15% ?

XRAT

Ladies and Gents,
Your help please.

I'm 44, and have a final salary pension which pays 2/3 of my final pensionable salary, for this I pay 11% (or£3K) of my pensionable pay (about £30K.) This does not include the large ammount of overtime worked, which boosts my gross pay (to near £60K.)

I believe that I may pay 15% of salary into a pension?
Is that 15% of the gross, or the lower, pensionable pay?

Presumably if I want to pay more I make AVCs, however I am told that I can only draw a maximum 2/3 of final salary, so what would be the point, as I will already draw this with my current 11%? Or would the AVCs be a completely seperate entity which would boost my income in retirement.

If I can afford it (which I very much doubt) I can draw my current pension before age 55, would any AVCs also be covered by the exemption?

I'd like to keep as much from the Chancellor as possible, as he seems to help himself whenever he feels like it!!!

HGLTsuperstar

After A-Day you can pay in all of your salary if you so desire.
If you're wanting to keep GB (he was still Chancellor on this morning's news but...) have you used up your ISA allowance for 2005-06, and remember nearly time for next yr's one.
As for your other points, I'll leave it to the big hitters on the board.

exil

You can pay in all of your salary from April - if the scheme will actually accept it (they don't have to). If they don't, then see an IFA for how else you can boost your contributions. You will be able to pay up to your gross pay including overtime.

Actually, with a 2/3 final salary scheme, you're doing OK anyway - only reason for boosting contributions will be if you want to retire early.

dunstonh

AVCs have to commence benefits at the same time as the occ scheme they are attached to. AVCs should not be used when looking to retire early. Although AVCs and FSAVCs are a dead product from April.

Post April, the 15% limit will not be an issue to you.

Not much else to add from what has already been said.

Pal

Except to add that the current limit is 15% of Gross salary for the tax year, so you could pay 15% of your total earnings during the 2005/06 tax year as long as you get it in before 5 April 2006. After that date you can pay 100% as long as the scheme allows you to do so.

One to ask your HR department.

conradmum

Sorry, I don't get this. What would be the benefit of paying extra into a final salary scheme? Isn't the amount paid as a pension fixed according to the salary at the time of retirement?
Not dependent on the amount contributed?

Debt_Free_Chick

conradmum wrote:

Sorry, I don't get this. What would be the benefit of paying extra into a final salary scheme? Isn't the amount paid as a pension fixed according to the salary at the time of retirement?
Not dependent on the amount contributed?

At the moment (before April) yes .... the maximum pension you can receive is based on your salary. However, when you are a member of a pension scheme, it's quite common to find that the scheme does not use all your salary for pension purposes e.g. overtime, bonuses and benefits in kind can be excluded. So there is a gap between what you actually earn and the "pensionable" salary that the scheme uses. You can pay extra contributions (AVCs) to provide you with a pension to fill the gap.

After April, this method of calculating the maximum pension disappears. You can have as much pension as you like, provided the total value of all your pensions is less than £1.5m. In fact, you can still have pensions over the £1.5m limit, but they will be cut back for tax.

HTH

reddevilled

conradmum wrote:

Sorry, I don't get this. What would be the benefit of paying extra into a final salary scheme? Isn't the amount paid as a pension fixed according to the salary at the time of retirement?
Not dependent on the amount contributed?

Anything extra you pay is kept in a separate pot (if you like) which will then be used to purchase an annuity come retirement. It is separate from the final salary scheme.