What to do now.

geelamch

Before I continue ,I know it is time to see an Ifa and get a proper handle on things.(should have did this years ago)

Age 47 ,earnings £39714 +ot £6000.
Final salary scheme 2/3
Employer pays 11% me 8%
Also pay avc £95.49 weekly ,this can be taken as part of lump sum.
I have been with them for 21 years and also had the luxury of transferring previous pension which has given me 33 years membership.

Wife
Age 39,earnings £16500
Employer pays 10% to pension she 10%
Only been running for around 2 years

We have quite a bit of savings for that rainy day that will come at some time.
My query is that I will shortly receive a £50 weekly rise.sounds great but it obviously takes me further into the 40% bracket so I need to find a way of not giving the greedy taxman any more than necessary.

My aim is to find a way to deduct this rise from source before tax.
My employer has now commenced a product called avc extra .sounds like a second pension to me.you can pay in £3600 annually and on drawing pension take 25% lump sum and purchase an annuity with remainder.does anyone think this is wise or do I have alternative.
As I said I think it is time to see an IFA (too miserable previously and probably has cost me in the long run) but armed with any insight would be helpful.

kidmugsy

Broadly, if your employer offers "Salary Sacrifice" then there will probably be a substantial advantage to doing it through him. If not, the fact that your current AVC can be taken as part of the lump sum makes more AVC contributions tempting. I can't see any major advantage, though, to "AVC extra" - I'd rather open a personal pension or SIPP, myself.

geelamch

Hi kidmugsy ,
The avc I pay at present is at the max so I have no flexibility there.

geelamch

The only other point that may steer me towards any alternative is that I would like to increase the lump sum so perhaps more isas etc may be the only option (just hate giving the taxman more).if I was to save in a cash fashion I would be willing to take a more risky approach with £200 a month.perhaps some type of volatile share account.

geelamch

If I were to open a sipp would I be allowed to claim a tax free element?

atush

If you want to retire earlier than your date, it would make sense to save in S&S ISas outside your pension.

Wont save you tax though, so like the others said, max your pension by putting more into your AVC so that you take take it as LS and not reduce your FS pension.

AlwaysLearnin

What's the difference between the avc and avc extra? Unless I'm missing something, I can't see a reason why not just put the extra in to the existing avc. Even if the 'extra' allows contributions via sal sacrifice, that's only really saving 2% NI at the levels you're talking which, if you're restricted to an annuity I don't see that's worth it (are you sure it's got to be annuity?)

FYI too, for your final salary the co isn't putting in 11%, they are putting in whatever is necessary to meet the pension amount

Edit: ah, responses while typing, slowly... . You do still get tax relief on a SIPP, but only 20% by default, then you claim the rest via a tax return

AlwaysLearnin

Does the employer have other salary sacrifice options, such as bike to work etc?

OldBeanz

You will also be able to use flexible drawdown so it will be tax efficient to pay enough into your pensions to bring yourself back down to the 20% rate. Flexible drawdown means that you will be able to invest into a pension with 40% tax break, on retiral - draw 25% tax free, then take out taxable income as required (logically not taking out enough each year to put you into 40% tax bracket in retirement).

geelamch

AlwaysLearnin wrote: »

What's the difference between the avc and avc extra? Unless I'm missing something, I can't see a reason why not just put the extra in to the existing avc. Even if the 'extra' allows contributions via sal sacrifice, that's only really saving 2% NI at the levels you're talking which, if you're restricted to an annuity I don't see that's worth it (are you sure it's got to be annuity?)

FYI too, for your final salary the co isn't putting in 11%, they are putting in whatever is necessary to meet the pension amount

Edit: ah, responses while typing, slowly... . You do still get tax relief on a SIPP, but only 20% by default, then you claim the rest via a tax return

The existing avc is limited in the amount we can put in,I am now at the max.

geelamch

The tax man cometh!