Being made redundant
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Have you looked at post 18?
Your employer is making you redundant - has no advice or assistance been offered regarding your options/pension etc?0 -
billpaul812 wrote: »Thank you all for your thoughts.
Have to admit I hadn't considered that the £25K I will get now will grow slightly so in 2021 it won't be the £5K difference that it looks like now. Only thing is I suppose is did that £30K projected (2021) figure I've been given allow for growth because if it didn't that would have grown too, so back to square one.
AlanP, so if my redundancy lump sum is £67K, you are saying that I ask payroll to pay £37K straight into my AVC, yes I do have a small one. So does this reduce the tax I pay, not quite sure how it works and what the gain is? I did ask payroll a while ago to do an estimate for me and they said that £67K would become £53K so worth doing something to improve that. Thanks again for your advice.
On the first point - If your LGPS statement is like mine the "at NRA" figure is based on carrying on working for N-years on current salary. In effect the CARE element will be increased by (1/49th Salary * N-Years) so no "growth" allowance.
If you think about that the pension admin people do not know what annual increment you will get (if any), nor whether you will get a promotion so they can only base it on "as paid now".
On the second point - Instead of taking that £37k as taxable income (and losing £14k as it will be at HR 40% tax by the looks of it) you pay it into the AVC and pay no tax as it is not being paid to you as taxable income and pension contributions come off Gross Salary before tax due is calculated.
You then take the AVC as the (up to) 25% tax free element associated with starting to draw a pension.
To calculate how much you can get:
((20 * Annual Pension) + AVC Pot + Accrued Lump Sum from the pre-2008 1/80ths scheme) * 25%
If the (AVC Pot + Accrued Lump Sum) is less than that calculation you are good to go.
So based on the figures you have given us so far:
((20 * 25,000) + £37,000 (?) + Accrued Lump Sum)) * 25% is going to be at least £134,250.
Unless you already have a lot in the LGPS AVC it should all work out for you.
What I will be doing as I get closer to retirement is paying as much as I can into the AVC, living off savings and/or 0% credit card for a while if necessary to get it as high as possible, ideally paying no tax at all for the last 12-24 months before going.0 -
Your employer is making you redundant - has no advice or assistance been offered regarding your options/pension etc?
Only got told Monday, have a meeting this Monday to discuss things. That's why I'm trying to get my ducks in row with the help of you guys.0 -
Thanks again Alan, given that by the time this all winds through ie a meeting week will be the start of a 30 day consultation period and at the end of that I will be formally be made redundant and get paid 3 months salary (because of my position I'm on gardening leave, ay least I am at the moment), my pension will start early Feb 2018. I'm a bit worried about resistance to asking them to pay £37K of my lump sum into my AVC (I'm well below the threshold by the way) and then saying at the same time start my pension and pay me the AVC as a lump sum. So would it be better, ie reduce risk of resistance if I defer payment of my pension / AVC until April 2018 ie by roughly six or seven weeks. I'm just thinking this gets me into a new tax year. Is this beneficial / necessary.?0
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I don't think you will have the option of delaying the start of the pension in a redundancy, and Over-55, situation.
Where do you think the resistance might come from?
Your employer will pay the same amount whether you put it into a pension or not.
The main pension LGPS Scheme will pay out exactly the same whether you put it into an AVC or not.
When you have the meeting ask them? They might need to check with Payroll / Pension around timings but in principle it's your money once it goes onto your payslip so what you do with it is up to you.0 -
Where do you think the resistance might come from?
Dunno, just a feeling that it might not go well!!
Your employer will pay the same amount whether you put it into a pension or not.
The main pension LGPS Scheme will pay out exactly the same whether you put it into an AVC or not.
Ok, but how much do I gain and where does that come from?0 -
you gain £14000+, it being 40% higher rate tax on the redundancy amount above £30k.
It is not taxable going into the AVC, and the AVC is withdrawn as part of the '25% tax free lump sum' which you are entitled to when you start being paid the pension.The questions that get the best answers are the questions that give most detail....0 -
Understood and thanks. Would this something that I can demand or is there an element of some employers do it some don't?0
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You need to discuss the options with your HR/Payroll/Pensions people but I cannot see any reason why they should refuse, nor am I aware of any reason why they could refuse (but haven't looked into it particularly).
I doubt if you would be the first person to ask about this given the number of rounds of restructuring / redundancies that have gone on over the last few years at LAs.0
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