity to grow in value. Also those years before getting the state pension: you are likely to be more active and will want to do more things (and thus spend more money/need more money) than in later years, so maybe a higher pension in the earlier pension years? Plenty to think about.
IHT is easy to avoid via potentially exempt transfers, late in life unlimited pension contributions without tax relief and lifetime mortgages to increase the previous two. Instead, start out by drawing at least the income tax personal allowances in taxable from the pension every year until state pension age because that's a use it or lose it allowance. That preserves the amount in the ISA. If VCTs are suitable for you there's considerably greater scope for withdrawing taxable pension money with no net tax cost.
Great video thanks. Next year I will be 55 and can access my FREETRADE stocks and shares pension sipp, but is that different the first withdrawal of 25% would I need to sell all the holdings to then withdraw the whole amount to get 25% tax free?
James the average uk pension is just £114k...... How about doing this with figures ordinary people would see.... I do wonder what % of the uk has pension pots of £770k....
Agree. Would be great to see what approach to take using different pension sizes.
Quite a few really. There's about 4 of us in a department of 7 who have taken cash equivalent transfer value from our old final salary pensions (which ended about 15 years ago, now on a DC pension). Most of us have between £500,000 & £600,000 + in a Sipp. By the way, we are all on or around the national average wage, £35,000 to £45,000.
@stephenoverthrow2463 lucky you I worked for company and hundreds of staff on final income pensions and they are worth very little. I tried to cash mine and got a valuation of 50k, thought about it a few months and thought id go ahead. The valuation dropped to 30k! Because interest rates went up, silly me thought it would go up if interest rate was higher.
Because these channels want the big earners to come and use them directly or their services in the future, people like us with lower incomes and savings in pensions etc likely won’t use, however I think they may get many more views earning them better RUclips income. Missed opportunity?
Probably quite a few of his target audience, but would also be good for folks who also had to go part-time/take time out of the workforce for caring responsibilities
James
This is really interesting analysis and advice. I had a question on the strategy at 11 minutes plus in the video. Given the strategy is to keep the tax rate down why would Lois not take the 4% income from her Isa which is tax free thereby reducing the amount of capital she needs to take from her investment account by £12k? For me it surely makes sense to preserve capital as much as possible.
I would be particularly interested to see if it made more sense for her to take the 4% income from every bucket in the first year, thus retaining the capital element as much as possible, and I would look to move the capital from the investment account to the ISA account over the next 5 years by utilising her ISA allowances. In this way she would increase her tax free income over the next 5 years and the longer term gain from that would surely negate the slightly higher taxes in years 1- 4? What do you think about this strategy?
Finally I also think that Lois could find a much better yield than 4% and at the moment Higher Yield Bond funds are paying out over 7% (and given interest rates are likely to fall from their current lofty highs the capital returns are likely to be positive) and some enhanced dividend funds are paying out over 6%.
Paused: £16760 from SIPP, Use the £5k SRT, £1k SA, £3k CGT allowances from GIA and then ISA for rest.
Pretty much.
I've been hitting my annual pension contribution limit for years before it went up last year. With the employer contribution saving around £40k a year cost me way less than £40k
Just the tax and NI savings are a big help. I increased my contributions by £1000 a month but nothing like that came off the bottom line of my payslip.
Hey James , very good video . I can do better editing in your videos which can help you to get more engagement in your videos . Pls lmk what do you think ?
Take a 25%portion of tax free cash and the rest from pension each year. Make sure your pension is still performing as well as it can, don’t drain it.. By the way James it would be great to see a video for the low wage folk like artists. It’s really hard right now to make ends meet. If you don’t earn a lot then you can’t save a lot….
It's all digit's on a screen the credit system goes down and whoof of it's gone. Best return gold in your own possession or private vaulted. No third party risk. And Royal mail British minted coins . Capital gains tax free.
James I d really like to get some advice from you in regards to my personal finance s and future pension and Iht planning. How would this work? Are you taking on clients or providing one off advice.
