Work pension - limited on how much I can contribute

borb12

I'm looking for pension advice. I earn £509 per month. I have started a workplace pension scheme voluntarily last month. Upon enquiring further they tell me the maximum I can contribute to my pension is £6.33 per month. I was looking to put away £80 as I am 32 years old and have started a pension a bit late in life but want to do the best for my future. The pension adviser at HR informed me I can only contribute the difference between their lower level £503 and what I earn at £509 which is where the £6.33 comes from (that is my 'pensionable salary'). Where can I obtain advice on where to get another pension or a way in which to contribute a lot more as I don't think I will be able to live off this amount in my retirement years and probably isn't worth doing. Thank you in advance for any help.

Paul_Herring

They're going off their obligationto provide the absolute minimum requirements (other more enlightened companies start at £0, not £503.) The £503 is mentioned here:

http://www.thepensionsregulator.gov.uk/automatic-enrolment-earnings-threshold.aspx



It is not, however, a legal maximum for contributions:
https://thepeoplespension.co.uk/help/knowledgebase/can-employees-andor-employers-contribute-legal-minimum-contribution/
https://www.nestpensions.org.uk/schemeweb/nest/employers/get-ready-for-auto-enrolment/contributions.html

I think whoever is in HR is either mistaken, or they don't want to complicate their bookkeeping by having people do anything but the default.

What may limit your contributions however, is not being able to contribute enough to take your pay down below minimum wage, in which case you can contribute to a different (personal) pension fund where you can claim the income tax back.

Dazed_and_confused

If the existing workplace pension is deducted before tax then it might make more sense for the op to open a personal pension in order to benefit from the basic rate relief which will be added by the pension company.

The £80 proposed contribution could become £100 before even being invested.

There might be other considerations which make the company pension the better option but it is possible the op is in reality not getting any real tax relief on the existing contributions due to the relatively low earnings.

Obviously any income from other sources could alter this assumption.

cloud_dog

^^^^^This^^^^^

borb12

No other income just that one. Wondering whether with my low income it is actually worth doing the work pension at all as their contribution of 2% on the £6 won't amount to much. Then if not a work pension where can I go to for advice on an alternative pension as still wish to put by for my retirement.

cloud_dog

borb12 wrote: »

No other income just that one. Wondering whether with my low income it is actually worth doing the work pension at all as their contribution of 2% on the £6 won't amount to much.

But you are getting free money from the company. You are only earning a small amount therefore the contributions are small. As far as I am aware (and as others have said) there shouldn't be a limit to you contributing more in to the works scheme (assuming you do not contribute more than would take you below your minimum earnings level).

borb12 wrote: »

Then if not a work pension where can I go to for advice on an alternative pension as still wish to put by for my retirement.

You've said that you want to contribute an additional £80 so you can quite easily do that by opening a personal pension or a SIPP.

Additionally, you would benefit from the pension tax relief from the government. So for you this would be a free 25%. Based on your £80, £100 would actually be credited to your personal pension or SIPP.

Regarding a pension, we don't know enough about your feelings towards managing your pension investments etc so it is really difficult to offer any guidance in that area.

As a fall back you might want to consider taking about a Aviva Stakeholder pension through Cavendish. There is a one-off set up fee £35 or £40 (depending on proof of identification documents) but you will benefit from a lower annual charge on the investment of 0.55%.

xylophone

What is the name of the scheme?

Does it operate "relief at source" or "net pay"?

https://thepeoplespension.co.uk/help/knowledgebase/are-the-contributions-paid-net-or-gross/

borb12

Should I go to a financial planning service for advice on private pensions then as this seems the only pension where I can put aside enough to make worthwhile having a pension. I feel I need to meet someone to sit down and go through all the available/suitable options in order to understand it.

cloud_dog

It really doesn't need to be that complicated, although if you feel you need that kind of support then that is what you may need to do. The costs are going to be considerable considering the monies involved though.

xylophone

What are the answers to the questions posed in my post above?

kidmugsy

borb12 wrote: »

Should I go to a financial planning service for advice on private pensions?

I suggest that you begin by visiting the website of Hargreaves Lansdown. You can learn an awful lot there free, at your own pace.

If you decide to open a SIPP, for instance, they would be a candidate provider for you. If you wanted a Personal Pension or Stakeholder Pension then there's Cavendish. There are other firms mentioned at the monevator blog, which tabulates their charges.
http://monevator.com/compare-uk-cheapest-online-brokers/