Pensions advice

ChrisJ1988

Bit of background to help with answering my question.

I am 31 and just started looking into pensions for the first time in my life I always thought thats what old people need to do so I guess I am old now. I am in a final salary DB pension scheme and have just started paying 2% AVCs, hence the looking into things. I am a higher earner so pay 40% tax.

I do not/will not need access to any savings before I retire so is my best bet to pump as much of my savings/investment money into my pension? As far as I can tell I get a 40% “return” straight away simply due to not paying tax on the money I put into my pension. Subject to staying under the 40K yearly limit and 1.055Million lifetime limit I see no reason to invest in anything other than my pension?

Have I missed something?

MallyGirl

sounds about right. I wish I had worked that out at 31 and I am now in catchup mode.

Dazed_and_confused

I am in a final salary DB pension scheme

As far as I can tell I get a 40% “return” straight away simply due to not paying tax on the money I put into my pension

Does your final salary scheme allow you to contribute more? I don't think they all do.

p00hsticks

Sounds good - not many final salary DB schemes left any more.

One thing you might want to consider is what the normal retirement age (NRA) of the scheme, if you are allowed to take it early and what reduction is applied to do so.



Some people find that putting money into a SIPP or S&S ISA incrases your flexibility as it can provide funding to fill the gap between taking an eary retirement and the NRA.

ChrisJ1988

I cannot top up my DB scheme, any extra payments I make go into a seperate DC pot which is invested on my behalf.

My normal pension age is 65 but can retire at 55 however doing so means I have to sacrifice 45% of the DB income on a reducing sliding scale up to the age of 65. I am planning to go around 58-59 which means I would have to sacrifice ~30% of my DB final salary. This is still a good 28 years away so will be subject to how the AVC investments do. I want to retire early so need to build up some other form of retirement benefit. This is the main reason for my question.

Woby_Tide

If already a higher rate tax payer is there a chance your DB pension will exceed the LTA before your actual dates?

Brynsam

You're assuming your DB scheme will still be around and letting you build up benefits for the next 30 years - that is highly unlikely, so plan for the alternative!

A mix of investments - pensions, ISAs, EIS etc - will give you the best chance of having a very comfortable retirement.

ChrisJ1988

Thank you for the replies, banging it into the pension it is then.

Cheers.

squirrelpie

I do not/will not need access to any savings before I retire

You sound very certain of that. Does that mean you are confident that you have sufficient resources elsewhere to cater for any events life can throw at you? All the usual things such as houses and families, and the less pleasant things like severe illness or injury?


If you want to retire early, as well as consider any of the other possibilities, then it is sensible to have some savings outside your pension. Perhaps you already do and just haven't mentioned them.

ChrisJ1988

Yes I am very sure, thats why I mentioned it so when people replied they could take this infomation into account.