The average life expectancy in the UK is around 80 years.
Will it be really worth putting extra into a pension?
Ideally one would want to get a good return for..money invested or salary sacrificed.
Therefor on average a person would have to live past 86/90 years before it starts to be beneficial...
First.. again 🙂 love when these drop. Ping!! :-)
2nd
Just a point on Lois' ISA investments. She has not put in £20K since 2010 as the ISA limit was £10K back in those days, only rising to £20K in 2017. This makes her growth rate (assuming she maxxed out every year) even more impressive.
Yes, indeed, well done Lois...but for her it seems easy to do on a 90k annual salary...what about people with roughly a third of her income, who are paying rent and sacrificing a lot to max their ISA?
Very good scenario and example of tax efficiency ... one more question, can you recommend a financial advisor in Colchester, please?
Hi Paul, please see my latest comment further up, you'll see I didn't always have a £90k salary. Try Fornham W R S Financial (London Road, Stanway) near Colchester.
The benefits of the ISA route are that Lois has approx £30k a year tax free - plus her £12k (ish) personal allowance. So, potentially £42k pa tax free. If she pulled her pension down monthly and didn't take a lump sum, she could effectively recieve around £46k pa tax free. As we go forward and the age you can access a pension is pushed to 57 (and you just know they're aiming for 60) the ISA route appears to be a much better option, especially for those looking to retire early or maybe significantly reduce their hours and top up from elsewhere.
@@Dionysos640 this is not state pension age that is being discussed. It is the age at which you can access your personal pension (such as a SIPP).
@rl3799 which is moving to 10 years before state pension age
Who has £20k after tax, every year for the next 14 years to put into an ISA .....🤔
@@Lookup2Wakeup louis
@@Lookup2Wakeup People on very high incomes do. This is why ISAs should be pulled by the government - they're a tax fiddle designed to benefit the rich.
does the pension provider automatically allocates the 25% tax free cash in a separate bucket/account (as you showed in this vid)? How does it keep track of how much of the % of tax free cash is withdrawn since the pension amount can constantly change if it sits in.
So the question is at what time do we know what is 25% tax free amount 1) at the age of 55 or 2) when we start drawing down pension?
Hi James, the ISA/Pension conundrum. The problem is the government keep changing the rules on pensions lump sum/annual allowances/lifetime allowances etc. Knowing what the rules will be in 20 years on tied up money in a pension. Ive opted to hedge my bets and do part pension and part ISA. No idea what the future holds, but I'm comfortable with my decisions.
YES! I completely agree with this. Pensions (both State and SIPP) are a hostage to fortune. In fact doubly so, because not only do you not know how long you're going to live, but as you say, you also have absolutely no idea how the rules are going to be changed by future governments. I'm 63 now and over the past few years I have started dumping stuff into my SIPP in quite a big way. But an ISA is a no-brainer (as they say) because if any government ever threatened to chip away at the sheltered status you always have the nuclear option of cashing it in and putting it to some other use. Conversely, as this vid demonstrates amply, a SIPP is very much a "brainer", in fact a Total Head-Flip.
YES! I completely agree with this. Pensions (both State and SIPP) are a hostage to fortune. In fact doubly so, because not only do you not know how long you're going to live, but as you say, you also have absolutely no idea how the rules are going to be changed by future governments. I'm 63 now and over the past few years I have started putting stuff into my SIPP in quite a big way. But an ISA is a no-brainer (as they say) because if any government ever threatened to chip away at the sheltered status you always have the nuclear option of cashing it in and putting it to some other use. Conversely, as this vid demonstrates amply, a SIPP is very much a "brainer", in fact a Total Headflip.
Maybe not 50/50 ration but seems sensible decision
I too was not comfortable with pension policies, but for some reason felt more confident with ISA being left alone by government.
This is very interesting, but I really wanted to be told, more or less, what percentage of savings I should put in my ISA, SIPP and whatnot...
Depends on at what age you want to retire and how the amount you need each year will change through retirement.
