Pension need to knows Official MSE Guide Discussion

Albermarle

naive1 said:

Hello, I apologise if this is a really stupid question, but it is possible that I could invest in my workplace pension scheme, accept their investment recommendations, but then because they choose to invest in companies that go bust or if the pension company themselves go bust, I could end up with no pension at all (i.e., not even the contributions I had made)?  I would like to invest more in my pension scheme, but I want to know if it is as safe as putting money in a savings account, and I cannot get a straight answer about this from my employer or from their pension provider!  Many thanks for any guidance.

I am sure your pension provider never actually made any recommendations , and if they did I am sure it would not be individual companies. It does not work like that .
A typical workplace  pension provider will offer a range of investment funds ( can be as little as four or hundreds) These funds are made up of lots of other investments, shares etc so their performance is not reliant on just a handful of companies.
If you do not actively pick a fund(s) your money goes into a default fund, which is usually a middle of the road type fund . Normally nowadays you should have on line access and be able to see where your pension money is invested, and possible alternative funds to switch into ( if you want to) 
Although these funds can for sure go down as well as up , the chance they will go bust/to zero is pretty remote , as is the chance of the pension provider them selves going bust .
So over the short term ( < 5 years ) it is always possible that there will be less in the pension than you have contributed due to market conditions but in the long term (> 10 years) you would normally expect to see some healthy growth .

naive1

Many thanks to Dunstonh and Albermarle for your extremely helpful replies.  Theoretically possible but highly unlikely answers my question.  I understand the your well made points about inflation and investment too, it was just the lack of clarity around worse case scenario that was bothering me!  

steyert

Hi i am living on my pension and savings  ..My wife did not work and had no income so i claimed part of her tax allowance. She is now receiving  a pension will this be regarded as income and will i have to return the allowance to my wife
My wifes  pension  is £9000 pa

Best Regards Alan

jem16

steyert said:

Hi i am living on my pension and savings  ..My wife did not work and had no income so i claimed part of her tax allowance. She is now receiving  a pension will this be regarded as income and will i have to return the allowance to my wife
My wifes  pension  is £9000 pa

Best Regards Alan

Yes it's regarded as taxable income. However if this is her only taxable income it should not make any difference to her transferring part of it to you as only a maximum of £1250 can be transferred which is still less than her £12,500 tax-free allowance.

paulsingleton66

I have a question I hope someone can help me with. What are the (full) implications of me taking 25% tax free from one of my pension pots when I turn 55 in April 2021? This is my situation - I have 3 pensions, that I will call small, medium and large. My small pension is a works pension that I am still actively contributing into monthly via my work and, as I have only been there a short time is only valued at around £9k. This is the only pension I contribute to at the moment. My medium pension is an old pension from my employment with BT in the 1990s (Section C) which has a transfer out value of around £160k and pension of £4688 per annum payable at 60. My large pension is my SIPP which is around £500k. I'd like to take 25% from my large pension in about 6 months time but not touch my medium and small pensions. I intend to continue working as I enjoy it, amazing as that sounds. In terms of the implications of taking that tax free lump sum, what I'm aware of is that I believe will need to reduce the contributions to my small active works pension (to £4k per year)? I presume that, as well as notifying my SIPP provider whilst arranging the tax free lump sum, I will also need to notify both my current small active works pension company and my medium BT pension provider? What other implications are there? Thanks in advance for any advice!

Malthusian

I'd like to take 25% from my large pension in about 6 months time but not touch my medium and small pensions. I intend to continue working as I enjoy it, amazing as that sounds. In terms of the implications of taking that tax free lump sum, what I'm aware of is that I believe will need to reduce the contributions to my small active works pension (to £4k per year)?

Nope. Taking the tax free lump sum doesn't trigger the Money Purchase Annual Allowance. If you took a penny of taxable income from the resulting drawdown fund, that would.

DavidDowdle

Hi, I have a civil service pension that became available at age 60, I am now 61 ½ years old. I am in full time employment and pay tax at the 40% rate. My civil service pension is only £7,000 ish but I will pay £2,800 tax on it if I take it now. Several IFA’s have lost interest as soon as I say I am looking for advice on this, they seem to want customers with huge pension pots to invest instead. I have been thinking about taking out a new pension but I intend to retire in 3 to 4 years so it's probably not worth it.

Any advice on how I can avoid paying this tax is gratefully received, even if it is just a signpost to a more appropriate body.

Thanks very much

David

dunstonh

Several IFA’s have lost interest as soon as I say I am looking for advice on this, they seem to want customers with huge pension pots to invest instead.

What advice are you looking for?  its unusual to go to an IFA for advice on a public sector pension that is already in payment. 

You mention about wanting to commence a new pension but you also state that you are employed.   An IFA cannot help you there because the advice would be to use the employer's auto-enrolment scheme.    There is no point turning down the free money from the employer.   If you didn't join the workplace pension, you would be classed as an opt out and only around 1 in 10 IFAs hold the permissions required to give advice to opt-outs.  If you are a member of the workplace scheme then using that would likely be the advice.

For future reference, it is always best to start your own thread on something.   Adding yours onto an existing thread can make it messy.  Especially if you get multiple responses to other posts all at the same time.

jem16

DavidDowdle said:

Hi, I have a civil service pension that became available at age 60, I am now 61 ½ years old. I am in full time employment and pay tax at the 40% rate. My civil service pension is only £7,000 ish but I will pay £2,800 tax on it if I take it now. Several IFA’s have lost interest as soon as I say I am looking for advice on this, they seem to want customers with huge pension pots to invest instead. I have been thinking about taking out a new pension but I intend to retire in 3 to 4 years so it's probably not worth it.

Any advice on how I can avoid paying this tax is gratefully received, even if it is just a signpost to a more appropriate body.

Thanks very much

David

Any reason you didn't take the Civil Service pension at age 60 if that was when it was due? It doesn't increase because you didn't take it.

Only way of avoiding the 40% tax is by paying an appropriate amount into a pension scheme to reduce your taxable income. Does your employer offer a pension scheme and are you already paying into this? 

GunJack

jem16 said:

DavidDowdle said:

Hi, I have a civil service pension that became available at age 60, I am now 61 ½ years old. I am in full time employment and pay tax at the 40% rate. My civil service pension is only £7,000 ish but I will pay £2,800 tax on it if I take it now. Several IFA’s have lost interest as soon as I say I am looking for advice on this, they seem to want customers with huge pension pots to invest instead. I have been thinking about taking out a new pension but I intend to retire in 3 to 4 years so it's probably not worth it.

Any advice on how I can avoid paying this tax is gratefully received, even if it is just a signpost to a more appropriate body.

Thanks very much

David

Any reason you didn't take the Civil Service pension at age 60 if that was when it was due? It doesn't increase because you didn't take it.

Only way of avoiding the 40% tax is by paying an appropriate amount into a pension scheme to reduce your taxable income. Does your employer offer a pension scheme and are you already paying into this? 

Pretty much this from jem, CS Classic (I'm assuming with a NPA of 60)  is a bit "use it or lose it", so so far you've lost 1.5 year's worth of pension by not taking it...