Pension after redundancy

tfspark

After forty years service and at the age of almost 63 I am about to take voluntree redundancy.


At the end of 2013, my employers stopped the final salary scheme. I had paid into it for 32 years, which was one year short of a full pension. This is due to start paying out at the age of 65.

On the 1st January 2014 I started paying into a stakeholder pension set up by my employers. So we both paid contributions into it.


My last day at work is 30th April 2019.


I intend to take the first 30k as it is tax free.


If I advise my payroll department to pay the rest of the redundancy (which includes a PILON payment and some holiday pay) as a lump sum into my stakeholder pension does that become tax free?


Also, as the company car is going back I will need to buy another one.
So, can I then take a tax free lump sum from the stakeholder pension. ( far less than 25%) or is this considered recyling?


SP for me is 66. I'm determined not to touch the FSS until 65 as I would lose money. Apart from the lump sum, if that is allowed, I hope not to touch the stakeholder for as long as possible.


I hope that makes sense and would welcolme any feedback.

AlanP_2

tfspark wrote: »

After forty years service and at the age of almost 63 I am about to take voluntree redundancy.


At the end of 2013, my employers stopped the final salary scheme. I had paid into it for 32 years, which was one year short of a full pension. This is due to start paying out at the age of 65.

On the 1st January 2014 I started paying into a stakeholder pension set up by my employers. So we both paid contributions into it.


My last day at work is 30th April 2019.


I intend to take the first 30k as it is tax free.


If I advise my payroll department to pay the rest of the redundancy (which includes a PILON payment and some holiday pay) as a lump sum into my stakeholder pension does that become tax free?


Also, as the company car is going back I will need to buy another one.
So, can I then take a tax free lump sum from the stakeholder pension. ( far less than 25%) or is this considered recyling?


SP for me is 66. I'm determined not to touch the FSS until 65 as I would lose money. Apart from the lump sum, if that is allowed, I hope not to touch the stakeholder for as long as possible.


I hope that makes sense and would welcolme any feedback.

You can have your redundancy in excess of £30k paid into the pension (assuming Payroll / Pension Company can cope with that, worth checking).

You can then take 25% of the stakeholder pot tax free, anything over that would be taxable and what you would pay depends on overall income situation.

What you want to try and achieve is using up your Tax Allowance each year by withdrawing enough taxable income from the pot.

Once you get DB and SP you will be paying tax so getting what you can out of stakeholder before then would be worth it.

If on standard £12,500 for 19/20 tax years you could take £15625 from the pension. 25% (£3125) would be the tax free part with £12,500 taxable but within your allowance so nothing to pay. You would need to adjust these based on income already earned in the tax year.

Recycling rules relate to taking tax free from Pension A and paying in to Pension B to get more tax relief so not relevant here.

Linton

One gotcha that may or may not apply to you - the annual allowance of £40K does apply to redundancy pension contributions. Your redundancy pay may be less than £40K, or you may have sufficient carry over from previous years, in which case you should be OK, otherwise otherwise.

tfspark

Thanks for the quick responses. All very helpful.

All very scary this retirement lark. 😊