Final Salary Pension - is it worth paying into AVCs?

RJDidier

Thanks to everyone who replied, very helpful,

RJ

robin61

kidmugsy wrote: »

I can't see much of a public interest justification for salary sacrifice.

Well the one time I have contributed outside of the salary sacrifice scheme I had to claim the additional 20% tax relief from HMRC so presumably it saves them time. Also I didn't get any NI relief so the less attractive pensions are the less likely people will want to invest in pensions. I was under the impression that the Government want to encourage people to save towards their own retirements they won't do that by making pensions less attractive.

atush

Also, you are just age 25. Have you already bought a home? Will you get married? Have children?

Do you have an emergency pot of 6 months spending?

If you have any medium term spending plans not saved for, or dont have an full emergency pot i'd consider saving outside of a pension in current accts and S&S isas. This money could be put into pension later if you dont need it and you are a 40% taxpayer.

If you have saved for all you need to, then yes I would put more into pension, where would depend on what you find about about your Avcs, and how early before scheme age you plan to retire.

RJDidier

Have checked with pension department, and I have to take main pension once I take AVC.

However, as I get (20%) tax relief on the contributions, if I stop the contributions, my take-home pay would increase by approx £40 less than my current contributions. Is it possible to claim this relief back if I'm contributing to a private pension / ISA, how would I do this?

atush

If you pay BRT, the pension company does it for you. If you pay HRT, you tell HMRC about your contributions and they lower the tax you pay via PAYE.

gadgetmind

kidmugsy wrote: »

I can't see much of a public interest justification for salary sacrifice.

Well, it does allow those in the private sector with DC pensions to inch a little bit closer to the deal that those with public sector DB pensions get.

kangoora

RJDidier wrote: »

Have checked with pension department, and I have to take main pension once I take AVC.

However, as I get (20%) tax relief on the contributions, if I stop the contributions, my take-home pay would increase by approx £40 less than my current contributions. Is it possible to claim this relief back if I'm contributing to a private pension / ISA, how would I do this?

If you open a PP with one of the many providers, e.g. Hargreaves - Lansdown, Charles Stanley Direct (there are a number of them) they will claim back the tax relief for you and add it to your pension. It may be a few weeks in arrears, unlike company pension payments.

You'd also want to investigate the charging basis, some charge a percentage, other fixed rates, others capped percentages, with a variation on charges for buying funds, monthly payments etc. It depends a lot on how much you intend to save.

If you become a HRT you will need to inform HMRC of your separate pension payments and they will refund you the extra 20% directly, usually by adjusting your tax code.