I would have done some pension recycling - putting £2880 into the pension each year - which would yield £3660 put into pension with tax relief. This wouldn't trigger the pension recycling rules because it would be under £7500 each year. You would make a couple of hundred even after tax and there would be more to invest than putting into an isa still
This is a good strategy that most people miss. Not enough time to include it in this vid!
I've never heard of the pension recycling scheme, future video James 👀👀🤔🤔😉😉
Edited- Great content James🙏🙏
Plus if it is you and a partner, you can put in 5760 and get a 20% return from hmrc
I do exactly this. The £720 the government adds onto my £2880 each year, goes against my taxed part when I do a draw down. So last tax year at 66 I had my £10.6k state pension, plus draw down £15k. I paid approx £2k tax., but deduct £720 means really I only paid £1280 in tax last year.
Previous four £16k drawdowns have all been tax free.
My pot has still gone up in value, now at £440k. But I only draw down when the market is up.
That £7,500 a year tax free lump sum every rolling twelve months period limit only applies to tax free lump sum recycling, unlimited income recycling is allowed, subject to annual allowance. The alternative increase in contributions over the two tax years before the lump sum is taken, the year of taking and the following two can often work around this.
Is it worth changing tact to start paying avc's at 55 if the retirement goal was 60?
I say this again as a HMRC senior taxation officer just spend it spend it or give it away and live for at least 7years or we will grab your wealth at 40% Im always amazed by the schemes set up that invariably fail when we tackle them at probate!!! Spend it use it .If a labour Government gets in they have a plan to grab more from you .I know.
back then, 20 odd years ago, I was hitting highs like this. But that was pre 2000. Now, in retirement, the values in my pots are near 1/10th of these (a bit better, perhaps)... Why?? The numbers back then were lower. aka we are omitting inflation. I am coming to the belief the £ has been silently greatly devalued.
How can I recoup as a pensioner the wealth gap which has occured? I can't go out and get a £100k+ job now. Worse, I've taken zero from my funds trying to keep their value up.
Bad luck? Ponzi scheme? Deliberate theft of wealth?
The frozen thresholds as such a ripoff. They give you tax relief to invest in DC but they take it all back later. It is like a loan with bad terms and conditions!
Alternatively, learn about VCTs, decide whether that small company investing is suitable for you and potentially withdraw all of this pension money with no net tax cost, as I'm doing. For most people the 25% tax free lump sum combined with basic rate tax in and out delivers at least a 6.25% net gain. Salary sacrifice to save NI, employer contributions & maximising use of the personal allowance can increase the gain even without VCT use.
I feel bad for Lois if she is watching this 😂. Great effort and achievement in any event.
Say you have a £100K pension pot..... Is it correct you can withdraw the 25% tax free portion and the 75% taxed portion in what ever combination you choose..... So you ask for £5K tax free and £50K taxed....... this would leave £45K (£20K tax free and £25K taxed) .......... If this is invested in shares which double in value, does that mean you now have £40K tax free and £50K taxed to withdraw ............. This only makes sense if the pension provider values your total pension assets every time you make either a taxed or non tax withdrawal and treats it is a % taken from each side.... Is this how it works?
One of the problems is that the pensions market is very restrictive. Moving from employer to employer means you’ll end up either having lots of pensions, or you get to pay to transfer fees or your employer won’t contribute to your pension pot and will only contribute to their choice of pensions. It’s frustrating. Add to that things like a define benefit pension which you can’t add to but is getting screwed because they’ve moved the retirement date back by 2 years.
There is a new commitment from the govt to great a “pension for life” so employers have to pay into a pot of your choosing.
Not sure on when, but it would simplify pensions dramatically.
A pension of my choosing would’ve been great, as now I have several - which I might combine/consolidate. Another topic to cover James, although from what I observe consolidation won’t make any real difference, other than potentially saving on fees. Of course, simplifying management too.
