Being made redundant

kidmugsy · 16 October 2017 at 1:13AM

billpaul812 wrote: »

If I went to an IFA to help me set that up how much would be a reasonable charge for their services?

There's no need for an IFA. You can DIY as follows.

(i) Choose a provider of some sort of personal pension. The monevator blog compares charges.
http://monevator.com/compare-uk-cheapest-online-brokers/

For what it's worth we each opened a SIPP with Hargreaves Lansdown; their service is excellent and their charges are OK for modest SIPPs like ours or yours. Other firms that people hereabouts like for pensions or ISAs include Cavendish, AJ Bell, Charles Stanley Direct, Halifax, and probably others I can't remember.

(ii) Check (say) HL's website, or give them a phone call. You fill in the forms and send them your contribution (£29.6k). They claim back the tax relief from hmrc (£7.4k): it takes about 6 to 8 weeks for them to receive it. You phone hmrc (8 a.m. on Saturday is best, apparently) and explain that you want to reclaim the further £7.4k for your pocket. They will deal with it. Remember that you must tell them the GROSS amount of your pension contribution i.e. £29.6k + £7.4k = £37k.

Now, you will have to decide what to invest your pension pot in. Before spending on an IFA you could start by asking for suggestions here, or simply find a few old threads that are relevant.

On the other hand, if you do want to use an IFA you might want to bring him in earlier so you can get his views on which provider to use. I have no idea about fees: I've never used an IFA. By IFA standards the sums of money involved are pretty modest so the fees might seem disproportionately large. Or you could even consider using HL's advisory service, or their suggested default portfolios - note that I have no experience of these either.

Then again, if you plan to drawdown all the money in your new pension over the course of (say) a couple of years, you might well decide not to invest the money but just to leave it as a cash account. It'll earn negligible interest probably, but at least it will be safe from a stock market collapse.

billpaul812 · 16 October 2017 at 3:19PM

Thanks for taking the time to set it out like this, much appreciated. I will follow up on you leads.

billpaul812 · 16 October 2017 at 6:14PM

I gave Hargreaves Lansdown a ring. I hope I can summarise accurately.

First hurdle to overcome was that I can't move more than 100% of my earned income and a pension isn't earned income which means that my max annual limit is £3,600.

However, if I do it this FY, then my earned income to date is greater than the £23K that I want to invest and that can be counted, as can the tax free £30 of my redundancy payment.

As already pointed out above HL will contribute from HMRC 20% and I have to claim 20% direct from HMRC.

The gotcha though is that the only withdrawal option that will be of value is the lump sum, UFPLUS I think, (obviously anything around an annuity for such a small sum isn't going to amount to much) and that only the first 25% is tax free, the rest is taxed at 20%.

Bit of swings and roundabouts I think, although a net gain I think.

kidmugsy · 16 October 2017 at 9:40PM

billpaul812 wrote: »

I gave Hargreaves Lansdown a ring. I hope I can summarise accurately. ...

However, if I do it this FY, then my earned income to date is greater than the £23K that I want to invest and that can be counted, as can the tax free £30 of my redundancy payment.

The gotcha though is that the only withdrawal option that will be of value is the lump sum ... and that only the first 25% is tax free, the rest is taxed at 20%.

Aye, those are the rules for all of us. Note that the tax rate on "the rest" depends on your total income for that financial year. Don't let a taxable drawdown take you into higher rate tax.

kidmugsy · 16 October 2017 at 9:50PM

Another point. HMRC will probably want to compare your total pension contribution in this tax year to your Annual Allowance (£40k).

So they will add (i) the increase in value attributed to your LGPS (an arcane calculation you can't do on your own, you'd need to ask your LGPS), (ii) your AVC contributions, (iii) your gross personal pension contributions. Those will presumably add up to more than the AA.

It isn't a disaster though because you can also carry forward any unused AA from 16/17, 15/16, and 14/15. As long as the sum of those plus 17/18's £40k exceed (i) + (ii) + (iii) you'll be fine.

Being made redundant

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