Best way to save £200/£300 per month in addition to Works Pension

bluenose1

Hi all,
am paying the maximum I can into my works D.C. scheme pot.
Hoping to retire in approx 2.5/ 3 years at 55 and have identified a couple of hundred pounds a month I could save.
Just wondering if worth me paying this into a SIPP and if so the most cost effective one. Or is there something else I should be considering?

From when I retire I expect my tax personal tax allowance to be utilised by taking my DB Pension, house income or DC drawdown. So not sure if I would be just best putting it in an ISA.
Any thoughts appreciated.

gazapc

Are you currently a higher ratepayer?

bluenose1

gazapc wrote: »

Are you currently a higher ratepayer?

Hi,
No I am not. But paying the maximum into my scheme as not allowed to earn less than National Minimum Wage and still get Salary Sacrifice.

Dox

Have you asked your employer if you can pay more into your works pension as a personal contribution (i.e. not by salary sacrifice)?

Bimbly

Dox wrote: »

Have you asked your employer if you can pay more into your works pension as a personal contribution (i.e. not by salary sacrifice)?

Mine would allow me to do this. I could salary sacrifice down to the minimum wage, then pay more into the scheme by paying sums directly from my bank account. It says so on my online account. Maybe worth asking the scheme itself about this possibility rather than your employer/payroll.

cloud_dog

Perhaps this might be an instance where a LISA may be a better option for the additional money (below NMW). Assuming you are under 40.

Dox

cloud_dog wrote: »

Perhaps this might be an instance where a LISA may be a better option for the additional money (below NMW). Assuming you are under 40.

OP's post indicates they are in their early fifties.

cloud_dog

Dox wrote: »

OP's post indicates they are in their early fifties.

Time to visit the opticons

squirrelpie

I think I would just put it in an ISA. It sounds like it will be tax neutral to put it in a pension, so no reason to do that, and an ISA is more flexible.

bluenose1

Thanks all.
Will enquire though my pension provider if possible. Though has crossed my mind an ISA may be better if I will be paying tax when I withdraw it if not getting benefit of salary sacrifice.

Though am I correct in thinking for every £800 I put in a pension scheme this will be topped up to £1,000 and even if I do pay tax on withdrawing it I will be able to withdraw £850 which is an increase of approx 6%.
Thanks again

AlanP_2

bluenose1 wrote: »

Thanks all.
Will enquire though my pension provider if possible. Though has crossed my mind an ISA may be better if I will be paying tax when I withdraw it if not getting benefit of salary sacrifice.

Though am I correct in thinking for every £800 I put in a pension scheme this will be topped up to £1,000 and even if I do pay tax on withdrawing it I will be able to withdraw £850 which is an increase of approx 6%.
Thanks again

Yes, it works out at a 6.25% return if you are paying tax on 75% of what you withdraw.

A pretty good return considering you can use the same underlying funds as you would in the ISA so investment returns would be the same.

Slightly higher costs possibly, the access age factor and the fact that taking anything over 25% TFLS will trigger MPAA of £4k are factors to bear in mind for anyone making that choice (along with inheritance aspects if estate large enough).