Topping Up LGS Pension - ARCs vs AVCs?

gardenia101

jem16 wrote: »

NI contributions are based on your gross salary, not net so I don't see a problem.

Does your payslip still show NI deductions?

Thanks again Jem, you are very helpful - yes my payslip still shows NI being deducted, & my taxable salary is shown increasing monthly as expected, even though I'm not actually earning enough now to pay tax.

I was hoping this would be the case, but the booklet sent with my SP forecast didn't explain it very clearly, so I had a minor panic...

atush

What will your qualifying earnings be, after your pension?

jem16

atush wrote: »

What will your qualifying earnings be, after your pension?

Qualifying earnings are before pension contributions not after.

gardenia101

jem16 wrote: »

No you're still classed as a taxpayer, hence why you can get tax relief on the pension payments. If you were not a taxpayer you would be limited to a gross £3600 payment into a pension....

Just resurrecting an old thread as I want to make sure I understand all this - apologies if I've misunderstood something.

I've had to decrease my hours at work due to a deterioration in my health, so I'm now earning under £10K/year making me a non taxpayer for 14/15 (& I imagine for every year now on).

I'm a bit confused now about Jem's statement above about being limited to £3600 being paid into a pension since I'm paying a lot more than this as a combination of ARCs & regular payments into my LGPS. When I started these ARCs I was a tax payer, but now I'm not so can I continue to make these payments?

ASAIUI I'm still just above the threshold for getting full NI contributions going towards my state pension as I do earn (gross) over £153. Can someone confirm that I'm correct & my eligibility towards my SP in still ticking along nicely please?

Many thanks

jem16

gardenia101 wrote: »

Just resurrecting an old thread as I want to make sure I understand all this - apologies if I've misunderstood something.

I've had to decrease my hours at work due to a deterioration in my health, so I'm now earning under £10K/year making me a non taxpayer for 14/15 (& I imagine for every year now on).

For income tax purposes you are a non-taxpayer. However for the purposes of tax relief on pension payments, you can claim tax relief on £3600 gross or 100% of earned income.

I'm a bit confused now about Jem's statement above about being limited to £3600 being paid into a pension since I'm paying a lot more than this as a combination of ARCs & regular payments into my LGPS. When I started these ARCs I was a tax payer, but now I'm not so can I continue to make these payments?

You are in a unique, but unfortunate situation as you are earning less than £10k now. Tax relief is able to be claimed on up to 100% of earned income. If you were paying this into a personal pension you would be gaining tax relief. However because the LGPS takes off contributions from gross salary you are receiving no tax relief as you already earn below the £10k personal allowance and pay no tax.

So there is nothing stopping you paying in to the LGPS and ARCs as I'm assuming the total amount paid is less than the annual pension allowance of £40k, but unfortunately you are receiving no tax relief on your payments.

ASAIUI I'm still just above the threshold for getting full NI contributions going towards my state pension as I do earn (gross) over £153. Can someone confirm that I'm correct & my eligibility towards my SP in still ticking along nicely please?

Many thanks

Yes you're correct as far as NI contributions towards your basic state pension is concerned. I assume NI contributions are still being deducted?

gardenia101

jem16 wrote: »

For income tax purposes you are a non-taxpayer. However for the purposes of tax relief on pension payments, you can claim tax relief on £3600 gross or 100% of earned income.

Thanks Jem. I was reading it to mean I could only contribute £3600 into the pension although I did think on some level that wasn't right (or what you meant).

You are in a unique, but unfortunate situation as you are earning less than £10k now. Tax relief is able to be claimed on up to 100% of earned income. If you were paying this into a personal pension you would be gaining tax relief. However because the LGPS takes off contributions from gross salary you are receiving no tax relief as you already earn below the £10k personal allowance and pay no tax.

So there is nothing stopping you paying in to the LGPS and ARCs as I'm assuming the total amount paid is less than the annual pension allowance of £40k, but unfortunately you are receiving no tax relief on your payments.



Yes you're correct as far as NI contributions towards your basic state pension is concerned. I assume NI contributions are still being deducted?

I often feel I'm unique & unfortunate :rotfl: but thank you (again) for explaining it all so well.

Yes, NI is still being deducted at a pitiful amount each month, & yes, all pension contributions come to well under the £40K limit.

jem16

gardenia101 wrote: »

I often feel I'm unique & unfortunate :rotfl: but thank you (again) for explaining it all so well.

Perhaps you should now consider if ARCs offer the best option for you since you are receiving no tax relief. If you out that money in a personal pension you would be getting tax relief.

woolly_wombat

jem16 wrote: »

Perhaps you should now consider if ARCs offer the best option for you since you are receiving no tax relief. If you out that money in a personal pension you would be getting tax relief.

So what?

ARCs offer the opportunity to purchase index-linked additional pension at very competitive rates and no investment risk.

I would think very, very carefully before giving that up.

WW

jem16

woolly_wombat wrote: »

So what?

ARCs offer the opportunity to purchase index-linked additional pension at very competitive rates and no investment risk.

I would think very, very carefully before giving that up.

WW

So would I but the situation may have changed with the OP having to work less.

My concern would be if he/she has to leave work before normal retirement age and her pension is reduced. If there was also a personal pension to take it could avoid that reduction. This will only be possible with the new rules from April 2015.

gardenia101

jem16 wrote: »

Perhaps you should now consider if ARCs offer the best option for you since you are receiving no tax relief. If you out that money in a personal pension you would be getting tax relief.

Sorry, missed this post Jem.

I was wondering the same thing, since they are rather expensive. But the way I've always understood it (which could be wrong ) is that it would take a much bigger private pension pot to provide a similar level of benefit to ARCs/APCs. Since I don't earn very much, could I get anywhere close to the private pension pot needed?

I'm 45 & my salary in unlikely to increase much. I also won't be working any more hours as my health is already quite poor.

What do you all think? Thanks again.