Pension advice welcome.

ibizafan_2

Although it is only a part-time job, I have been paying into the Whitbread pension for quite a few years. They closed their final salary pension to all staff a while ago and switched to a money purchase scheme. I am eligible to take the deferred final salary pension from next year although I am going to continue working for another three years approximately. The pensions department have said that I can continue to pay into the money purchase scheme. Can anyone tell me whether there is any advantage to doing this? To put things into perspective, I only work between 11 and 16 hours per week at this job. I am also retiring from my main job which gives me a local government pension with 25 years service. The Whitbread pension payments are very small so is it still worth it? Any advice would be greatly appreciated.

jem16

ibizafan wrote: »

The Whitbread pension payments are very small so is it still worth it? Any advice would be greatly appreciated.

How much is the employer paying into this?

ibizafan_2

They are paying 3% in and I am paying 2%. They pay minimum wage.

kidmugsy

ibizafan wrote: »

They are paying 3% in and I am paying 2%. They pay minimum wage.

Ignoring small effects: after tax relief, you pay £1.60 for very £5 going into the fund. When you crystallise it, you'll get a 25% tax free lump sum = £1.25. So there will be £3.75 left to pay you an annuity or income withdrawal, and it will have cost you a net 35 pence. On the other hand if the fund totals less that £2000 when you come to draw it, you can get the whole lot out at once, 25% tax-free and the rest exposed to income tax.

ibizafan_2

Thanks for that. Although the sums involved will be very small, I might as well carry on paying in.

xylophone

If your state/ two FS occupational pensions guarantee income of more than £20000 per annum, you could transfer the DB into a SIPP and draw down as required?
http://www.hl.co.uk/pensions/income-drawdown/what-is-flexible-drawdown