Company Pension - Refund Less 20% tax

YorkBluenose

Hi

My company's money purchase pension scheme, into which they contribute 11% of salary, states that if you leave the company within 2 years you can choose to take a refund of the current value of the scheme, less 20% tax.

This is not something I'm considering as I've been in the scheme for 2+ years

However, I am curious to whether the following scenario might be valid:-

- Wealthy individual already having adequate retirement provision
- joins company on a big fat salary
- elects to pay 100% of salary into pension scheme
- leaves company just short of two years
- chooses to take refund of pension fund value less 20% tax

In effect reducing income tax burden for the two years to 20%...and also pocketing (20% of) the 11% company contribution. All subject to investment performance etc.

Or would this be adjusted through annual tax return to the IR ?

The situation doesn’t apply to me (unfortunately). I’m not an IFA nave no vested interest other than idle curiosity (which is worryingly indicative that I really do need to try and get out more!)

Thanks

Debt_Free_Chick

YorkBluenose wrote: »

In effect reducing income tax burden for the two years to 20%...and also pocketing (20% of) the 11% company contribution. All subject to investment performance etc.

Individuals don't normally receive the company's contributions - members get their own contributions back and the company's are returned to them (or, more often, netted off against the next month's contributions due for other members).

But you're right - the tax on the member's refund is a flat 20% so there's a marginal benefit to the plan you outline.

And, yes, you do need to get out more :rotfl: