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Pension need to knows Official MSE Guide Discussion

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MSE_GuyMSE_Guy MSE News EditorMSE Staff
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This discussion's specifically to discuss the new MSE Pension Need to Knows Guide.

Click Reply below to discuss it
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Replies

  • kidmugsykidmugsy Forumite
    12.6K posts
    Hung up my suit!
    ✭✭✭✭✭
    I'm going to study "THE CHEAPEST FIRMS" section with great interest.
    Free the dunston one next time too.
  • kidmugsy wrote: »
    I'm going to study "THE CHEAPEST FIRMS" section with great interest.

    It's not right, they're not the cheapest.

    Buying a PP via Cavendish offers an AMC of 0.70% (Aviva directly is 1.00%) - according to the link.

    Our firm have negotiated an AMC of 0.25% for Aviva's platform (which is essentially the same as a PP, in fact platforms are supposedly better than a PP because they offer more features).

    The fact that cavendish don't charge commission is irrelevant. That's an additional/different service.

    I'm not trying to self-promote - we don't like to do too many start-up's, just trying to prove a point.
  • I earn £45,000 before tax p.a. My current contribution is 8% and my employer,s is 5%

    According to the pension calculator:

    "Costs & contributions

    What contribution costs you/month:£300
    What's added to pension (contribution + tax relief): £462.67
    Employer contribution: £187.50
    Your savings

    Monthly: A reduction of £300 from your pay packet adds £650 to your pension
    Annually: A reduction of £3600 from your pay packet adds £7800 to your pension"


    The monthly contribution I see going into my pension is £487.50 i.e. £300 (me) + £187.50 (employer). The widget states that "A reduction of £300 from your pay packet adds £650 to your pension"... but not £487.50.

    As the £45,000 is my salary "before tax" and both contributions are taken before tax... how is £650 figure arrived at? And more worryingly why isn't it going into my pension each month?
  • edited 10 October 2012 at 10:28AM
    bilbo51bilbo51 Forumite
    519 posts
    edited 10 October 2012 at 10:28AM
    sossij wrote: »
    I earn £45,000 before tax p.a. My current contribution is 8% and my employer,s is 5%

    According to the pension calculator:

    "Costs & contributions

    What contribution costs you/month:£300
    What's added to pension (contribution + tax relief): £462.67
    Employer contribution: £187.50
    Your savings

    Monthly: A reduction of £300 from your pay packet adds £650 to your pension
    Annually: A reduction of £3600 from your pay packet adds £7800 to your pension"


    The monthly contribution I see going into my pension is £487.50 i.e. £300 (me) + £187.50 (employer). The widget states that "A reduction of £300 from your pay packet adds £650 to your pension"... but not £487.50.

    As the £45,000 is my salary "before tax" and both contributions are taken before tax... how is £650 figure arrived at? And more worryingly why isn't it going into my pension each month?
    Your £300 has already got tax relief included as it's taken from your pre-tax salary. The calculator contribution figure is post tax - ie what it costs you out of your take home pay - called your "pay packet" above.
  • bilbo51 wrote: »
    Your £300 has already got tax relief included as it's taken from your pre-tax salary. The calculator contribution figure is post tax - ie what it costs you out of your take home pay - called your "pay packet" above.

    Hi Bilbo,

    Many thanks for your quick reply.

    Sorry for being thick...

    Yes I understand that the £300 will have tax relief on it as it is deducted from my pre-tax salary. To this I add my Employers contribution of £187.50.. which gives me £487.50, which is what I see going into my Pension each month. Yet the widget clearly states:

    "Monthly: A reduction of £300 from your pay packet adds £650 to your pension"

    I do not see this £650 "added" into my pension each month... where does this £650 figure come from?

    Many thanks :)
  • edited 10 October 2012 at 11:04AM
    bilbo51bilbo51 Forumite
    519 posts
    edited 10 October 2012 at 11:04AM
    sossij wrote: »
    Hi Bilbo,

    Many thanks for your quick reply.