Transfer fees are rare now, having been banned for newly opened pensions some years back. Aside from DB it's now usually free and easy to have one plus whatever your employer wants. Or even one total if using just the employer one makes sense.
@@jamesday426 Employer selected providers can have very limited offerings (within the specific scheme), that’s why I’m considering moving. Exit fees are zero, however, platform and fund fees vary quite a bit, some have caps, some don’t.
What about taking everything from pension, not taking anything from general account aside from £3000 capital gain allowance, and transferring it gradually into ISA? That would fully convert it to tax-free cash rather than take any taxable. Uses more pension but that cannot be converted anyway.
It depends on whether you are worried about inheritance tax
That can work very well & even better when combi ed with VCTs. Inheritance tax planning can include gifts out of income, potentially exempt transfers, lifetime mortgage, lifetime annuities and assorted other methods that work well with a pension drawing first approach. Total wealth and things like desire to keep control can influence what is the best fit for each person.
The video is extremely helpful but there are so many what if scenario/analysis …Is there no calculator that would work backwards to understand if I should continue contributing to ISA or Pension ….
The GIA investment could go into gold coins, anything such as Sovereigns or Krugerrand which has a notional monetary face-value.
When you cash out of those there is no CGT to pay because you are simply moving money and not cashing out from assets.
The fact that you bought them ten years ago for £50k and today they are worth £125k (or whatever) is irrelevant.
Not Krugerrands. However, Sovereigns are CGT exempt and you can even pay the Royal Mint to look after them for you.
I'm not clear in the example if Lois expects to get her income from dividends inside the ISA and pension (with maybe a cash bridge to state pension for a small shortfall?). It seems like she might be at first, but later in the video (13:48) we seem to be talking about total return (and CGT considerations) with Lois depleting the capital in her ISA and GIA to zero for some reason. I think dividend income vs total return seems to be a bit of a personal decision more than anything else, but is @JamesShack assuming the latter in this example?
In the first attempt at solving the drawdown problem I demonstrate how if Lois is following an income strategy, to be tax efficient she's going to have to ignore the income, and sell down her assets as it it's a total return strategy.
@@JamesShack Ah OK. And thanks, David Cameron, for pension freedom. No thanks for making the tax situation that goes with it a nightmare. Forcing future pensioners to all become tax accountants wasn't on my bingo card.
I get monthly income from my company pension which is taxed at source
cant see ant way to avoid that
I had initially planned to retire at 62, work part-time, and save money, but the impact of high prices on various goods and services has significantly disrupted my retirement plan. I'm worried about whether those who experienced the 2008 financial crisis had it easier than I currently am. The volatility of the stock market is a concern as my income has decreased, and I fear that I won't be able to contribute as much as before, potentially jeopardizing my retirement savings.
The increasing prices have impacted my plan to retire at 62, work part-time, and save for the future. I'm concerned about whether those who navigated the 2008 financial crisis had an easier time than I am currently experiencing. The combination of stock market volatility and a decrease in income is causing anxiety about whether I'll have sufficient funds for retirement.
This is precisely why I like having a portfolio coach guide my day-to-day market decisions: with their extensive knowledge of going long and short at the same time, using risk for its asymmetrical upside and laying it off as a hedge against the inevitable downward turns, their skillset makes it nearly impossible for them to underperform. I've been utilizing a portfolio coach for more than two years, and I've made over $800,000.
Mind if I ask you to recommend this particular coach to you using their service?
Leticia Zavala Perkins, a highly respected figure in her field. I suggest delving deeper into her credentials, as she possesses extensive experience and serves as a valuable resource for individuals seeking guidance in navigating the financial market.
Thank you for the lead. I searched her up, and I have sent her an email. I hope she gets back to me soon.
Here's a different scenario for you to get your teeth into!
Retiring at 57.
Estimated final salary scheme pension of 40k per annum.
Private pension pot estimated 250k.
Planning to leave the UK and sail overseas long term - living aboard and returning to the UK for a few weeks per year. Annual living costs of 30-50k.
