Funding A Retirement Account

dunstonh

If you are not going to spend the money in three years time then it will be there for longer than three years. So, you need to consider the whole period. Not just the period you are still working.

Seasidegal58

Sorry I should have said I'll probably need some funds for bringing my own place up to scratch as well which will be in the few months after retirement.

Thinking about it do you have to take the tax free sum all in one go or can you draw it out say in two or three tranches?

dunstonh

You can draw the pension as you like. ad-hoc, regular, annual, whatever

Seasidegal58

But is that the tax free 25% bit?

LHW99

As I understand it you can either take all the tax free 25% in one go, or you can take UFPLS.
25% of the UFPLS is tax-free, but the remainder is taxed at your normal rate.

I don't think you can take (say) 12.5% tax free one year and the other 12.5% tax free in the next.

dunstonh

You can take the 25% in stages as well. So, you can do 12.5% one year and 12.5% the next (done by a 50% crystallisation with nil income and 25% lump sum in both years).

kidmugsy

MallyGirl wrote: »

My husband's company also put the employer NI in his pension but mine doesn't.

Lucky old husband. In two senses, no doubt.

Seasidegal58

Thanks very much for clarifying.

I'm off to sort out my salary sacrifice tomorrow when I get into work!

Great advice from everyone!:T

PoundsShillingsAndPence

'If you have a flexible system you can save even more NI by focusing the sal sac in a few months rather than equally across the year '

how does this work?

For example - say you were already salary sacrificing enough to get your max employers contributions and had decided to sacrifice a further ie £6000 (gross) this financial year (2018/2019) and you are a 20% tax payer with standard personal allowance - i don't understand why paying it over a few months would be better than over the whole year (ie extra 500 each month)?

Thanks

cloud_dog

PoundsShillingsAndPence wrote: »

'If you have a flexible system you can save even more NI by focusing the sal sac in a few months rather than equally across the year '

how does this work?

For example - say you were already salary sacrificing enough to get your max employers contributions and had decided to sacrifice a further ie £6000 (gross) this financial year (2018/2019) and you are a 20% tax payer with standard personal allowance - i don't understand why paying it over a few months would be better than over the whole year (ie extra 500 each month)?

Thanks

The reason is that your NI contributions are calculated under PAYE, which in essence undertakes its calculation based on what is being paid, i.e. one months salary. Taxation is based across the year as a whole.

Making a lump sum payment in one months salary reduces your income and therefore NI requirements by the amount being sacrificed / paid (down to your minimum earnings).