Just lost out on early severance package - What Now

jerrysimon

Thanks now I understand lol

Its great you guys take the time to respond to us newbies.

I need to check with work about AVCs but I am serioulsy looking at using two SIPPs one for me and one for my wife to fund either two or three years i.e. leaving work either next year or the year after on my 57/58 birthday (Sep) to take me up to payment of my work pension at 60 which will prevent any reduction. At 58 I will have half salary i.e. 40 years.

Jerry

jamesd

jerrysimon wrote: »

Seems like you have to take account of more than just your contributions into your work pension i.e. in my case my wife put in £500 and they put in £1500 and presumably any money it makes.

There are two limits and the way it works for each is a bit different:

1. The annual contribution allowance. Add up the amount paid in to all pensions for you however they get there and that counts against the allowance. You have carry forward for up to three years to use if you go over this.

2. Your earned income. Salary sacrifice employer contributions and other employer contributions do not count against this. That is, any money that ends up in the pension pot without extra tax relief being added doesn't count. Any pension contributions from net pay count at net pay plus tax relief, from gross pay (but not via salary sacrifice) count as the gross pay amount. There is no carry forward from past years but there is 3600 gross limit that is available to those with lower or no earned income.

jerrysimon

So you have to have earned more than 40K in one year to put more than 40k in the same year ?

As I said if I only want to put another 23K in one for me, it does not matter if I do it now or in the next tax year.

I spoke to HL and they also confirmed if you keep 1K in they dont charge for drawing it out within 12 months. Though of course once you start drawing the 40K max drops to 10K/year you can then put in.

Jerry

robin61

jerrysimon wrote: »

Thanks now I understand lol

Its great you guys take the time to respond to us newbies.

I need to check with work about AVCs but I am serioulsy looking at using two SIPPs one for me and one for my wife to fund either two or three years i.e. leaving work either next year or the year after on my 57/58 birthday (Sep) to take me up to payment of my work pension at 60 which will prevent any reduction. At 58 I will have half salary i.e. 40 years.

Jerry

If your AVC contributions come off your gross pay you will get 20% tax relief and 12% NI relief whereas if you invest in a SIPP you will only get the 20% tax relief. So if you have the option to transfer the AVC fund to a SIPP at any time I am struggling to think what advantages a SIPP would have now unless you are uncomfortable with the funds that your work AVC allows you to invest in.

jerrysimon

I will check AVC contribuitions.

Of course the AVC contributions can only come from my salary and get those benefits ?

Its unlikely I can save 23K in one year, though with the SIPP I can top it up with my mortage equity.

Jerry

OldBeanz

The Government doesn't allow you to benefit from a cut in National Insurance if you are one of its employees and paying AVC's.

jerrysimon

Our whole NI thing is even more confusing. There is some kind of opt out where again I think my wife and I pay less contribution (maybe that is the 12%). That will effect my state pension in that I think we will only get around £6.1K/year each whe it all changes in April when we move across to the normal system.

To be honest if I make it to 66.5 now then as both my wife and I will get it, with my final salary pension scheme we will have more than enough to live on.

Jerry

kidmugsy

jerrysimon wrote: »

once you start drawing the 40K max drops to 10K/year you can then put in.

once you start drawing more than 25% of the 40K max drops to 10K/year you can then put in