Small pension and about to be made redundant

jamesd

If your employer pays it directly into a pension it would depend on how. Normally it would be paid in gross before tax is deducted so that would have the same effect as if you got tax relief. It wouldn't get additional tax relief.

You could ask your employer to add the saved employer NI to the pension, adding another 12.8% to the money paid in.

Saramago

So, employer pays NI on redundancy payments?

I think my employer will be very cross with me and not sure they would want to do me any favours so I will have to give them incentive.

I've been with them for 22 years and have asked to be paid redundancy for the whole period on moral basis. They refused, capping it at 20 years. Also I've asked to have something paid into my pension to cover me for the next couple of years till I'm 60. They refused. So now I am going to go for unpaid holiday time during the 5 years I worked as full time in house freelancer. They have already accepted that during that time I was 'employee'. Letters are being given out today and I am strait of with it to solicitors. If they paid 22 years it would have been extra £5000 and I would be happy with that. Now I can possibly get extra £15000. I guess this will incur the wrath of bosses and they might not want to be accommodating to me.

JA1000

Be carful of the Drawdown route with a small pension fund, when I mean small less than £100k

Saramago

My pensions found will be just over £100K.

I've also found out that I am not eligable to claim unpaid holiday pay as I have gone over the time limit. So the pot is to be £50K .

My IFA , whom so far I've only met once, said that I should start drawing the pension now and I am not sure what he meant. I am not keen at buying annuity now as I am too young, (ha..ha.. of course I am not too young - I'm just not old enough!) but if I don't get a job I will need something to live off.

jamesd

No need to buy an annuity. Income drawdown means staying invested and taking an income from investments. You or you and the IFA together would select a range of investments and a level of income so that the ups and downs won't be greater than your pension pot allows. Typically that would be 5-6% of capital each year in income but that depends on just how the money is invested and how cautious you want to be.

Unlike the annuity case you can also choose to stop or start or restart taking the income. With state pension age a few years away you'll also be able to deliberately take more than the sustainable income level for a few years, knowing that the state pension income will then top up your income and you can decrease the income level from the pension to the lower sustainable level that would remain.

It's also possible to use that ability to temporarily take higher income to defer taking the state pensions for a while, if your circumstances allow that. The state pensions go up by about 10% for each year of delay in starting them, pro-rated for shorter periods, so it can be a useful way to increase your eventual long term income.

A search here for posts mentioning income drawdown should find more information on this for you. The main concerns are that some people will find the variation in value of investments unsettling and that there's a chance that the money could run out, leaving you dependent on other income sources, if any, or possibly the pension minimum income guarantee. You manage these risks through the choice of investments and income level.

Saramago

Thanks James this is so very useful to me.

I have had a look at other topics and am gradually learning and weighing my options.

IFA seems a very nice man, and he is looking after my partner's finances, but I do like to know what is going on and want to make decisions with as much information at hand as I can.