Any advice on achieving financial nomad status and its implications? Is it worth it?
Some years ago I mentioned a Portuguese or Spanish scheme to a couple planning to go sailing outside the UK. Thx tax treaty provided that personal pensions were taxable in the country of residence, no longer UK, and the country had an income tax bug zero rate for foreign pensions. This allowed drawing 100% of the personal pension pot tax free, with a back tax caveat I'd they returned to the UK resident status in the following few years.
An important caveat is that the country must have an income tax, even if the rate is nil.
Having considered that opportunity you might then look I to establishing tax residence in a country where you get state pension increases but where taxation is low. The channel island of Sark wants more residents & has no income or inheritance taxes but instead a per person tax of around £1k a year, with talk of higher rates as much as four times that for spending too few days physically present. Still may be useful & any British citizen can live & work there.
Malaysia
I have money in Vanguard pension in VUSA which is distributing. I now have an option to invest in VUAG which is accumulating. Will I suffer any detriment if I transfer 100% of my VUSA to VUAG?
Flippen hell, you’re good!
Is there an opportunity to open a new pension account and drawdown from the existing taxable pension to invest in that. I think the annual limits are low but the imputs to that would avoid tax / could reclaim the tax on drawdown, but would build up a further tax free pot of 25% at a later stage?
Yes, until your 75th birthday you can do this for at least £2,880 net, £3,600 gross each year. Your income tax basic rate band is increased by the gross contributions amount when doing this. You'll find that providers will usually offer a way to do this without a totally different pension, either different dub- accounts or tracking crystallised amount.
@@jamesday426 wow. That's interesting. So if you start your drawdowns at say 60 and adopted this tactic until 75, with a return of 5% each year you could turn £57k of contributions into an £87k pot of which £21k would be tax free ....
It all helps!
Then the Chancellor changes the tax and pension rules....an unknown effect on your hard earned pension
What’s your views on pensions as a vehicle for generational wealth? Could it be an effective vehicle to pass wealth down multiple generations?
It can be, if you’re wealthy enough not to need to draw from your pension in early retirement or at all, you can draw your pension last or focus on spending/ giving away other assets that fall inside your estate first. You pension is a great last resort vehicle, it’s there for you to use it if you need to but if you don’t it gets inherited free of IHT.
However I think the pre 75 death benefits are perhaps too generous. So there may be some changes to policy there in the future. That’s just my opinion however.
Minefield isn’t it. Great examples
3:55 you miss the point of dividend investing. It's not just about returns, it's about being able to draw money without selling your shares and therefore maintaining the primary investment. You might well double your money on a particular investment but you have to de-invest to make money. This means that you are robbing yourself of both future capital and income growth. Plus you may have come off the top at the time you need that money, in other words there is zero chance that your favourite share/fund will maximise at the same time you need the money. and you may have to watch your shares devalue. This is much more painful than have a dividend cut.
In the second part of the video I demonstrate why you would need to draw down different amounts from different accounts to remain tax efficient. So a dividend investor would have to sell stocks irrespective of the income that is generated.
@@JamesShack Only if you are also drawing money from a GIA/other taxable source as you illustrate. If you are only drawing money from one source (e.g. a SIPP) whether the money comes from de-investment, or your dividends is irrelevant, the tax treatment will be the same. Also, why would you put money into a taxable investment source if you haven't used up your 80k p.a. allowance, surely that's more than enough for 99% of the population. If you are rich enough to worry about that, why would you unnecessarily expose yourself to tax liability by having a further investment account? I'd be putting money into assets like paintings, wine, gold, property etc. easy to liquidate and avoid IT and IHT as well.
Can I pay money into my uk pensions from Australia post tax and claim that tax back? I think salary sacrifice to the uk may be difficult. There's a max of $30,000 you can contribute here taxed at 15% (salary sacrifice I thought was tax free until recently) . After that, it's going to be 19%.
You must be a UK tax payer to get UK pension tax relief. It's unlikely that a UK firm would let you open an account.