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bally3
#41 Posted : 11 February 2019 21:15:18(UTC)
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Essentially, paying into a pension scheme is certainly worthwhile if you are a 40% tax payer, less so if you are only a 20% tax payer.  As a 20% tax payer, you get the 20% back from the government but you will still be paying the 12% employee national insurance contributions.  So if you want to pay more money into your pension, or you are already doing so, talk to your employer about ‘salary sacrifice’ whereby you can agree to take a lower salary and the employer agrees to pay the difference into your pension as an employer contribution.  Indeed, the employer may be willing to increase this amount by the 13.8% employer NI contributions they are saving.

 

 

 

hi adrian ,

salary sacrifice is what im doing at the moment , me paying 40% , my company paying 8% ..............  (hopefully going up to 10% soon )

 

thanks 

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Sonue
#42 Posted : 12 February 2019 16:39:24(UTC)
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Originally Posted by: Replicar328 Go to Quoted Post

I’ve read this whole thread pretty quickly, so apologies if I’m repeating or contradicting.

Typically, defined benefit (DB) pensions are worth hanging onto – they are increasingly rare, especially in the private sector where companies can simply no longer afford to top up the shortfalls arising from increased life expectancy and lower investment returns.

Check with your DB provider but they may have an AVC (Additional Voluntary Contribution) scheme running alongside.  When you come to take your DB pension, it will have a grossed up value which is effectively the actuarial sum calculated to pay that pension to you for the rest of your life.  You may then be able to take all or a large proportion of your AVC pot tax free – up to about a third of the grossed up value of your DB pot (i.e. taking out 25% tax free).  So it’s worth considering transferring other pension pots into the parallel AVC.

Essentially, paying into a pension scheme is certainly worthwhile if you are a 40% tax payer, less so if you are only a 20% tax payer.  As a 20% tax payer, you get the 20% back from the government but you will still be paying the 12% employee national insurance contributions.  So if you want to pay more money into your pension, or you are already doing so, talk to your employer about ‘salary sacrifice’ whereby you can agree to take a lower salary and the employer agrees to pay the difference into your pension as an employer contribution.  Indeed, the employer may be willing to increase this amount by the 13.8% employer NI contributions they are saving.

This is particularly relevant if you have signed up to a Workplace Pension where the total contribution will go up to 8% in April – 3% for the employer, 5% for the employee.

As a general rule, don’t buy a pension annuity.  They are terribly bad value – the whole pensions industry depended on the fact that you were obliged to buy one and thankfully the government has ended that appalling rule.  If you do decide to take an annuity, remember to take the 25% tax free sum first.  You can still buy an annuity with that 25% but it won’t be taxed, whereas the pension annuity will be taxed!  Logic and common sense do not apply.

Hope this helps

Adrian

Please do take advice. There is some helpful information on here but some is incorrect. For example if you take the 25% tax free cash and buy an annuity (purchased life annuity) with that money part of it will be tax and part tax free. Part is classed as a return of capital which is tax free.

 

I am a financial adviser and have been for 36 years.

 

Please do be careful about defining your course of action. You are making a lifelong decision potentially based on non qualified information.

 

Edited by user 12 February 2019 17:27:26(UTC)  | Reason: Not specified

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bally3 on 13/02/2019(UTC)
bally3
#43 Posted : 13 February 2019 10:59:29(UTC)
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hi grant ,

i now have a very good FA , he has worked with around 15 of us from my workplace , came highly recommended and is local too .

thanks 

1991 mk1 mariner blue
2007 mk3 starlight silver
2006 mk3 galaxy grey
2007 mk3 true red,
2002 mk2.5 sunlight silver


Sonue
#44 Posted : 13 February 2019 19:25:05(UTC)
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Originally Posted by: bally3 Go to Quoted Post

hi grant ,

i now have a very good FA , he has worked with around 15 of us from my workplace , came highly recommended and is local too .

thanks 

Excellent. That is good to know. 

 

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