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  • FIRST POST
    • Chickabee
    • By Chickabee 15th Sep 17, 11:54 PM
    • 194Posts
    • 71Thanks
    Chickabee
    Pensions - can you lose money?
    • #1
    • 15th Sep 17, 11:54 PM
    Pensions - can you lose money? 15th Sep 17 at 11:54 PM
    Despite being quite money savvy in most ways I have to admit I could write all I know about pensions on the back of a postage stamp.


    So I was hoping some pension expert could perhaps give me a little bit of guidance.


    I managed to build up about 40k work place pension with my previous employer. Its managed by Willis Towers Watson. To be honest I never paid much attention to the pension or contributed perhaps as much as I should because I've always had the probably misjudged assumption that you never know where that money is going and who knows if you will ever get it when you retire. As a result I've always been more of a saver because I know despite low returns I know I'm not losing money.
    However I have since moved to another job and joined their workplace pension. Its through Aviva and doesn't seem to have the same matched contributions that I had with my previous employer. Even still I am contributing monthly. But I wanted to ask someone that knows about pensions:
    1. can they lose value - is there a risk element?
    2. can I contribute to my 40k pension as well as my current work based pension?
    3. if I contribute to the 40k pension do I also get tax relief on my contribution or would it be deducted from my salary after tax as a private contribution?


    Thanks for any guidance
Page 1
    • xylophone
    • By xylophone 16th Sep 17, 12:01 AM
    • 22,881 Posts
    • 13,243 Thanks
    xylophone
    • #2
    • 16th Sep 17, 12:01 AM
    • #2
    • 16th Sep 17, 12:01 AM
    Is the WTW administered pension a deferred defined benefit scheme?

    The Aviva workplace pension - this?

    https://www.aviva.co.uk/business/workplace-pensions/auto-enrolment/contributions/
    • Chickabee
    • By Chickabee 16th Sep 17, 12:16 AM
    • 194 Posts
    • 71 Thanks
    Chickabee
    • #3
    • 16th Sep 17, 12:16 AM
    • #3
    • 16th Sep 17, 12:16 AM
    Thanks for responding - just checked the WTW pension and its about 44K and is called a Lifeplan investment and refers to Defined Contribution.


    As regards the current workplace one I;, not sure where I plucked Aviva from - its actually a Legal & General pension
    • ricky_v
    • By ricky_v 16th Sep 17, 12:59 AM
    • 252 Posts
    • 129 Thanks
    ricky_v
    • #4
    • 16th Sep 17, 12:59 AM
    • #4
    • 16th Sep 17, 12:59 AM
    Defined Contribution usually carry an element of risk as your contributions and your employer's contributions go into stocks/shares and/or bonds. You should beable to put your entire pot into purely a cash fund as opposed to the riskier stocks/bonds however inflation will devalue your pot over time.

    As a result I've always been more of a saver because I know despite low returns I know I'm not losing money.
    Beaware of inflation, usually inflation is more than low returns, which erodes your puchasing power over time. Don't forget the tax benefits of pension contributions. If you're in your early 50's then as much as possible should be going into your DC pension as you'll enjoy the 25% tax free lump sum in only a matter of a few years
    • xylophone
    • By xylophone 16th Sep 17, 1:08 AM
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    xylophone
    • #5
    • 16th Sep 17, 1:08 AM
    • #5
    • 16th Sep 17, 1:08 AM
    WTW would be able to tell you whether the scheme is open to new contributions - if it was a group pension scheme it may not be. (Like this? https://www.basf.com/documents/uk/UK-Pensions/Forms/Inv%20Instruction%20Form%20new%20DC%20mbrs%20BandW .pdf)

    It may be possible to transfer it to your current pension scheme or to another personal pension scheme where you can continue to contribute.

    Are you currently with RBS/Williams and Glyn?

    https://rbs.tbs.aon.com/RBS/media/default/PDFs/Current%20Pension%20Plan/Pensions_Explained_181016_2.pdf

    Re tax relief

    http://www.scottishwidows.co.uk/Extranet/Literature/Doc/FP0491

    https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief
    Last edited by xylophone; 16-09-2017 at 1:13 AM.
    • Money Help
    • By Money Help 16th Sep 17, 8:04 AM
    • 24 Posts
    • 11 Thanks
    Money Help
    • #6
    • 16th Sep 17, 8:04 AM
    • #6
    • 16th Sep 17, 8:04 AM
    The riskiness of your pensions will depend how they are invested. Investment into cash, gilts and bonds will be low risk and stocks and shares will be higher risk.

    You can contribute to as many pensions as you like as long as the total gross amount (after tax relief added) contributed by you and your employer does not exceed £40k. Your personal contributions cannot exceed 100% of your gross earnings.
    • Chickabee
    • By Chickabee 16th Sep 17, 9:46 AM
    • 194 Posts
    • 71 Thanks
    Chickabee
    • #7
    • 16th Sep 17, 9:46 AM
    • #7
    • 16th Sep 17, 9:46 AM
    Are you currently with RBS/Williams and Glyn?




