Aegon and Retiready

chrisrsmith

Hi,

Two questions….

1) Does anybody have a view regarding switching from Aegon (Scottish Equitable) and across to Retiready? I am advised that I will be switched over automatically soon unless I 'opt out'.
I'm no expert regarding pensions, but from the little I do know, I am quite okay with the current relationship.

2) I left a company and the pension that I had was termed 'Paid Up' as I no longer had contributions made into my pension from them.
I could swear that I was advised that I could;t make any further contributions to that scheme as I had left. In checking today, I was told that my understanding was wrong and that I can pay into that pension net and then it would be grossed up.
I left the company for a career break and am unsure if I will return to work and also wondering about taking the 25% tax free in a couple of months. Again I am unsure that should I take 25% then that prohibits me from working again and staring another pension?

I asked the person on the phone how much I could add to the pension that was 'paid up' and they said I can pay as much as I liked - seemed odd to me. They only seemed to want to know if I was going to pay a lump sum or a monthly payment.

Any guidance / advice would be very much appreciated.

I haven't worked for 3 years now and not made any pension payments since 2014. If I can achieve 20% additional to any future contributions - seems sensible to me to do so.

If I'm talking rubbish, please be blunt but please point me in a new direction or please give me you advice..

Thank you in advance.

dunstonh

1) Does anybody have a view regarding switching from Aegon (Scottish Equitable) and across to Retiready? I am advised that I will be switched over automatically soon unless I 'opt out'.
I'm no expert regarding pensions, but from the little I do know, I am quite okay with the current relationship.

it is certainly in the interests of Aegon. Whether it is best for you though is a different matter.

Again I am unsure that should I take 25% then that prohibits me from working again and staring another pension?

It doesnt stop either of those things. However, you shouldnt take the 25% unless you need it.

I asked the person on the phone how much I could add to the pension that was 'paid up' and they said I can pay as much as I liked - seemed odd to me. They only seemed to want to know if I was going to pay a lump sum or a monthly payment.

You can pay upto 100% of your earnings or £40,000 whichever is lower. (there is potential to go more if you earn more than £40k and if you earn less than £3600 you can still put upto £3600 in).

Any guidance / advice would be very much appreciated.

The board is not authorised to give advice. Just comment and discussion only.

How much do you expect to earn in this tax year? (earn means income by way of employment or self employment)

chrisrsmith

Hi DunstonH

Thank you for the prompt response. As mentioned in my message, i took a career break (about 3 years ago) and am wondering I'll go back to work.

So therefore with no actual earnings - I can put in the £3600 and get 20% added?

Also, you mentioned that I shouldn't take out the 25% unless I needed it - what is the reason for that please?

Thank you

xylophone

How old are you?

Do you have any other pension provision?

Have you obtained a state pension forecast?

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

If you can contribute to the Aegon pension (and wish so to do), or indeed if you wish to contribute to another pension, if you have no relevant earnings then you are limited as to the amount you can contribute.

You may contribute a net amount of up to £2880 per tax year and the pension provider will claim tax relief of £720, making a total of £3,600.

If you drew down any amount other than your PCLS from a DC pension and then took another pensionable employment, you would need to have a look at the rules surrounding Money Purchase Annual Allowance with regard to contributions to that pension.

http://www.pruadviser.co.uk/content/knowledge/technical-centre/tax_relief_members_contributions/

http://www.pruadviser.co.uk/content/knowledge/technical-centre/money_purchase_annual_allowance_mpaa/

You might wish to book an appointment with Pension Wise.

https://www.pensionwise.gov.uk/en

dunstonh

So therefore with no actual earnings - I can put in the £3600 and get 20% added?

If you do not return to work in this tax year, you can put £3600 gross. The 20% is deducted and that is what you write the cheque for. i.e. £2880

Also, you mentioned that I shouldn't take out the 25% unless I needed it - what is the reason for that please?

its sitting tax free, probably earning around 5-7% per annum. You can only draw one lot of 25% tax free now. If you dont need the money, and stick it in a bank account earning say 1%, then you will not be able to draw another 25% tax free even if the money in the pension doubles in the next 10 years. If you left it in the pension and the pension, say doubles, you can get more out of the pension tax free when you do need it.

Also, another method of income is to have 25% of the income paid tax free. This can help give you a bit more when you really need the money.

Pensions are also outside of your estate for IHT (in case IHT is an issue for you).

chrisrsmith

Thank you guys for the information - much appreciated..

I've booked an appointment with PensionWise.

I am 54.

I have another pension thats sitting at around 70K too.

Regarding the state pension, I did receive a forecast and I will receive the maximum.


Q: Can I pay the £2880 retrospectively - i.e. for the years that I have not worked and not paid any pension contributions to anybody? So 2015, 2016 and this year.

Also I don;t understand DunstonH statement:
Also, another method of income is to have 25% of the income paid tax free. This can help give you a bit more when you really need the money.

Thanks
Chris

dunstonh

I've booked an appointment with PensionWise.

Remember that pensionwise is generic. They wont give advice.

Q: Can I pay the £2880 retrospectively - i.e. for the years that I have not worked and not paid any pension contributions to anybody? So 2015, 2016 and this year.

No.

Also I don;t understand DunstonH statement:
Also, another method of income is to have 25% of the income paid tax free. This can help give you a bit more when you really need the money.

If you take the 25% as a lump sum, then the income, when you draw it, will be all taxable. However, a very popular option, especially since the pension freedoms, is to not take it as a lump sum. But to take it as part of the income. Think of each monthly payment as an ad-hoc withdrawal with 75/25% split.

For example, lets say you decide your income draw is £500 per month from the pension. If you havent taken any tax free lump sum, then 25% of that income can be tax free (£100) with the other 75% (£400) taxable.

If your state pension is £8000 a year, that will eat up most of your personal allowance but you will still have £3500 available. If you havent taken any 25% lump sum, you could draw £4666 p.a. pension income and have the state pension income and pay no income tax. Whereas if you took the 25% as a lump sum, you would only draw £3500 a year and pay no tax. If you draw £4666 from the pension, you would start paying income tax.

You can still take lump sums in future and have the 25% available if and when you need it. It isnt lost. You dont need to do it just because you have got to 55.

Another point to note is that you are a non-taxpayer. So drawing your tax free lump sum is wasteful. You should save it until you are a taxpayer again. If you really did need a lump sum, it would be better to part crystalise to the amount you need and use some of the taxable chunk rather than just the tax free chunk. The taxable chunk can go against your tax free personal allowance resulting in no tax and would leave the remaning fund still able to pay a 25% tax free cash amount at a later date.

Its getting complicated as there are many different ways of doing this. An IFA would fiind out your objectives first and recommend what you need to do from there. We dont know your objectives. So, we could end up listing every option under the sun but only 1 or 2 could be suitable. If you are going to DIY on this, you need to find out about these options.