Company pension employee contribution

flopsy1973

Hi
My partner works for a small company who pay 5% into her pension regardless of anything she pays. She is not currently contributing but is there any gain in her contributing to this pension scheme if the company will not increase their contributions. Would she be better off saving into a monthly ISA and that could be used to supplement the pension


Many thanks

p00hsticks

How old is she ? what rate of tax does she pay ?
Any pension contributions will get tax relief - she won't pay any tax on them going into the pension. 25% will be tax free on the way out, the rest could potentially be subject to income tax depending on the totals.

What sort of ISA are you thinking of ? hopefully an S&S one if investing for the long term (although I'm not familiar with the new Lifetime ISAs if she's eligible).
Any earnings directed into an ISA will be after income tax has been deducted, but withdrawing money later on there will be no tax to pay (assuming the rules don't change).

ISAs are potentially more flexible in that you can withdraw money earlier if needed.

dunstonh

She is not currently contributing but is there any gain in her contributing to this pension scheme if the company will not increase their contributions.

Yes there is

1 - more money put aside means more money available in retirement
2 - tax relief on the contributions and possible reduction in NI too
3 - tax free growth

Would she be better off saving into a monthly ISA and that could be used to supplement the pension

You havent supplied enough information for anyone here to say what tax wrappers work out best for her.

flopsy1973

She is 42 and has virtually nothing in a pension pot, is paying lower 20% tax. She currently is thinking of using the value in the house when the mortgage is paid off to fund her retirement. I also have a home that im renting but living with her. Also we are looking at buying a bigger property that will be possibly mortgage free as our new home

kidmugsy

flopsy1973 wrote: »

She is 42 and has virtually nothing in a pension pot, is paying lower 20% tax.

The big question is whether, if she wanted to contribute to the scheme at the company, she could do it by salary sacrifice, sometimes called the "Smart" method. That way she'd avoid both some income tax and some National Insurance contributions.

flopsy1973

sorry for asking the obvious but how will that work and what are the tax advantages of her joining the company scheme

quotememiserable

flopsy1973 wrote: »

She currently is thinking of using the value in the house when the mortgage is paid off to fund her retirement.

...and where would she live in that case? And this needs some serious sums, is there enough value that can be released from a house to fund a whole retirement?

flopsy1973

quotememiserable wrote: »

...and where would she live in that case? And this needs some serious sums, is there enough value that can be released from a house to fund a whole retirement?

sorry when I say released I meant selling the house it is currently worth around 160K and we are buying another property which we will live in

xylophone

what are the tax advantages of her joining the company scheme

She is already in the company scheme, it is just that only the company is contributing.

Does the company offer salary sacrifice ( sometimes called Smart)?