    Sorry for being thick...

    Yes I understand that the £300 will have tax relief on it as it is deducted from my pre-tax salary. To this I add my Employers contribution of £187.50.. which gives me £487.50, which is what I see going into my Pension each month. Yet the widget clearly states:

    "Monthly: A reduction of £300 from your pay packet adds £650 to your pension"

    I do not see this £650 "added" into my pension each month... where does this £650 figure come from?

    Many thanks :)
    Your contributions are correct and you don't need to worry. You are contributing £300 and your employer is contributing £187.50. The £300 already includes the "taxman's contribution". ie you are getting tax relief at whatever your marginal rate is because you aren't paying tax on the £300.

    As to whether the calculator is correct or not, I can't comment. When I try to use it it asks me just to use numbers (ie no commas in amounts etc) even when I'm just using numbers. I think it's a bit buggy.

    EDIT: They seem to have fixed the numbers only issue. I can't see how they get the £462.67. Your marginal tax rate would have to be 54% to achieve this!!!!!

    Now I know it's buggy.
  • edited 10 October 2012 at 11:09AM
    sossijsossij Forumite
    14 posts
    edited 10 October 2012 at 11:09AM
    bilbo51 wrote: »
    Your contributions are correct and you don't need to worry. You are contributing £300 and your employer is contributing £187.50. The £300 already includes the "taxman's contribution". ie you are getting tax relief at whatever your marginal rate is because you aren't paying tax on the £300.

    As to whether the calculator is correct or not, I can't comment. When I try to use it it asks me just to use numbers (ie no commas in amounts etc) even when I'm just using numbers. I think it's a bit buggy.

    Thanks again Bilbo, yes I'm just using numbers too ;)

    What appears to be going on is that the widget is adding tax relief twice:

    "What contribution costs you/month:£300
    What's added to pension (contribution + tax relief): £462.67
    Employer contribution: £187.50"

    As you state the £300 already has tax relief on it, to which they add another "tax relief" from somewhere to get £462.67 and then add the employer contribution of £187.50. That is £462.67 + £187.50 = £650.17.

    This is the only way I can get to the £650 figure.. which I believe is wrong as the original £300 already has tax relief on it.

    Can anyone from MSE confirm the above?
  • dunstonhdunstonh Forumite
    101.1K posts
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    ✭✭✭✭✭✭
    I have to agree. The cheapest pensions section is wrong. It should say they are they are the cheapest pensions from companies that MSE promotes.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • edited 10 October 2012 at 12:20PM
    fairleadsfairleads Forumite
    595 posts
    edited 10 October 2012 at 12:20PM
    sossij wrote: »
    Thanks again Bilbo, yes I'm just using numbers too ;)

    What appears to be going on is that the widget is adding tax relief twice:

    "What contribution costs you/month300
    What's added to pension (contribution + tax relief): £462.67
    Employer contribution: £187.50"

    As you state the £300 already has tax relief on it, to which they add another "tax relief" from somewhere to get £462.67 and then add the employer contribution of £187.50. That is £462.67 + £187.50 = £650.17.

    This is the only way I can get to the £650 figure.. which I believe is wrong as the original £300 already has tax relief on it.

    Can anyone from MSE confirm the above?

    The clue to using the calculator and obtaining the correct result is in the terminology.
    i.e. your 300 contribution costs you 180, ( hr taxpayer) which is the figure to be used in the calculator. Enter 4.8% as your contribution and then check the result.
  • fairleads wrote: »
    The clue to using the calculator and obtaining the correct result is in the terminology.
    i.e. your 300 contribution costs you 180, ( hr taxpayer) which is the figure to be used in the calculator.

    So why does the first text edit box clearly ask you to enter your pre-tax annual salary?

    The subsequent calculations are incorrect.
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