DCPension

garrob

Hi folks, The company I work for stopped our final salary pension on 31st March 2016, so we now pay into a DC pension from then. I contribute 10% and my employer contributes 15%. We have been saving into a rainy day fund from the Halifax and have built up £11,000 over the last 9 months, very little interest.My question is - could I pay an extra £500 pounds a month into my pension and would that generate a bit more income? I am paying £150 per month off my salary to AVC. Many thanks

El_Torro

Most workplace pensions will allow you to contribute more. So this shouldn’t be an issue.

Your employer might not contribute more than 15% (already pretty generous) but you’ll still benefit from contributing more yourself.

dunstonh

 I am paying £150 per month off my salary to AVC.

Is that the AVC linked to the original main scheme?   Its unusual to run an AVC alongside a defined contribution scheme as its unnecessary duplication.

Albermarle

garrob said:

Hi folks, The company I work for stopped our final salary pension on 31st March 2016, so we now pay into a DC pension from then. I contribute 10% and my employer contributes 15%. We have been saving into a rainy day fund from the Halifax and have built up £11,000 over the last 9 months, very little interest.My question is - could I pay an extra £500 pounds a month into my pension and would that generate a bit more income? I am paying £150 per month off my salary to AVC. Many thanks

It depends to some extent on the rest of your situation . Age ? mortgage to pay? etc

garrob

Thank you for your replies. They call it AVC but when I log on to my account there is no separate balance for AVC it just shows the total amount that I have built up. If I paid in say another £500 per month would I get the Government benefit of that as well? I am 61 today and maybe going to retire in 2 years time. Mortgage paid off but still have 2 kids at home 19 and 17. My wife is a civil servant and will continue to work another 5 or 6 years. Car is on a contract which ends at the end of the year and I don’t know if I want another car as my wife has one which is paid for.

dunstonh

They call it AVC but when I log on to my account there is no separate balance for AVC it just shows the total amount that I have built up. 

Terminology for you.  They are using it to refer to the contributions rather than AVC is in a pension product.

. If I paid in say another £500 per month would I get the Government benefit of that as well?

yes

Albermarle

As long as you are still working you can contribute gross to a pension up to the level of your total salary.
So if your earn £20K , you can contribute £16K from taxed pay and £4K tax relief will be added on.
If your employer operates a salary sacrifice scheme for pensions or your contributions come out before tax , then you do not get added tax relief as you will not have paid tax on the contributions in the first place .
Once your taxable earnings go to zero , you can still add £2880 ( + £720 tax relief. ) 

garrob

So I pay about £350 ish and my employer pays the rest which takes it up to £1000 per month going into my pension. If I can add another £500 per month would I still qualify for the Government tax relief? and how much would I gain over the year?

Dazed_and_C0nfused

If you are earning enough to be allowed to contribute the £500 then it will be £625 once the basic rate tax relief is added.

So after a year you will have handed over £6,000 and have a pension fund of £7,500.

Plus or minus any investment return and charges.

OldBeanz

Dazed_and_C0nfused said:

If you are earning enough to be allowed to contribute the £500 then it will be £625 once the basic rate tax relief is added.

So after a year you will have handed over £6,000 and have a pension fund of £7,500.

Plus or minus any investment return and charges.

With SalSac it works the other way round. You pay £500 into your pension so have £6k after a year but if you had taken that amount as salary then you would have been taxed and received £400 for the month and £4.8k for the year. You will also benefit from paying less NI.