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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 3
    • AlanP
    • By AlanP 11th Oct 17, 12:13 PM
    • 998 Posts
    • 708 Thanks
    AlanP
    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?
    Originally posted by billpaul812
    Personal Pension Provider will automatically claim / add BR tax element for you, so increasing the value of your pot, leaving you to claim the difference from HMRC.

    That might be provided by way of Tax Code Adjustment as opposed to cash in hand, either way it does not end up in your pension pot.

    Withdrawals from the PP will be taxable (except for the 25% TFLS), but likely to be at BR unless your LGPS pension is very high.
    • kidmugsy
    • By kidmugsy 11th Oct 17, 12:18 PM
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    kidmugsy
    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?
    Originally posted by billpaul812
    Not quite. You contribute 80% of the £37k (£29.6k), the taxman pays the other 20% into your pension fund (£7.4k), and you reclaim the further 20% for your pocket (£7.4k).
    • billpaul812
    • By billpaul812 12th Oct 17, 8:53 PM
    • 53 Posts
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    billpaul812
    If I went to an IFA to help me set that up how much would be a reasonable charge for their services?
    • xylophone
    • By xylophone 12th Oct 17, 11:51 PM
    • 23,666 Posts
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    xylophone
    Have you obtained a state pension statement?

    https://www.gov.uk/check-state-pension

    With regard to the IFA, you could ring round for quotes.

    https://directory.moneyadviceservice.org.uk/en

    Or you might open a SIPP or other personal pension.

    http://www.hl.co.uk/pensions/sipp

    https://www.cavendishonline.co.uk/pensions/

    Relief at source will mean that basic rate tax relief will be claimed by the provider.

    You will need to contact HMRC to reclaim the higher rate tax relief.
    • billpaul812
    • By billpaul812 14th Oct 17, 11:21 AM
    • 53 Posts
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    billpaul812
    Yes I have checked my state pension position but I don't get that for nearly 4 years.
    • Silvertabby
    • By Silvertabby 14th Oct 17, 12:37 PM
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    Silvertabby
    Yes I have checked my state pension position but I don't get that for nearly 4 years. Posted by billpaul812
    xylophone meant have you checked the amount of your State pension. As you were contracted out for at least the time you were in the LGPS (until 2016) then you are unlikely to get the full single tier £160 per week.
    • xylophone
    • By xylophone 14th Oct 17, 2:21 PM
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    xylophone
    What does your statement say?
    • billpaul812
    • By billpaul812 15th Oct 17, 10:55 AM
    • 53 Posts
    • 3 Thanks
    billpaul812
    I'll post back with what my state pension statement says but the .gov service is unavailable at the moment. My recollection was that it was £140 ish, but can't recall if that was the current or predicted value.
    • billpaul812
    • By billpaul812 15th Oct 17, 3:05 PM
    • 53 Posts
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    billpaul812
    State pension forecast is £145 a week which is dependent on me continuing to pay NI, which I think I will stop paying now that I am drawing my pension?

    Is there anyway to get a statement of my current position or am i missing something?
    • Silvertabby
    • By Silvertabby 15th Oct 17, 3:50 PM
    • 1,936 Posts
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    Silvertabby
    State pension forecast is £145 a week which is dependent on me continuing to pay NI, which I think I will stop paying now that I am drawing my pension?

    Is there anyway to get a statement of my current position or am i missing something? Posted by billpaul812

    Assuming you are about 62 then, if you don't pay any further NI, your current State pension will be something like £127 per week.


    However, you could still get £145 by paying voluntary Class 3 NI contributions.


    In round figures, that would cost you £3K (£750 per year for 4 years) which is a very good return for an extra £18 per week of additional State pension for the rest of your life. Even if you pay tax, making this £18 £14.40, then you will break even after just 4 years.
    • xylophone
    • By xylophone 15th Oct 17, 4:24 PM
    • 23,666 Posts
    • 13,791 Thanks
    xylophone
    If you get a job after redundancy then it is likely that you will be earning enough to pay NI up to state pension age.

    It is likely that you have already earned enough in this tax year and therefore paid enough in this tax year for it to be a qualifying year.

    You can check the current position on line.

    If you do not return to work or do not earn enough for NI paid or credited, then you can make voluntary contributions.

    https://www.royallondon.com/Global/documents/GoodWithYourMoney/TOPPING-UP-YOUR-STATE-PENSION-GUIDE.pdf
    • kidmugsy
    • By kidmugsy 16th Oct 17, 1:13 AM
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    kidmugsy
    If I went to an IFA to help me set that up how much would be a reasonable charge for their services?
    Originally posted by billpaul812
    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.
    Last edited by kidmugsy; 16-10-2017 at 1:21 AM. Reason: last para
    • billpaul812
    • By billpaul812 16th Oct 17, 3:19 PM
    • 53 Posts
    • 3 Thanks
    billpaul812
    Thanks for taking the time to set it out like this, much appreciated. I will follow up on you leads.
    • billpaul812
    • By billpaul812 16th Oct 17, 6:14 PM
    • 53 Posts
    • 3 Thanks
    billpaul812
    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.
    Last edited by billpaul812; 16-10-2017 at 7:58 PM.
    • kidmugsy
    • By kidmugsy 16th Oct 17, 9:40 PM
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    kidmugsy
    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%.
    Originally posted by billpaul812
    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
    • By kidmugsy 16th Oct 17, 9:50 PM
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    kidmugsy
    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.
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