Just lost out on early severance package - What Now

kidmugsy

jerrysimon wrote: »

Given I just want to take advantage of the government addition and it will only be a max of two years should I just do a cash one i.e. I really want no risk ?

I am thinking of putting in 5K i.e. max it out for my wife and maybe 10k for myself ?

Jerry

You can fit in £6k for your wife.

Subtract her existing pension contribution from her pay. Multiply the result by 0.8. That's the amount she can make as a "net contribution".

Hargreaves Lansdown don't charge fees if you keep it all in cash. They charge a hefty fee if you open a pension and then close it again within a year. My memory is that that fee isn't charged if you leave £1k behind for longer. if you want to take the lot out quickly people say that Virgin are cheap. Remember to leave time for the tax rebate to reach the pension provider - about 6 weeks. Check on the internet.

jerrysimon

Thanks you are right I can squeeze in 6K (£6176) to be exact. It would definately be in there a year.

Looking again its more important to do hers than mine if I am going to work for another year or so.

You guys have been really helpfull. I will have a look round at the cash one as I have a few days yet.

Regards

Jerry

jerrysimon

Ok that is my wife sorted

As a standard rate tax payer if I was to purchase a 5K one before the end of the current tax year in addition to the 1K added by the government would I also then get the tax back i.e. another 20% when I did a tax return for 2015/16 ?

That sounds too good to be true lol

Ah reading more about that its only for higher rate tax payers. That's some perk!

Jerry

robin61

jerrysimon wrote: »

Ok that is my wife sorted

As a standard rate tax payer if I was to purchase a 5K one before the end of the current tax year in addition to the 1K added by the government would I also then get the tax back i.e. another 20% when I did a tax return for 2015/16 ?

That sounds too good to be true lol

Ah reading more about that its only for higher rate tax payers. That's some perk!

Jerry

Yes it is good while it lasts. Is there an AVC scheme available via your work pension scheme ?

jerrysimon

Yes but I think I missed the deadline for next year

I am not a higher rate tax payer.

Its outsourced to Scottish Widows & Standard Life ?

Jerry

jerrysimon

Details

Members can also contribute to a fund which an annuity can be purchased from when you reach retirement age. Contributions are tax free and can be increased, decreased or suspended at any time. Changes to your contributions can only take place from the next available payroll run; please note that your employers deadline to make any changes to your deductions are generally in the first week of the month. The fund that you build up will depend on the level of your contributions and the performance of your selected investment options. There are administration fees placed on your fund by the providers however these are generally lower than the fees charged by free standing AVC funds that can be bought outside of the scheme.
The funds are administered by the civil service's two providers - Scottish Widows and Standard Life. Contact details for each provider are below

jerrysimon

Would that be better than starting up a SIPP for myself ?

Jerry

jerrysimon

I am just about to set up the SIPP for my wife. 6K seems like the mnagic number given she contributes around £500 a year to he pension (works for a school paid by county council). She pays 5.5% but they top it up with more (another £1500 so adding another %15) does that also need to be taken into account i.e. should I be subtracting their contribution off her earnings for last year as well ?

Sorry for all the questions you guys have been so helpful.

Jerry

kidmugsy

jerrysimon wrote: »

She pays 5.5% but they top it up with more (another £1500 so adding another %15) does that also need to be taken into account i.e. should I be subtracting their contribution off her earnings for last year as well ?

Nope, you can ignore their contribution.

The council pension would matter if you were constrained by the £40k annual allowance, but you are miles away from that.

robin61

jerrysimon wrote: »

Would that be better than starting up a SIPP for myself ?

Jerry

I would look into the AVC options first.
So for example if you pay into the AVC monthly via a salary sacrifice method I.e. straight from your gross pay you stand to benefit from 20% tax relief but also 12% NI relief. It says contributions are tax free in your post so this looks likely.
You also mentioned buying an annuity with the AVC and that' s fine but does your pension come with a lump sum and is it possible to instead use the AVC to increase your lump sum ? If it is you can potentially get the whole lot out tax free when you retire whereas an annuity would be taxed.
I know our scheme at work is like this. Yours might not be but worth investigation before committing to a SIPP I think.
I' m not saying the SIPP is a bad idea at all but maybe the AVC might have some advantages.