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    • billpaul812
    • By billpaul812 3rd Oct 17, 10:20 AM
    • 53Posts
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    billpaul812
    Being made redundant
    • #1
    • 3rd Oct 17, 10:20 AM
    Being made redundant 3rd Oct 17 at 10:20 AM
    Hope this is the right forum for this advice request, please advise if not.

    I'm a member of the LGPS and am being made redundant nearly 4 years before my NRA. This leaves me approx 5K short of my projected final pension of £30K, quite a wack. I'm prepared to carry on working but locality is such that I feel its unlikely that I will get a job with access to the LGPS.

    Any advice on what I can do for the best please in terms of maximising post retirement income.

    Thanks.
    BP
Page 2
    • billpaul812
    • By billpaul812 4th Oct 17, 3:29 PM
    • 53 Posts
    • 3 Thanks
    billpaul812
    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.
    • xylophone
    • By xylophone 4th Oct 17, 4:17 PM
    • 23,646 Posts
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    xylophone
    Have you looked at post 18?

    Your employer is making you redundant - has no advice or assistance been offered regarding your options/pension etc?
    • AlanP
    • By AlanP 4th Oct 17, 4:55 PM
    • 993 Posts
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    AlanP
    Have you looked at post 18?

    Your employer is making you redundant - has no advice or assistance been offered regarding your options/pension etc?
    Originally posted by xylophone
    I suspect some LA employers are "better" at that than others unfortunately.
    • AlanP
    • By AlanP 4th Oct 17, 5:07 PM
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    AlanP
    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.
    Originally posted by billpaul812
    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.
    • billpaul812
    • By billpaul812 4th Oct 17, 7:50 PM
    • 53 Posts
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    billpaul812
    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.
    • billpaul812
    • By billpaul812 4th Oct 17, 8:02 PM
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    billpaul812
    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.?
    • AlanP
    • By AlanP 4th Oct 17, 8:51 PM
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    AlanP
    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.
    • billpaul812
    • By billpaul812 4th Oct 17, 9:11 PM
    • 53 Posts
    • 3 Thanks
    billpaul812
    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?
    • mgdavid
    • By mgdavid 5th Oct 17, 1:21 AM
    • 5,281 Posts
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    mgdavid
    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.
    A salary slave no more.....
    • billpaul812
    • By billpaul812 5th Oct 17, 11:10 AM
    • 53 Posts
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    billpaul812
    Understood and thanks. Would this something that I can demand or is there an element of some employers do it some don't?
    • AlanP
    • By AlanP 5th Oct 17, 1:22 PM
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    AlanP
    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.
    Last edited by AlanP; 05-10-2017 at 1:25 PM.
    • billpaul812
    • By billpaul812 5th Oct 17, 7:12 PM
    • 53 Posts
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    billpaul812
    Thanks again Alan
    • AlanP
    • By AlanP 5th Oct 17, 7:59 PM
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    AlanP
    Thanks again Alan
    Originally posted by billpaul812
    No problem, glad to be of help.

    Let us know how you get on as others might want to go down the same route at some stage.
    • billpaul812
    • By billpaul812 10th Oct 17, 10:53 AM
    • 53 Posts
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    billpaul812
    I've just had a chat with my AVC people and it seems that paying my lump sum into my AVC as suggested above is a non starter for the following reasons.

    1. I can only pay pensionable pay into an AVC
    2. The amount that I can pay into my AVC is capped at 50% of my pensionable pay

    Any suggestions other than just ploughing as much as I can afford into my AVC for the next 3 months?
    • AlanP
    • By AlanP 10th Oct 17, 1:23 PM
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    AlanP
    That's a shame. I wasn't aware of the "pensionable pay" criteria but having taken a closer look I can see it here, about halfway through the AVC section:

    https://www.lgpsmember.org/arm/already-member-extra.php

    I guess you have a pre-2014 AVC scheme to be limited to 50% of salary.

    Ploughing as much as you can in over next few months may be the best you can do in the circumstances.
    • billpaul812
    • By billpaul812 10th Oct 17, 1:40 PM
    • 53 Posts
    • 3 Thanks
    billpaul812
    Yes, my AVC has been running for about 8 years.

    Thanks again for your advice.
    • bigadaj
    • By bigadaj 10th Oct 17, 3:47 PM
    • 10,803 Posts
    • 7,100 Thanks
    bigadaj
    That's a shame. I wasn't aware of the "pensionable pay" criteria but having taken a closer look I can see it here, about halfway through the AVC section:

    https://www.lgpsmember.org/arm/already-member-extra.php

    I guess you have a pre-2014 AVC scheme to be limited to 50% of salary.

    Ploughing as much as you can in over next few months may be the best you can do in the circumstances.
    Originally posted by AlanP
    Why not pay any excess that can't be put into the AVC imto a personal pension or sipp, with similar tax savings, though without NI. Tax it need to be reclaimed but the net effect would be similar.
    • AlanP
    • By AlanP 10th Oct 17, 10:02 PM
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    AlanP
    I was thinking that after I posted my comment. Would need to be done this tax year whilst there is enough qualifying income but certainly worth running the numbers.

    I don't think the net effects would be quite the same as the OP would be taxed on 75% of what was taken out of the PP whilst the LGPS AVC would be tax free in its entirety.

    If nothing else it would get the tax paid on the over £30k portion into a pension pot belonging to the OP.
    • kidmugsy
    • By kidmugsy 10th Oct 17, 10:26 PM
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    kidmugsy
    Would need to be done this tax year whilst there is enough qualifying income.
    Originally posted by AlanP
    Agreed!

    Is there any chance that paying more National Insurance Contributions could be worthwhile in terms of a bigger State Retirement Pension?
    • billpaul812
    • By billpaul812 11th Oct 17, 11:46 AM
    • 53 Posts
    • 3 Thanks
    billpaul812
    Why not pay any excess that can't be put into the AVC imto a personal pension or sipp, with similar tax savings, though without NI. Tax it need to be reclaimed but the net effect would be similar.
    Originally posted by bigadaj
    Thanks for the suggestion, putting in my own words to check whether I've understood!!

    I have a £67K lump sum.
    Deduct the tax free £30K.
    Deduct tax @ 40% from the remaining £37K (=£14K) leaving £23K.
    Pay that £23K in a personal pension or SIP and then I will be able to claim the £14K back from the tax man?


    So I put the £23K (that is left after deduction of the tax free £30K and the 40% tax on the remainder tax into a PP or SIP and then i will be able to reclaim the £14K tax that my employer deducted?
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