    Yes joined RBS group recently


    Just turned 40 ( still trying to cope with that!) so I still hopefully have a good few years to get money into a pension.


    If you want to pay into more than one pension how do you get the tax relief on your private pensions. The workplace pension takes the contribution from my salary before tax/ni. Can private pensions deduct it from your pre-tax salary or does it work differently?
    • Linton
    • By Linton 16th Sep 17, 9:50 AM
    • 8,215 Posts
    • 8,087 Thanks
    Linton
    • #8
    • 16th Sep 17, 9:50 AM
    • #8
    • 16th Sep 17, 9:50 AM

    ...
    I wanted to ask someone that knows about pensions:
    1. can they lose value - is there a risk element?
    2. can I contribute to my 40k pension as well as my current work based pension?
    3. if I contribute to the 40k pension do I also get tax relief on my contribution or would it be deducted from my salary after tax as a private contribution?


    Thanks for any guidance
    Originally posted by Chickabee
    1) Investments in pensions can lose money. Over time, assuming the investment choice is sensible, the chance of a loss decreases to the point where it could only occur following a global economic catastrophe where any other financial arrangement including cash could be at risk as well. So you need to be looking at 5-10 years investing as a minimum.

    As others have pointed out cash savings have a greater chance of long term loss of real value because of inflation.

    2) You can contribute to as many other pensions as you like. Many employer schemes do not allow you to contribute if you are no longer an employee.

    3) If you pay taxed income into a pension HMRC directly add in the 20% tax you paid to your pension. So to get £1000 into a pension you actually pay in £800. It's the £1000 which counts against the pension contribution limits. Higher rate tax is paid to you either directly or through a change in tax code.
    • AlanP
    • By AlanP 16th Sep 17, 9:59 AM
    • 898 Posts
    • 618 Thanks
    AlanP
    • #9
    • 16th Sep 17, 9:59 AM
    • #9
    • 16th Sep 17, 9:59 AM
    If your workplace one is being done as Salary Sacrifice so you save the Tax & the NI then it would be most beneficial to pay more into that.

    PP investments out of taxed income attract tax relief but you can't get the NI back.
    • xylophone
    • By xylophone 16th Sep 17, 9:59 AM
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    xylophone
    The workplace pension takes the contribution from my salary before tax/ni.
    "Net pay"

    The other method of giving tax relief is "relief at source"

    Have you read the links on tax relief posted in post 5 above?

    Had you explored the possibility of transferring your WTW into your L&G?
    • zagfles
    • By zagfles 16th Sep 17, 10:30 AM
    • 12,261 Posts
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    zagfles
    "Net pay"
    Originally posted by xylophone
    "Before tax & NI" will be salary sacrifice. "Net pay" is where conts are taken before tax but after NI.
    • westv
    • By westv 16th Sep 17, 11:09 AM
    • 4,291 Posts
    • 1,864 Thanks
    westv

    Just turned 40 ( still trying to cope with that!) so I still hopefully have a good few years to get money into a pension.
    Originally posted by Chickabee
    I've had a number of 39th birthdays.
    • atush
    • By atush 16th Sep 17, 11:21 AM
    • 16,244 Posts
    • 9,916 Thanks
    atush
    As a result I've always been more of a saver because I know despite low returns I know I'm not losing money.
    Pensions only lose money when investments fall. But over 10 years or mroe they are the best bet.

    And you have been losing money, each year due to inflation. This is a fact that you may not have been aware of.

    If your new pension is Salary sacrifice, put in as much as you c an afford to. As each 100 into your oension is only going to cost you 68.
    • dunstonh
    • By dunstonh 16th Sep 17, 11:31 AM
    • 89,521 Posts
    • 54,969 Thanks
    dunstonh
    As a result I've always been more of a saver because I know despite low returns I know I'm not losing money.
    So, you have replaced investment risk with shortfall and inflation risk. Investments may only suffer those. Cash does suffer those.

    For long term, cash is actually higher risk when you consider all risks. you need to pay in around 3 times more than you would if you used investments. I suspect you have not been doing that. So, you have created more risk and reduced what you have by being a saver.

    Risk is not on/off. it is a sliding scale. Every option has risks, including cash. Its about being balanced with your risk. You dont need to go gung ho.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
    • xylophone
    • By xylophone 16th Sep 17, 11:50 AM
    • 22,881 Posts
    • 13,243 Thanks
    xylophone
    "Before tax & NI" will be salary sacrifice. "Net pay" is where conts are taken before tax but after NI.
    Thanks - I missed the reference to NI.

    However, I am not sure that the RBS DC is sal sac as commonly understood - do you happen to know?

    As far as I can make out, RBS pay the employees a basic salary and then 15% of salary on top which the employee can choose what to do with.

    The employee can choose to pay the 15% ( or part of it) into a group pension scheme scheme.

