company pension contribution

[Deleted User]

Hello,
I am looking for information if anyone can help.I have searched elsewhere.
I am in employment and will continue to be employed for the forseeable future.
M y employer is stopping our final salary db pension wef 01/07/16.
I can access my pension at that date and join a new dc scheme.
My employer will pay 20% of my salary into new dc scheme.
I am male aged 60.
Question : what is the limit or restriction on the amount I can contribute to new dc scheme if i take my benefits from the final salary db scheme at that (or any other) date?
thanks, billy

[Deleted User]

Hello again,
This is not my first post, I had to re register after internet problem,
thanks, Billy

PensionTech

The amount you can contribute to the new DC scheme is limited by the Annual Allowance, which stands at £40,000 per tax year (including employer contributions). This will be slightly lower for the 2016/17 tax year as the growth of your DB pension between April and July 2016 will also be taken into account. It is not affected by whether you start drawing your DB pension or not. The only exception is if you start taking the DB pension this year and it is reduced for early payment, in which case you may find that the Annual Allowance used up by your DB pension this year is low or zero, so you may be able to contribute the full £40,000 into your DC pension this year after all.

However, if you are a high earner and have a lot of service built up in the DB pension, there's a small chance that you may start to come up against the Lifetime Allowance of £1 million - so you may want to dial back your DC contributions to ensure that you don't go over that limit when you come to take your benefits out of the DC scheme. If you can tell us roughly how much you've built up in the DB scheme, and whether you have any other substantial pension benefits held elsewhere, we can see whether this is likely to be an issue for you.

[Deleted User]

Thanks for reply.
Salary £34000 pa
DB pension £ 16000 pa plus lump sum £100000. (cetv value £ 400000)
No other pension provision or pot.
Billy

PensionTech

Ok, in that case you probably don't need to worry about the Lifetime Allowance or the Annual Allowance. You should be able to contribute pretty much your whole salary into the DC pension if you want to, although this could be slightly more complicated if your employer operates what's called "salary sacrifice" for pension contributions - and you'll be told if they do, as it would have to form part of your contract.

[Deleted User]

Thanks again,
No salary sacrifice. I am hoping I can contribute enough into new dc scheme to keep my earnings/salary within my current 20% tax bracket.
I am only looking at all options re the final salary scheme but I would like the security and peace of mind of having the scheme in payment. All be it at a cost.
I appreciate your help,
Billy

PensionTech

What are your concerns about the final salary scheme if you don't start drawing the pension?

[Deleted User]

Hello again,
I have a strong fear of losing all or some of the pension. There is a large deficit in the fund which is increasing all the time,hence one of the reasons for scheme closure.
There is a strong possibility of changes in ownership of the company.There is currently a merger proceeding with the parent company and another. I am very wary of the uncertainty of it all. I plan to retire in 2 years and cannot afford to lose anything now. I understand there are protective measures in place but I cannot shake of the fear of loss. Thanks, Billy

bigadaj

Given the Bhs debacle then I can understand your concerns, though the pension protection fund should guard 90% of your pension value, with the drawback that you would lose inflation protection.

My understanding was that drawing a pension reduced your contribution limit to £10000 per year, but maybe that is defined contribution only.

If I were you then I might look at taking the pension on the basis of reducing hours, dropping down to a 4 day week might keep you out of higher rate tax on that basis.

greenglide

My understanding was that drawing a pension reduced your contribution limit to £10000 per year, but maybe that is defined contribution only.

This only applies to taking advantage of the new "pensions freedoms".

Doesn't include DB schemes or taking just the tax free 25% and leaving the rest uncrystallised.

[Deleted User]

Hello bigadaj,
Thanks for reply. Reduced hours not an option. I was aware of pension protect fund and it is not exactly definitive re safeguards. Not enough at the moment to give me complete peace of mind.. I also understood that there may be restrictions on future contributions into dc scheme if already getting payment from another pension.Hence my question.PensionTech has said the normal limits apply whilst you have a different or uncertain view. It is confusing as different opinions come up on all searches.
Thanks
Billy