[Closed] Pension Rules - Transfers etc. - URGENT

Note, while pensions are a good way to access free cash (tax free), any money put into a pension can only be got out under strict rules.

Firstly IANAFA

1) There is a limit, but it'll depend on your salary

2) Yes you can transfer it elsewhere. But it depends on a: type of pension, and b: how much is in it. If it's £30k+ you'll certainly need a FA for this

3) There may be differences/consequences as an ex-employee (there was with mine, so my transfer was instigated before leaving) Though it may be a little late for you now

4) Yes, but you might have to wait a bit for it. I got a tax rebate (not pension related) in late October

It's probably worth getting an informal chat with a FA to see what your options are, before making any decisions (it should be free before they start any proper work)

https://www.pensionsadvisoryservice.org.uk/

boombang:
Very helpful

From a pensions point of view, redundancy gives you several choices. You can keep your pension benefits where they are, and even continue contributing to the workplace scheme. Or, you can transfer what you’ve saved to a new pension scheme.

You can also use part of your taxable redundancy payment, to make pension contributions.

andy5390

2) Yes you can transfer it elsewhere. But it depends on a: type of pension, and b: how much is in it. If it’s £30k+ you’ll certainly need a FA for this

Yep, the real Q is if I can just pay in the max up to the limit (seems top be £40k) and then mo0ve the whole thing later with the help of a FA.
I have numerous bits of pensions scattered about... (well presumably, unless I've lost them by not notifying of change of address or something)

intheborders

Note, while pensions are a good way to access free cash (tax free), any money put into a pension can only be got out under strict rules.

By got out does than mean transferred to another pension or do you mean actually taken out?

IANAFA either, my answers:

1) It sounds like you have a Defined Contribution (DC) pension scheme, where the pension you get depends on how much is put in and how it's invested, and not on your salary. The annual limit is £40k, and both your contributions and your employer's are counted. You can carry forward unused allowance from the 3 previous years. If you go over the limit you pay silly tax.

2) I think you can transfer a company DC pension, but it's not an area I've any experience in.

3) If you're putting it in the company scheme I think you have to do it before you leave. After that, you can put it in a SIPP and get the same tax advantages. Key point is whether the company 'matches' what you put in to any extent - if so, that's obviously best.

4) Yes, you can claim back tax, it doesn't matter when in the tax year you paid into the pension or whether tax was paid at the time.

BUT beware that Sunak is thinking about changing the tax rules for pensions because of the amount spent on Covid, so leaving it might be risky. Changes are unlikely to affect payments made before the change is announced, but it might happen part way through the tax year.

I a n a f a
You can withdraw 2 x small pot pension under 10k in a 12mth period

Once you reach 55. Then you have to crystallise your remaing lump sum 25% tax free lump sun rest in fraw doen or money purchave annuity

All pensilns shoild be portable.

Costs really eat into profits esp as numbers go over 100k

You get tax back at current rate grossed up by hmrc, then ypu pay tax on the 75% at your then rate. So if you can surbive on 12k thsts great till you get your stste pension 165 a week

Vanguard life strategy funds for across the board worldwide investments at low cost, passive trackers mostly.

You need some rsiny day money so get an isa too

Limits are age dependent and i am sure you cam back track to get the full 40k taxable e benefits

Using your redundancy to boostbyour pensipn is wise. Almost certain you do mot have to add into a company scheme, unless it was old school final salary based, as these are often worth keeping

Greybeard

Brill, thanks ... I am trying to get a FA but due to the time of year/COVID etc. I might have to just take a stab based on what I can find out. Ideally I'll find an option lets me decide the final place later with more time and considered advice.

Pretty sure its a DC and the 40k is what it said ...

You can carry forward unused allowance from the 3 previous years.

That's gold... I hadn't realised that.

BUT beware that Sunak is thinking about changing the tax rules for pensions because of the amount spent on Covid, so leaving it might be risky. Changes are unlikely to affect payments made before the change is announced, but it might happen part way through the tax year.

Good to know...

singletrackmind

So if you can surbive on 12k thsts great till you get your stste pension 165 a week

Yeah, my biggest concern is after retirement (or even retiring at all). Between now and then I'll make enough somehow/have enough saved etc. so long as I'm reasonably healthy.

Its worth noting the 40k limit reduces if you're a very high earner (used to be over 120k or something, its now more, maybe double that?). I assume this may not affect you but worth mentioning.

If you run out of limit, there are other tax efficient ways to save, for example eis and vct

I'm not a financial adviser either, but I administer a large final salary scheme (30,000+ members) for a plc, so I have some idea, especially of the gaps in my knowledge.

If you’re being made redundant and particularly if you’re being asked to make a decision on pension provision, you should ask your employer about financial advice. Or your union/professional body, if you're in one.

