Carrying on pension contributions after redundancy

RobStaffs

My job is under threat. I am 50 years old and likely to be out of work in the medium period. Due to my notice period I will have another 4 months of pension contributions. Taking a pessimistic point of view would and assuming a longer period out of work I am contemplating allocating monthly pension contributions from our cash savings for at least a year and then assess at that point. Is it advisable to keep pension payments on going despite being out of work?

kidmugsy

RobStaffs wrote: »

My job is under threat. I am 50 years old and likely to be out of work in the medium period. Due to my notice period I will have another 4 months of pension contributions. Taking a pessimistic point of view would and assuming a longer period out of work I am contemplating allocating monthly pension contributions from our cash savings for at least a year and then assess at that point. Is it advisable to keep pension payments on going despite being out of work?

In most situations I'd say "no". You won't be getting employer's contribution, or salary sacrifice, or (I assume) higher rate tax relief. Unless you are looking for a tax shelter for your cash savings (which you may not need if you are going to be unemployed) I doubt there's much advantage during a period when money might be scarce.

One possible counterargument might involve interactions between savings and doles, but I know nothing about that.

If, on the other hand, you want to maximise the amount you have in pensions why not open a personal pension and bung a lot in now, in a tax year during which you have a year's worth of earnings?

RobStaffs

kidmugsy wrote: »

In most situations I'd say "no". You won't be getting employer's contribution, or salary sacrifice, or (I assume) higher rate tax relief. Unless you are looking for a tax shelter for your cash savings (which you may not need if you are going to be unemployed) I doubt there's much advantage during a period when money might be scarce.

One possible counterargument might involve interactions between savings and doles, but I know nothing about that.

If, on the other hand, you want to maximise the amount you have in pensions why not open a personal pension and bung a lot in now, in a tax year during which you have a year's worth of earnings?

thanks for your comments. The last point is a really good suggestion. My current pension is actually a personal pension which the company contributes to. I could ask my company to increase my employee pension contribution should my redundancy actually take place end of March. Alternatively I could allocate money to my stocks and shares ISA's. All very confusing at the moment but the lump sum payment into my pension sounds the best option.

PeacefulWaters

Remember anything you pay into that pension now could be withdrawn again when you're 55.

kidmugsy

RobStaffs wrote: »

My current pension is actually a personal pension which the company contributes to. I could ask my company to increase my employee pension contribution should my redundancy actually take place end of March. Alternatively I could allocate money to my stocks and shares ISA's. All very confusing at the moment but the lump sum payment into my pension sounds the best option.

The taxable part of a redundancy payment counts as earnings for pension purposes, so that may be another route to swell your pension pot.

atush

Yes, if your redundancy it over 30K, it is wise to put some/all of that taxable part into a pension.

And have you redone your CV and are you looking? How long will it take you to get another job?

Snakey

Be quick if you want pension contributions to count for this year. You can't usually do it using your employer's scheme because they will often pay in arrears e.g. your March payment won't actually be handed over to the pension company until mid-April (all comes out in the wash for ongoing employees with normal monthly contributions but it would make all the difference to you). So you would need to make your own arrangements.

WobblyDog

It might be worth checking if your pension has an Active Member Discount. In other words, will the pension management charges increase if you stop contributing? If so, continuning to make small monthly contributions may avoid the problem.

RobStaffs

atush wrote: »

Yes, if your redundancy it over 30K, it is wise to put some/all of that taxable part into a pension.

And have you redone your CV and are you looking? How long will it take you to get another job?

CV just about done. In truth I have not had my first consultation yet but its imminent.

RobStaffs

thanks to everyone for the useful comments. Really assists.

Mirador

If you are made redundant in March, will you be allowed to put money in to your pension in April since you won't technically be employed and therefore will be restricted to max £2880 contributions?