Question re Workplace Pension Enrolment.

swingaloo

Our workplace has recently enrolled us into a pension plan with Legal & General and at the end of last month they took our first contribution.

I am due to retire in January and will get my state pension then.

However I am going to continue to work on a part time basis with the company.

I was going to opt out of the pension scheme as I couldn't see the point in the money being taken from my wages so close to retirement.

But now I have a question- As the company pay in to the plan as well as myself am I as well to keep paying it? A bit like using it as a saving plan. If I pay it for the next however many years (possibly 3 to 5 years) and then decide to take it would I get the payments back plus the company share or is it not that straightforward?

Linton

Do you have other pensions? Are any of them defined contribution (ie not final salary)? Is the total value of all the pension pots greater than £18K?

If the L&G pension is less than £2K when you come to take it you can get it all back as a lump sum regarded as taxable income.

If you have other non trivial pension pots totaling more than £18K you wont be able to get the payments back as cash though you could merge the pension with other non-taken DC pensions. Or of course you could take 25% tax free cash and get a small annuity from your L&G pension.

In no case will you lose the employers contribution.

swingaloo

Thank you for the reply. I don't have any other pension other than the state pension. I did have an old work pension but I took that as a lump sum 2 years ago.

So as I understand it I should continue to make the payments as long as I stay employed there?

gadgetmind

Did you take the old work pension under triviality?

I think you still might be able to take new one under the "stranded pots" rule.

swingaloo

Yes I did take the other under triviality.

This is simply a new one now that the employer pension rules have come about.

I'm just trying to work out if I'm better staying in and paying or if its really not worth it in which case I should just opt out.

We are talking about me paying £8 a month and my employers paying their contribution bearing in mind that this will half when I go part time in 3 months.

Linton

swingaloo wrote: »

Thank you for the reply. I don't have any other pension other than the state pension. I did have an old work pension but I took that as a lump sum 2 years ago.

So as I understand it I should continue to make the payments as long as I stay employed there?

How did you take the lump sum? Was it because the total of all your pensions was less than £18K or under some other rules? If it was the £18K rule, that gives rise to an interesting question, which I have no idea of the answer, as to the implications should you wish to start a new pension.

Ignoring that, it's difficult to say whether you should or should not join the scheme as it depends on a number of interacting factors:

a) your tax position - will you be paying tax on your part time income? Will you be paying tax after full retirement? So there may or may not be a tax gain to be made by joining the scheme

b) the details of the scheme - how much is the employer contribution? Is the employee contribution out of taxed or untaxed income? If the former you may be able to get the tax payer to add in a refund of the 20% tax which you may not actually have paid.

c) the sums involved. If the total amounts to less than £2K you could take it all as a taxable lump sum, if not you probably couldnt though we have the question posed at the start of my reply.

Finally and perhaps most importantly

d) your attitude to extra hassle for what might be a small gain with a significant loss in flexibility.

gadgetmind

swingaloo wrote: »

Yes I did take the other under triviality.

OK, it sounds like you won't have used both of your "stranded pots" yet so should be able to use these rules.

http://www.pensionsadvisoryservice.org.uk/news/2012/april/new-rule-for-cashing-in-small-pension-pots

Please research this yourself as it's all quite complex.