Help & Advice with Pension / SIPP

LoopySnooker

neilvw wrote: »

Is the £35k-odd lump sum definitely 25% of the notional capitalised value, and not a standard or automatic lump sum which is usually less?

Do you have a benefit statement showing the annual pension you can expect / have accrued? A DB statement would definitely have those figures, not just the lump sum.

I'm not really sure about the notional capitalised value, the figures quoted are as follows:

No tax free lump - approx £6,900 / yr
With tax free lump of £35k, - approx £5,200 / yr

xylophone

Re Now and RAS

http://www.nowpensions.com/press-release/now-pensions-to-top-up-non-taxpayers-pension-pot-to-offset-net-pay-income-tax-relief-shortfall/

The commutation rate on the deferred DB scheme is a little over 20:1 so not bad - a shining star when compared with some schemes which offer 12:1 or less.

Is there pre 88 and post 88 GMP? How is it revaluing in deferment?

If there is GMP what is the split of the pension?

How is the pension index linked in payment?

What is scheme pension age?

LoopySnooker

Thanks again for all your help so far.

Is there pre 88 and post 88 GMP?

Yes, there seems to be 2 figures, which are approx £3100 pre 88 and approx £1200 post 88

How is it revaluing in deferment?

Not quite sure where to find this, sorry for being a bit dim !

If there is GMP what is the split of the pension?

There's a split at age 60 (2 yrs from now)

How is the pension index linked in payment?

Before age 60, total pension will increase in line with RPI upto 5%, then 80% of 5%-15% and 50% over 15%.
After age 60, pension in excess of GMP, as above. Pre 88 GMP no increase, post 88 GMP, 3% or CPI if less. From age 60, the State is responsible for increasing pre 88 GMP.

What is scheme pension age?

It mentions a normal pension date of year 2020 (age 62).

xylophone

After age 60, pension in excess of GMP, as above. Pre 88 GMP no increase, post 88 GMP, 3% or CPI if less. From age 60, the State is responsible for increasing pre 88 GMP.

I am assuming that this is not a public sector pension.

Under the new state pension arrangements, the state will not be indexing pre 88 GMP.


The scheme will be responsible for indexing post 88 GMP up to 3% - the state will no longer index link any excess over 3%.

Will the scheme be taking over? Your wife should check.

The excess will be index linked under scheme rules.

xylophone

Another thought occurs - your wife reaches scheme pension age at 62 ( after female GMP age which is 60).

Will your wife find that when she draws her scheme pension, the pre 88 portion will not be index linked in payment, the post 88 only up to 3% CPI and just the excess by scheme rules?

https://www.nao.org.uk/wp-content/uploads/2016/03/The-impact-of-state-pension-reforms-on-people-with-Guaranteed-Minimum-Pension.pdf

OldBeanz

Your wife will not be paying tax. Between stopping work and drawing her pension your wife will not be paying tax. You could pay all her earnings (less what is already contributed and multiplied by .8 as the government will contribute the .2) into a SIPP thereby gaining a tax relief uplift. She could then draw this at £16k pa until 66 when her other pensions kick in. As you are not going to hit those limits when she stops work she can contribute £3600 pa to her pension (£3.6k X .8). Keeping money in cash would be minimising a lot of risk in volatile markets. HL while not the cheapest have a good reputation for a quality service.

GazHol

OldBeanz wrote: »

Your wife will not be paying tax. Between stopping work and drawing her pension your wife will not be paying tax. You could pay all her earnings (less what is already contributed and multiplied by .8 as the government will contribute the .2) into a SIPP thereby gaining a tax relief uplift. She could then draw this at £16k pa until 66 when her other pensions kick in. As you are not going to hit those limits when she stops work she can contribute £3600 pa to her pension (£3.6k X .8). Keeping money in cash would be minimising a lot of risk in volatile markets. HL while not the cheapest have a good reputation for a quality service.

My OH is in similar situation (sub £10K earnings, 5.5% CARE scheme, previous DB payable from 60), although is 52. Does paying all remaining earnings in to a SIPP affect the NI contributions for the SP? OH already has 35 years mainly contracted out contributions pre Apr 2016.

xylophone

Does paying all remaining earnings in to a SIPP affect the NI contributions for the SP?

No.

Your wife is paying (or being credited with) NI through her employment?

http://www.litrg.org.uk/tax-guides/employed/what-national-insurance-do-i-pay-employee

Has she obtained a new state pension statement to check her "starting amount"?

https://www.gov.uk/check-state-pension

LoopySnooker

OldBeanz wrote: »

Your wife will not be paying tax. Between stopping work and drawing her pension your wife will not be paying tax. You could pay all her earnings (less what is already contributed and multiplied by .8 as the government will contribute the .2) into a SIPP thereby gaining a tax relief uplift. She could then draw this at £16k pa until 66 when her other pensions kick in. As you are not going to hit those limits when she stops work she can contribute £3600 pa to her pension (£3.6k X .8). Keeping money in cash would be minimising a lot of risk in volatile markets. HL while not the cheapest have a good reputation for a quality service.

I think the plan for the immediate future (next 3 years) will be to maximise my wife's pension contributions before she stops working. We should be able to build up a pot of £27k - £28k between now and April 2019, including tax relief. If we leave it in cash with HL, we will then have the option to draw it down to replace her earnings, or if we don't need it, maybe transfer it elsewhere. The important thing is to get the most tax relief whilst we can.

Before I go ahead and get started, does this seem the most logical option ? Or is there a better solution that I'm completely overlooking ?

Thanks again to everyone for their advice so far.

GazHol

xylophone wrote: »

No.

Your wife is paying (or being credited with) NI through her employment?

http://www.litrg.org.uk/tax-guides/employed/what-national-insurance-do-i-pay-employee

Has she obtained a new state pension statement to check her "starting amount"?

https://www.gov.uk/check-state-pension

Yes to NI through employment.

Starting amount (up to 5th Apr 2016) is £124.34, another 8 years to get the full £155.65.

Of course, OH wants to know why 37 years contributions doesn't give the full £155...