I have my National Insurance record - now what?

jamesd

Since S2P replaced SERPS in 2002 there was some extra topup for low earners compared to SERPS. But what we don't know is whether the number of years worked while contracted out will be enough to eliminate it all, since I'm not aware of anything that protects that money from the contracted out deduction.

It's not really worthwhile worrying about it much at this point, though. The actual answer will presumably be available within a year once projections are extended to those who are under 55.

The OH should be able to get an answer that does include all of this by asking now, being 55 or older and hence eligible for a projection that includes their foundation amount calculation.

I'll hope that assuming it's all eliminated ends up being too pessimistic, but time will tell soon enough and maybe Seanymph will be kind enough to return and let us know how it turned out once the answer is available.

Seanymph

Thanks everyone.

jem16 - I think I didn't like the amount it would cost me to be honest. Currently I pay in about £90, and my employer pays in over £300. Any additional payments were all me, and I seem to recall they were suggesting about £400 a month to make anything worthwhile - I may be being spoilt getting over £400 a month at a cost to me of around £75, but even so it seemed expensive - and wasn't my average salary pay out at the end either, it was with a different company.

Please confirm a PP/SIPP is a personal pension?

Seanymph

atush we are aiming (loosely) at Autumn 2020.

We accept we will need to do 'some' work beyond that date, but we would both like to leave our current employment, buy a motor home, and travel around.

My focus on the finances is an attempt to try and achieve that.

jem16

Seanymph wrote: »

jem16 - I think I didn't like the amount it would cost me to be honest. Currently I pay in about £90, and my employer pays in over £300. Any additional payments were all me, and I seem to recall they were suggesting about £400 a month to make anything worthwhile - I may be being spoilt getting over £400 a month at a cost to me of around £75, but even so it seemed expensive - and wasn't my average salary pay out at the end either, it was with a different company.

With an AVC you are free to pay in as much or as little as you like so you wouldn't need to have gone with £400pm. However to get anything near the same benefits you're getting from the LGPS would require a larger amount than what you pay.

This would be the same with any pension arrangement you make though.

Please confirm a PP/SIPP is a personal pension?

It is.

atush

53 is very young to retire, and gives you only 5 years (and you cant access pensions until 55). And there is a lot of years to cover before your LGPS pays out.

So you need both a DC pension and a S&S isa and cash. With enough in them to last you 12 years or more til getting your DB pension.

Seanymph

jamesd thank you so much for your time and detail.

I'm afraid I can't answer all of your points, I need to work through it and make sure I understand but didn't want to not reply as I am very grateful for your effort.

I am learning with every post. We will be looking to do 'some' work after we 'retire' - I THINK that we would be looking to run a self assessment and therefore pay self employed NI contributions to maximise our SP. This seems a sensible option to me to make sure we both get the maximum - am I right?

We currently have three houses - we would like to keep them all - one is vacant and in France, a renovation. One we live in and are still 'doing' - and another we currently have a grown up son in.

We also have 6kw Solar system on the roof which brings in over £2,000 a year through FIT payments.

I am leaning towards us being able to rent out the two in England and travel and base ourselves in the French house a bit too.

Currently we do have a mortgage of £65,577.

So, the bigger picture is not impossible I think, but it isn't good! Which is why I need all the help I can get.

Spidernick

Seanymph wrote: »

Currently we do have a mortgage of £65,577.

Sorry to go off topic, but how can you have a 'debt-free' MSE badge, in that case?

Jamesd,

Are you sure that taking out just the 25% tax-free element doesn't then reduce your annual allowance from £40K to £10K (post 8)? I thought this was the whole reason for the reduction, i.e. you cannot get something tax free and then immediately plough it back into your pension to get more tax relief on it. If you have a link to this, I'd be very grateful, as I'm doing a presentation on pension tax relief at work on Wednesday and will add this, if appropriate. Thanks.

jem16

Spidernick wrote: »

Are you sure that taking out just the 25% tax-free element doesn't then reduce your annual allowance from £40K to £10K (post 8)? I thought this was the whole reason for the reduction, i.e. you cannot get something tax free and then immediately plough it back into your pension to get more tax relief on it. If you have a link to this, I'd be very grateful, as I'm doing a presentation on pension tax relief at work on Wednesday and will add this, if appropriate. Thanks.

From Pension Advisory Service;

http://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/pensions-and-tax/the-annual-allowance

Changes to the annual allowance

If you have taken flexible benefits which include income, such as an ‘Uncrystallised Funds Pension Lump Sum (UFPLS)’ or flexible drawdown with income, and you want to continue paying contributions to a defined contribution pension scheme, you will have a reduced annual allowance of £10,000 towards your defined contribution benefits. The reduced allowance will apply if you have withdrawn more than the 25% tax free pension commencement lump sum (PCLS). The reduced amount is known as the ‘money purchase annual allowance (MPAA) ,and includes both your own contribution and any other contribution paid on your behalf, such as an employer or a third party. You cannot bring forward any unused annual allowances from the previous three tax years, to warrant a higher contribution of £10,000 towards your defined contribution benefits.

The money purchase annual allowance will only start to apply from the day after you have taken flexible benefits and so any previous savings are not affected.

Recycling of the tax-free lump sum is a whole different ball game.

Seanymph

Hi Spidernick.

Because a mortgage doesn't count, for all sorts of other reasons - i being considered sensible debt I think.

I owe nothing else though - (and if we are to be pedantic the mortgage is in OH's name).

jamesd

Spidernick wrote: »

Jamesd,

Are you sure that taking out just the 25% tax-free element doesn't then reduce your annual allowance from £40K to £10K (post 8)?

Yes, I'm sure. Jem16 has provided a relevant link that explains it. 25% tax free lump sum (the PCLS) is fine but not any more and not UFPLS, that is always a 25%:75% combination.

Spidernick wrote: »

I thought this was the whole reason for the reduction, i.e. you cannot get something tax free and then immediately plough it back into your pension to get more tax relief on it. If you have a link to this, I'd be very grateful, as I'm doing a presentation on pension tax relief at work on Wednesday and will add this, if appropriate. Thanks.

That's the purpose of the rule but the rules also allow for the fact that people might have to do things like using the lump sum to pay off their interest only pension mortgage or other needs that were planned long ago. So the rule has a limit to the 25% tax free lump sum being fine, but no more. It's not a perfect block but it prevents it being done on a large scale by high earners.

There are also some other ways that money can be taken without causing the reduction:

1. buying an annuity
2. taking income from a workplace defined benefit pension.
3. people who were in "capped income drawdown" before 6 April 2015 can continue to take their income from drawdown without triggering the restriction. They can also add other pots to their existing drawdown pot and draw an income from the combined pot.