    Again, (as I understand it), the employee can choose to contribute amounts over and above the 15% into the DC pension if they so choose.
    • kidmugsy
    • By kidmugsy 16th Sep 17, 12:05 PM
    • 9,629 Posts
    • 6,384 Thanks
    kidmugsy

    Saving more; it’s easy and won’t cost as much as you think
    Originally posted by xylophone
    I hate it when a clairvoyant tells me what I think.
    • xylophone
    • By xylophone 16th Sep 17, 12:19 PM
    • 22,881 Posts
    • 13,243 Thanks
    xylophone
    https://rbs.tbs.aon.com/RBS/media/default/PDFs/RBS%20Group%20Retirement%20Savings%20Plan/RBS_2016-newsletter_PRINT_03-01-17.pdf


    Saving more; it’s
    easy and won’t cost
    as much as you think
    It’s easy for bank employees to
    save more into their Individual
    Accounts in the Plan. Using
    RBSelect, you can choose to
    use more of your ValueAccount
    towards your Plan savings at any
    time. This means you save tax and
    National Insurance too


    This post is now out of order as I was attempting to edit the previous.

    I am still not sure about the salary sacrifice angle even after having read through the above.
    • zagfles
    • By zagfles 16th Sep 17, 1:09 PM
    • 12,261 Posts
    • 10,204 Thanks
    zagfles
    Thanks - I missed the reference to NI.

    However, I am not sure that the RBS DC is sal sac as commonly understood - do you happen to know?

    As far as I can make out, RBS pay the employees a basic salary and then 15% of salary on top which the employee can choose what to do with.

    The employee can choose to pay the 15% ( or part of it) into a group pension scheme scheme.

    Again, (as I understand it), the employee can choose to contribute amounts over and above the 15% into the DC pension if they so choose.
    Originally posted by xylophone
    Sorry don't know anything about that specific scheme, but if the 15% can be taken as salary, then it is really a salary sacrifice arrangement.

    It doesn't affect pensions, but the govt have new rules about sal sac where if someone has a cash alternative option to a benefit (eg a company car), then they will consider it a sal sac and the employee will be taxed on the higher of the BIK value or the cash alternative option.

    See https://www.clm.co.uk/company-car-tax/#cash
    • Chickabee
    • By Chickabee 16th Sep 17, 1:32 PM
    • 194 Posts
    • 71 Thanks
    Chickabee
    Thanks - I missed the reference to NI.

    However, I am not sure that the RBS DC is sal sac as commonly understood - do you happen to know?

    As far as I can make out, RBS pay the employees a basic salary and then 15% of salary on top which the employee can choose what to do with.

    The employee can choose to pay the 15% ( or part of it) into a group pension scheme scheme.

    Again, (as I understand it), the employee can choose to contribute amounts over and above the 15% into the DC pension if they so choose.
    Originally posted by xylophone


    As far as I'm aware with the RBS scheme the 15% salary top up can all be taken as cash and to be honest most people tend to take it as cash and very few pay into the work pension.
    They advertise their jobs with the additional 15% included in the starting salary. Which if I'm honest I think is a slightly sneaky way of making you think your salary is higher than what it actually is. If you do then opt to say put £100 into your pension each month RBS don't match any contributions. Its just your own contributions going in there. At least with my last job they had a good matched scheme where they matched more than you actually put in. Can't remember the full break down but if you put in 5%, they put in 8% . That's what gives me doubts about this pension as there is no matched employer contributions
    • xylophone
    • By xylophone 16th Sep 17, 2:25 PM
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    • 13,243 Thanks
    xylophone
    If you do then opt to say put £100 into your pension each month RBS don't match any contributions
    http://jobs.rbs.com/pages/reward-and-benefits

    RBS regard the "Value Account" as their contribution.

    https://rbs.tbs.aon.com/RBS/media/default/PDFs/RBS%20Group%20Retirement%20Savings%20Plan/RBS_2016-newsletter_PRINT_03-01-17.pdf



    The Plan is a valuable part of your benefits package. The bank wants to support you to save for retirement and the Plan is designed to make an important contribution to your retirement income. Your ValueAccount includes an amount from the bank towards a pension that you can choose to pay into the Plan.

    Our role as Trustees is to help you make the most of this significant benefit.
    We do this by providing you with information and support to explain the
    options and benefits available in the Plan. We also select and monitor the
    range of investment options and design the default investment strategy (for members who don’t want to make their own investment choice)
    .

    Were you given a copy of https://rbs.tbs.aon.com/RBS/media/default/PDFs/Current%20Pension%20Plan/Pensions_Explained_181016_2.pdf

    No matter what elections I make, the total pension
    cost currently paid by the bank is 15%.


    Are you a member of the
    RBS Group Retirement Savings Plan?

    Where does L&G come into it?
    Last edited by xylophone; 16-09-2017 at 2:28 PM. Reason: add
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