To invest in a pension or just invest

Z

Zutz

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Hi, I run a small business and was considering putting about €15,000 into the company pension, however, given the very poor record of the pension fund industry coupled with high management fee's, would I be better paying tax on the monies, taking salary and investing myself? The company pension only has a few grand already in there. I would be paying the higher rate of tax if I took it as a salary.
 
You have a lot of alternative options in respect of pension investments. Talk to a good independent broker before making any final decision.
 
There's a few issues that you need to consider before making your mind up: -

  • Whether to put the money into a pension or take it as salary and do something else with it. Factors that would influence that decision: - (1) your personal tax rate now, (2) your likely tax rate in retirement, (3) other personal circumstances e.g. any debts, future need for capital etc. For example, if you're paying high-rate tax now but have very little provision made for your retirement, will therefore possibly be tax-exempt or on the low rate in retirement and have no other more immediate needs for the cash, the tax break on the pension would win. But that's a lot of "ifs".
  • How to invest it, pension or otherwise. You're not tied in to high management fees. You're not even tied in to managed funds - there's a whole lot of alternative options out there (both within or without a pension scheme) - fixed rate deposits, index-tracking funds etc. If your current company pension scheme has high charges and/or a choice of funds that doesn't meet your requirements, don't put more money into it. Start another.
Liam D. Ferguson
 
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