Been kicked out of my DB Pension Scheme and now have to start again with a work place pension DC

WayOutNow2

dunstonh said:

You should aim to maximise the employer benefit as the very minimum. That is free money.    The 10.5% salary increase will be subject to NI.   Not only that, it is less than the employer and personal contribution. So, poor value.

So after taking the free money, am I best to add into the Salary Sacrificed DC Scheme, my personal SIPP or a ISA. Understand I get taxed either way, either at drawdown  with the Pension or from my gross salary before putting a net amount into a ISA.?

Albermarle

WayOutNow2 said:

dunstonh said:

You should aim to maximise the employer benefit as the very minimum. That is free money.    The 10.5% salary increase will be subject to NI.   Not only that, it is less than the employer and personal contribution. So, poor value.

So after taking the free money, am I best to add into the Salary Sacrificed DC Scheme, my personal SIPP or a ISA. Understand I get taxed either way, either at drawdown  with the Pension or from my gross salary before putting a net amount into a ISA.?

Salary sacrifice is better than a personal SIPP,  as you reduce your NI payments .
Otherwise you do get taxed either way but the pension offers a 6.25% tax benefit over the ISA ( as you can take 25% of the pension tax free) . It can be more than 6.25% if you are able to withdraw money from the pension in a more tax efficient way , which will depend on your circumstances at the time. 

dunstonh

WayOutNow2 said:

dunstonh said:

You should aim to maximise the employer benefit as the very minimum. That is free money.    The 10.5% salary increase will be subject to NI.   Not only that, it is less than the employer and personal contribution. So, poor value.

So after taking the free money, am I best to add into the Salary Sacrificed DC Scheme, my personal SIPP or a ISA. Understand I get taxed either way, either at drawdown  with the Pension or from my gross salary before putting a net amount into a ISA.?

From a taxation point of view, salary sacrifice is a little better than individual contributions.     However, an experienced investor may feel the benefit is not worth it if the investment selection is weak.  (although partial transfers may be a way to get around that).

You get taxed an effective 15% if you are a basic rate taxpayer in retirement.   Less than the tax relief gives you.   In tax terms, pensions are better than ISA unless you are a going to be earning a higher rate of tax in retirement compared to when you were working.   ISAs get no relief on contributions and the money going in is after tax and NI.  

AlanP_2

Though reading through these comments here that would seem to be a bad option and I'd be better off with the work place pension and putting in 6% with 12% double matching..

Taking a simplistic example and assuming all of this is taxable / subject to NI.

Salary £10k so 10.5% pay rise = £1050 - Less tax & NI => £714 extra in take home pay.

Pay that in to Vanguard SIPP and it will get tax relief so ends up as £892.50 in your pension pot.

Your employers 12% would put £1200 in to your workplace DC scheme. Your 6% would put £600 in but would only cost you £480 effectively as no tax paid on it. Total => £1800 in workplace scheme at a personal cost of £480.

WayOutNow2

Just been going through the available options with Standard Life.
I've picked 2 tracker funds that invest in equities (excluding UK). Wondering if I have chosen wisely here, can afford to take some risk with this pension pot from the outset so going for equity portfolio rather than bonds. Probably looking at a 50/50 split between:
SL Vanguard Emerging Markets Stock Index Pension Fund - BFAD - For emerging markets around the world.
Standard Life Overseas Tracker Pension Fund - H5 - Mostly American Stocks which I like the look of given it's market size.

Albermarle

Unusual not to have any exposure to your own domestic market .
Although there is plenty of debate as to the right UK % , zero is not normal for a balanced portfolio.

WayOutNow2

Albermarle said:

Unusual not to have any exposure to your own domestic market .
Although there is plenty of debate as to the right UK % , zero is not normal for a balanced portfolio.

Yes I am wondering about that and what percentage to use given the UK makes up about 5% of the global stock markets and can see the US is massive at 55%.

WayOutNow2

I think I should break it down like this then.
5% of pot in SL Vanguard FTSE UK all share index
25% of pot in to Emerging markets - China, Taiwan, Korea, India, Brazil, South Africa, Russia, Saudi Arabia, Malaysia
70% of pot into USA, Europe, Japan, Pacific Basin, Canada

Terron

One thing you might want to check is how your old pensions will be uprated once in payment. Before 1997 there was no requirement to do so. Then it was required to be updated by inflation capped at 5%. Then the cap was reduced to 2.5%.

Barry_F

I was a Headteacher until I took early retirement 5 years ago. I am due to get my state pension in September. I have been told that I will get less state pension as some of the contributions I made to my occupational pension will reduce the amount I paid towards my state pension. No-one ever told me that contributing to a works pension would reduce my state pension. This information needs to be shared so other people do not get the shock I got.