Be very wary of believing 'advice' on the internet - quite lot of the comments above are wrong - for instance:

2) Yes you can transfer it elsewhere. But it depends on a: type of pension, and b: how much is in it. If it’s £30k+ you’ll certainly need a FA for this

- actually, yes you can transfer, and that does not depend on the type of pension. Whether or not you need advice does depend on the type of pension (and the CETV being over £30k)

Once you reach 55. Then you have to crystallise your remaing lump sum 25% tax free lump sun rest in fraw doen or money purchave annuity

- no - there is absolutely no requirement to crystallise benefits at any age (unless the Scheme rules specify one), although they will be tested against the Lifetime Allowance at age 75 if not already crystallised.

Limits are age dependent

- they haven’t been since 2006 (possibly earlier, but I wasn’t dealing with money purchase schemes back then)

Its worth noting the 40k limit reduces if you’re a very high earner (used to be over 120k or something, its now more, maybe double that?). I assume this may not affect you but worth mentioning.

Yeah I escape that ...

If you’re being made redundant and particularly if you’re being asked to make a decision on pension provision, you should ask your employer about financial advice. Or your union/professional body, if you’re in one.

Be very wary of believing ‘advice’ on the internet – quite lot of the comments above are wrong – for instance:

Yeah what the employer provide is fixed ... not going to change or be open to negotiation.
It's obviously XMAS (when they traditionally do these VR offers) in part so they can shed a load of costs in this financial year so I understand the other parts but it's not clear to me why the deadline for accepting the offer has to be tied to deciding what to do with the pension but it is.
The first challenge was finding a solicitor with some very specific requirements. My first stop was a family friend who is a specialist HR lawyer who replied "sorry" as they couldn't meet the requirements and the company wouldn't budge. Tried a few more all with the same answer then remembered a friend is a recruiter for legal firms... pinged him and he came back with some hens teeth and rocking horse poo.

Tried 5-6 and got one who could do me before XMAS. Anyway the first stage was a full time job so I elected to get that done then work out the pension part.

– actually, yes you can transfer, and that does not depend on the type of pension. Whether or not you need advice does depend on the type of pension (and the CETV being over £30k)

Yeah its WELL over 30k and I'll get a FA ... the main decision I need to make is if I can pay the excess into the contributions pension now and then sort it out in the New Year. I did try my cousins FA who said yes then went quiet and I'm just getting OOO replies and don't really want to spend XMAS trying to find alternative ones only to then find he picks up on the 26th...

The 3 prev years (I didn't know about) means I can just about get all of it above 30k into a pension on my first spreadsheet calc. befopre the thread I didn't know if I could do that (and get tax relief) or not.

More details about the 3 years:

https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/pensions-and-tax/carry-forward

Note that you can only get tax relief on pension contributions up to your earnings this year, that may be a problem. But your taxable pay this year will include the taxable element of your redundancy pay, so it might not...

Whilst the annual allowance limit is £40k and you can carry forward unused allowance from 3 previous tax years, a key point is that your tax relievable contributions are limited to 100% of your earnings in the tax year. So for example if you earned £60k in the current tax year, that's your maximum total employer/employee contributions including any carry forward.

If it is a DC pension, you don't need an IFA to transfer, you could feasibly do this yourself but financial advice would be a better route if you aren't sure what you are doing and some products will not be accessible on a non advised basis.

First of all congratulations on getting VR. Assuming your last day is December 31st won’t your payoff come through in the January pay run? If so you should be able to ask HR to put through a change to make a £xxx contribution to your pension.

So for example if you earned £60k in the current tax year, that’s your maximum total employer/employee contributions including any carry forward

Incorrect

Whats with the time limit? You can take all the money as cash now, and have until April to pay in into a pension scheme, but its worth baring in mind you will pay tax on it up front (60% between 100 and 120k) and then get that back as cash (not pension) when you claim it back. You also can't claim ni contributions back (you may not pay these if the company can put the payment direct into a pension scheme)..

Go on superstu, enlighten us

First things first, confirm if you’re DB (final salary) or DC. It sounds like you are DC (and I will assume as such for remainder of my post) but the type of pension you’re in changes a) annual contribution rates - the limit is still £40k but it’s more complicated calculation for DB and b) how easy it is to transfer.

I don’t understand why the company is tying the two together - I suspect they are saying if you want to make an AVC payment from your VS into their scheme, they have to know now while you’re still an employee.
there is no requirement to pay into your current scheme however, as mentioned above you can pay into any pension before end of tax year and claim the tax back (although not NI as mentioned above)

Assuming it’s a DC scheme you should be able to transfer your work scheme relatively easily when you leave - although if the fee’s are reasonable and you’re happy with the investments, depending on the rules of the scheme, you don’t have to leave. Most allow you stay a member and The money can stay invested whilst not actively contributing.

You mention other pension schemes from previous employment. It’s worth spending some time tracking these down. They’ll still be invested and rightfully yours. Assuming identical fees and investment performance (which won’t be the case) there is no financial gain from consolidating pensions, but from an administration point of you it’s a no brainer. So I’d recommend combining all your work pensions into one or two pension schemes at some point in the future.

