Pension Question!!!

Carpet diem

I'm 30 and I'm an employee in an occupational pension scheme since 01/09/2014 so I'm investing 20% of my salary each year . I think this is the maximum for my age.

The scheme dictates that if you have less than 2 years service you can take cash payment of the funds less 20%.

Three questions:
1. Can I work up until 31/08/2016 to qualify as less than two years ? My answer would be no but just want to be sure when I need to make my exit!

2. Can I make an AVC that qualifies for tax relief in respect of the last year and how much?

3. If so, will these mean my service begins from 01/09/2013 ( assuming full year backdate of AVC ) so I will need to leave the scheme 01/09/2015 to take a cash payment ?


Thanks in advance for you help!

dobsdave

Why dont you just leave it now, and get refunded your payment.

Carpet diem

dobsdave wrote: »

Why dont you just leave it now, and get refunded your payment.

I've just started my pension so there wouldn't be much to take out! I don't think you read my post correctly.

Michellenman

Depending scheme rules this type of vesting means you're only able to take your own contributions less 20%. The employer contributions will be returned to your employer

1) yes once the date of your first contribution is less than two years from your last contribution.

2) yes and afaik there's no limit on how much you can contribute.

3) The AVC is made in reference to your 2013 tax and doesn't affect your dates of scheme membership - although I'm open to correction on this.

Tbh - I don't understand why you'd do it this way - put money in to your pension only to take it back minus 20%? Like a really crap savings account? Your funds are not guaranteed to grow and may very well fall. Certain growth funds may never fall but the charges and commission on these can mean that even with growth you may very well come out with less than you contributed. I'd consider this carefully and speak to your financial advisor about to is before going ahead?

Carpet diem

Michellenman wrote: »

Depending scheme rules this type of vesting means you're only able to take your own contributions less 20%. The employer contributions will be returned to your employer

1) yes once the date of your first contribution is less than two years from your last contribution.

2) yes and afaik there's no limit on how much you can contribute.

3) The AVC is made in reference to your 2013 tax and doesn't affect your dates of scheme membership - although I'm open to correction on this.

Tbh - I don't understand why you'd do it this way - put money in to your pension only to take it back minus 20%? Like a really crap savings account? Your funds are not guaranteed to grow and may very well fall. Certain growth funds may never fall but the charges and commission on these can mean that even with growth you may very well come out with less than you contributed. I'd consider this carefully and speak to your financial advisor about to is before going ahead?

Thanks michelmann for your response.

2) would the age limit not apply for tax relief purposes ?

3) I'm particularly interested in this so can get as much tax relief as possible.


Your question on why I do it - I'd get tax relief on 20% of my salary at 41% and then this is taxed on exit at 20% so even if find doesn't grow its a win win. I have savings as well but this I find is good way to lock in money.

Interested in other definite answers ?

dobsdave

Carpet diem wrote: »

I've just started my pension so there wouldn't be much to take out! I don't think you read my post correctly.

You didn't explain that you were trying to pay less tax.

The J Stands for Jay

Are you planning on quiting your job before you have worked there for two years and then taking a refund of your contributions less 20% tax? If you don't plan on quitting, then you'll not get the money out of the scheme.

Carpet diem

McGaggs wrote: »

Are you planning on quiting your job before you have worked there for two years and then taking a refund of your contributions less 20% tax? If you don't plan on quitting, then you'll not get the money out of the scheme.

That's the plan unless I really want to stay . I plan to do bit of travelling, change jobs and hope to get more money due to upskilling in meantime. If I stay it will have to be for very good reasons and not laziness which has happened to me in the past!

SBarrett

Yes, it is a good way of reducing you tax. if you are already contributing the max though you can't top it up, unless you have bonuses etc that are in addition, you can put 20% of that in as an AVC.

You have to be sure that your employer doesn't waive the vesting rules though, otherwise your plan goes out the window. As it is a short term strategy, stick the money in cash. With rates so low and the management charge, you'll probably lose a 1% -2% but that's better than losing 7-8% if markets fall.

Even money launderers don't expect 100% back.

Steven