Should I pay taxable redundancy cash into pension?

Scrounger

Of course it will work for you!

I'm not sure when you finished, but if you have earned income (taxable pay) for this tax year then you can pay in 80% of this as well.

You could arrange it as two 'small pots'.

I use Fidelity, Hargreaves Lansdown and Vanguard - all seem pretty good.

Scrounger

immy1

Hi Scrounger. I just meant for me as I will have to do it myself and unsure what I am doing.  At the minute I have an L&G small pension at work which the employer was paying into it.  It is not guaranteed as depends on market performance. There is only about £12k in it so I could add about another £12 - 13K myself.  As I said though I would want it out next year anyway.

billy2shots

I'm a newb at this sort of thing so  will probably educate myself here rather than help but.....


Isn't it better that your employer doesn't pay directly into your pension?

Redundancy money is tax free (upto £30k) so having it costs little (tX on £10k) then paying it personally into your pension will see it bumped up 20% (or more for higher rate tax payers?)

In short, won't the OP potentially be at least 20% better off going the personal route?

immy1

Hi billy2shots.   It's far easier if the company will pay anything over £30k into the pension.  Unfortunately my last employer wouldn't do it.

Scrounger

If you have a spare half-hour, this thread contains much useful info:

http://forums.moneysavingexpert.com/discussion/5580163/paying-2880-into-pension-when-retired/p1

Scrounger

immy1

Thanks. I'll have a read of that.

itsmeagain

Most employers allow you to change your percentage contribution / make 'lump sum' payments for DC/SIPP type pensions. I do not understand why you can't simply request your employer to make a £12k lump sum payment in the final month?  Thus allowing it to be paid in tax free and taken back out the pension at a later date using the 25% tax free element of your pension.
If your case, If you don't get salary sacrifice NI benefits by using the employer, I can't see that it makes much difference whether your employer pays your pension for you, or you pay 80% of the gross into the pension yourself?