Personal Pension Contributions

george4064

Hi,

I'm currently 27, living in London with £200k mortgage, working full time with salary of £44k. I expect this to increase as I get older.

I currently have two pensions, one with my current employer and another with my previous employer as below:

Previous employer DC pension - £7k - 100% BlackRock Consensus 100
Current employer DC pension - £8.7k - 80% L&G World ex UK Equity Index/20% L&G UK Equity Index

Currently, employer contributes 7.5% whilst I contribute 3%, currently about £340 pm in total. This is the max I can contribute until I reach 40 where I can up it to 4% from me and 10% from my employer, and further increases available at 50+ and 60+.

Just wondering if I'm missing anything or anything I should do to better set myself up for the future?

Thanks in advance.

lisyloo

When you say 3% is the max, what is making it the max?
Are you saying it’s the max in your employers scheme?

I would say you need to put more in.
If your employer won’t let you then you could get a SIPP for yourself where you will receive tax relief.

george4064

lisyloo wrote: »

When you say 3% is the max, what is making it the max?
Are you saying it’s the max in your employers scheme?

I would say you need to put more in.
If your employer won’t let you then you could get a SIPP for yourself where you will receive tax relief.

Its the max according to the terms of my employers scheme.

I always have taken the belief that I should maximise the benefit of employer contribution matching and the rest into S&S ISA.

AnotherJoe

george4064 wrote: »

Its the max according to the terms of my employers scheme.

I always have taken the belief that I should maximise the benefit of employer contribution matching and the rest into S&S ISA.

That belief is robbing you of tax relief. Robbing you blind if you are a high rate taxpayer.

Though I dont think you quite are?

george4064

AnotherJoe wrote: »

That belief is robbing you of tax relief. Robbing you blind if you are a high rate taxpayer.

Though I dont think you quite are?

Not yet.

Am I right in saying that when I move into the higher rate tax band I should up my pension contributions to 'bring me back' to the standard rate band?

lisyloo

The benefit of S&S ISA is that you can acces the money when you want. That’s a double edged sword as retirement savings are meant to be for retirement.

The benefits to a SIPP are that you’d get tax relief. This is more valuable for higher rate tax payers, but you’d still get (currently) a 25% tax free lump sum plus in retirement your personal allowance is tax free. So in early retirement you wouldn’t have to pay tax on the first £12.5k of your income (2019/2020 figures). That would reduce a lot when you get to state pension age (well you get the same allowance but it would be partially used by state pension).
The tax benefits are better if you get 40% tax relief on the way in but pay 20% on the way out.
The downsides to pensions are that you cannot acces the money until 55 (unless terminally ill).

There has to be a balance here as there’s a trade off.

Personally I don’t think 10.5% is enough to be contributing but it depends on when you want to retire and what level of lifestyle you want.

Most people suggest working out how much you want to live on and what age you want to retire and then working out how much you need to put in.

cloud_dog

george4064 wrote: »

Not yet.

Am I right in saying that when I move into the higher rate tax band I should up my pension contributions to 'bring me back' to the standard rate band?

Does your employer operate salary sacrifice?

lisyloo

george4064 wrote: »

Not yet.

Am I right in saying that when I move into the higher rate tax band I should up my pension contributions to 'bring me back' to the standard rate band?

Sort ot but it’s a little more complicated in practice.
If you are unable to put more into your employers scheme, the you’ll need you own SIPP.
They won’t know about your tax affairs so they will give you basic rate tax relief.

You then send the figures to HMRC who would then give you the extra tax relief (into your pocket not into your pension).

So net effect is the same but it’s a roundabout route.

lisyloo

cloud_dog wrote: »

Does your employer operate salary sacrifice?

As I understand it he can’t increase for 13 years so any extra would have to go into a SIPP right?

cloud_dog

lisyloo wrote: »

As I understand it he can’t increase for 13 years so any extra would have to go into a SIPP right?

Yes, possibly.

The OP may have quoted those directly from the employee handbook (sic) as verbatim but it may be worth asking the employer if the OP can contribute more without any associated increase by the company (until 40). If the OP can actually contribute more (no skin off the company's nose) and they offer SS then that is a consideration.

george4064

Thanks for all your useful replies. I'll take a closer look at my company pension scheme and see if I can contribute more to it (without any further employer conts).