DC Pension Scheme
GoingSolo
Posts: 73 Forumite
I'm taking early retirement end of June 2015 but I have to join the new DC scheme to retain death in service and other benefits. I won't need to keep the DC scheme open as I'll be talking my works pension and don't plan to have another pension so am I right in thinking I get all of my contributions back plus what ever my employer has put in?
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I'm taking early retirement end of June 2015 but I have to join the new DC scheme to retain death in service and other benefits. I won't need to keep the DC scheme open as I'll be talking my works pension and don't plan to have another pension so am I right in thinking I get all of my contributions back plus what ever my employer has put in?
It depends on the DC arrangement if it is an occupational pension or contracts based, i.e. with a third party provider. I presume it is the latter, and so you won't receive a full refund of your contributions plus your employers payment unless it is done within the 30 day cooling off period (even then it is typically just your own contribution only). In terms of the 'short service refund' if you've been in an occupational DC scheme for less than 2 years, the government is closing this 'loophole' shortly to bring it in line with all other DC arrangements as well as the proposed "pot follows member" rule.
You are able to draw this pot out if it remains small (under £10,000) under the small pots rule, and 25% will be tax-free while the remaining 75% will be taxed as income for the year.
If it is over this amount, then theoretically you can enter into income drawdown to exhaust the pot. Taxation is the same as above.Stephen Covey once said that "when you teach once, you learn twice". That is the primary reason for my participation on the forums as an IFA.
Although I strive to provide accurate information in my posts, there may be the odd time when I fail. Yes I know it's hard to believe but even Your Hero can make mistakes. Apologies in advance.0 -
It depends what you mean - is it that you need to join the new DC scheme now but will be leaving that as well in June 2015?
If so, there's a good chance you'll be able to take it as a small pot, as YourHero says - unless you and your employer are going to pay a lot in over the next ten months and the fund value goes over £10,000. However, even if it does go over that amount, you should then be able to take it as a lump sum under the new flexibilities being introduced from April 2015 - although you may have to transfer it to a new provider in order to do so, and take a hit on any associated fees.
If you take a lump sum in one of these ways, then again as YourHero says, 25% will be tax-free and 75% will be taxed as income received in the tax year in which it is paid. The gross amount of the lump sum will be your contributions and your employer's contributions, plus (or minus) any investment return over that period.I am a Technical Analyst at a third-party pension administration company. My job is to interpret rules and legislation and provide technical guidance, but I am not a lawyer or a qualified advisor of any kind and anything I say on these boards is my opinion only.0 -
How big do you expect your DC fund to be by June 15?Free the dunston one next time too.0
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From me six payments of £168 = £1008 and the employer puts in 18% of salary so circa £7560 from them. So in total about £8568.0
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From me six payments of £168 = £1008 and the employer puts in 18% of salary so circa £7560 from them. So in total about £8568.
Well worth it then. I suggest that in June '15 you will have a choice between withdrawing all or part of it (after transfer if necessary) or transferring it to (say) a SIPP that will let you invest in things not permitted in (say) an ISA, or that are less tax-efficient to hold in an ISA. For instance, holding some overseas shares in a pension rather than an ISA can let you avoid their home government's Withholding Tax on the dividends, and some of the provider's Foreign Exchange charges. Or you could buy US Treasuries directly, rather than being restricted to buying an ETF of them, with its associated charges. Whether these advantages amount to a row of beans is for you to decide.
There's also the potential advantage that an uncrystallised pension can be directed to your widow or dependants as a lump sum, tax-free, if you die before age 75. It's quick money too; it doesn't need to wait for probate because it's not part of your "estate".Free the dunston one next time too.0 -
GoingSolo, best check the terms and conditions of the scheme, i have also joined the company pension scheme before auto enrolment, again for the death in sevice benefit ( hope it is not needed! ) but if i leave it before TWO FULL YEARS i only get back my payments and any gain or loss,after two years i get back mine and what the company pays in.
Regards
Ganga:)ITS NOT EASY TO GET EVERYTHING WRONG ,I HAVE TO WORK HARD TO DO IT!0 -
Now looking into putting severance pay circa £72k into pension pot so as not to pay 40% on it. Also may have another £8k from the company that I plan to plough in if I can get my hands on it. We can also pay in any bonus and overtime payments we get.
Better start doing some OT from 01-01-15 then.
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