If they’re DC pensions you can do this all yourself, but it’s sounds like you want an IFA to do this (sensible) so all I will say is FEE’s!

If you go with an IFA then you must scrutinise both the fee’s for their time and the fee’s of the pension scheme they’re recommending. Fee’s matter in investments / pensions - Percentages seem small but compounded over many years they eat into your pot in a big way.

IANAFA.

Good luck!

First of all congratulations on getting VR. Assuming your last day is December 31st won’t your payoff come through in the January pay run? If so you should be able to ask HR to put through a change to make a £xxx contribution to your pension.

Cheers ..

I don’t understand why the company is tying the two together – I suspect they are saying if you want to make an AVC payment from your VS into their scheme, they have to know now while you’re still an employee.

I guess it's just convenient for them to wrap everything up and there will be even fewer admin type people left than the current minimalist ones.

there is no requirement to pay into your current scheme however, as mentioned above you can pay into any pension before end of tax year and claim the tax back (although not NI as mentioned above)

Well that seems worth it ... I'm pretty sure it's DC and the standard life website I now have access to allows me some options to consolidate other pensions so I'm assuming that part more so.

If you go with an IFA then you must scrutinise both the fee’s for their time and the fee’s of the pension scheme they’re recommending. Fee’s matter in investments / pensions – Percentages seem small but compounded over many years they eat into your pot in a big way.

This seems like a good reason as well to just max out on the current scheme then shop around later.

Whilst the annual allowance limit is £40k and you can carry forward unused allowance from 3 previous tax years, a key point is that your tax relievable contributions are limited to 100% of your earnings in the tax year. So for example if you earned £60k in the current tax year, that’s your maximum total employer/employee contributions including any carry forward.

Just checking but I assume that is pre-tax/NI basic earnings minus any non-taxable benefits such as health insurance?

In which case I should be fine ...

from 3 previous tax years

It might not make a difference but is that 3 including this or 3 in total?

is that 3 including this or 3 in total

Neither (they're the same thing?) - it's the 3 previous years to this one, ie, not including this one.

Neither (they’re the same thing?) – it’s the 3 previous years to this one, ie, not including this one.

Cheers, I could have worded that better 😉 but that's good.

Does anyone know, do I need to "claim" or notify them/someone I'm using the previous 3 yrs or is it automatic?

I took VR 5 years ago and my payment was over £30k the balance I paid into my final salary scheme as an AVC (tax free) the rest (£30k) went in the bank (wish it was still there) I recall asking the HR team for more advice at the time but they were made redundant before I got an answer, I left my company on last day of November and was asked also to make decisions before end of year, fortunately for me I'd been aware of the sums for 2 months so was able to make informed decisions.

Good luck with the future

do I need to “claim” or notify them/someone I’m using the previous 3 yrs or is it automatic

I just kept careful records of what I'd put in, and was never asked for them. I don't remember any forms that asked what my annual contribution was. That was about 6 years ago, it might have changed but I don't see why it should have.

Sent you a pm

Is the tax releif amount imcl or excl ypu tax free personal allowance
Eg. I earn 20k but put 20k in a ppp as a lump sum, Is 20k or 8k the tax relief amount, with 12k being my personal allowance

You should only get tax relief on tax you have paid. For that first 12k you should get nothing as you have paid nothing, however as the first 20% is thrown on by your pension provider (if you contribute manually), I have no idea how this works.

You should only get tax relief on tax you have paid

You might think that, but there is no requirement to pay tax, or even have an income to pay £2,880 into a personal pension, and the contributions will be grossed up to £3,600 (my maths may be shonky - I don’t do this for a living). Beyond that it depends on the type of pension (personal pension, or occupational). For personal contributions to an occupational scheme, the deductions are before tax (after NI), so you get relief at your marginal rate; for personal pensions, you pay from net pay, and the provider claims basic rate tax back from HMRC, and you claim the difference to higher rate(s) through your tax return. And if your employer operates a pay sacrifice arrangement, it's different again (and I think the redundancy situation would be sacrifice).

2) Yes you can transfer it elsewhere. But it depends on a: type of pension, and b: how much is in it. If it’s £30k+ you’ll certainly need a FA for this

Yeah its WELL over 30k and I’ll get a FA …

You only need a IFA if it's a defined benefit pension (final salary). You can transfer a Defined Contribution pension by just filling in a single form with your new provider authorising the transfer, they then collect it from your existing provider. I've moved loads around over the years, consolidating various schemes.

You should only get tax relief on tax you have paid

You might think that, but there is no requirement to pay tax, or even have an income to pay £2,880 into a personal pension

It's true that if you are a non-taxpayer, you can pay £2,880 into a pension and it will be grossed up as if you'd paid tax, but if you've paid income tax, which it's fair to infer that the OP has or will do, you can't get tax relief on more than you've earned that year.