Martin Lewis: An important warning to every employee in the UK

gropinginthedark

My son, having been on basic universal credit, started a job in Jan, he's been enrolled into this scheme.  Is there an upper limit for contributions? If so is it related to the tax year and then can he ask for a large chunk of feb/march pay to go into the scheme so it falls into this tax year?
But his 2021/2 total income will be below his tax threshold so will there be any benefit from the tax uplift a taxpayer would get?

lisyloo

gropinginthedark said:

My son, having been on basic universal credit, started a job in Jan, he's been enrolled into this scheme.  Is there an upper limit for contributions? If so is it related to the tax year and then can he ask for a large chunk of feb/march pay to go into the scheme so it falls into this tax year?
But his 2021/2 total income will be below his tax threshold so will there be any benefit from the tax uplift a taxpayer would get?

In practice the limit is that the employer MUST by law pay minimum wage.
There’s also a £40k annual limit but I’m guessing that’s not relevant.

If his employer operates “relief at source” then he might get some pension tax relief added even though he’s not paid any.
he needs to find out (quickly) how they operate their pension scheme.

Scottish79

If you are in a council house - a private pension will in retirement be used up to pay rent , or a very large chunk of your private pension will

is it worth having a private pension when living in a council house??

Luv_Lee

Hi Martin

I've paid into a LGPS + AVCs each month for 30 years.  However, as a part-time employee, I earn less than the anual tax allowance of £12,570, so don't benefit from the 20% tax deductions on my pension payments.

When I eventually claim my LGP and State Pension, will 20% tax be charged on all of my pension benefits above the anual tax allowance?

To my mind, it appears that the less one earns, the less allowances are available.  Higher earners are given 40% tax allowance against their pension payments.  Yet when they retire, they may only be paying the 20% tax rate on their pension benefits, because their retirement income may be lower than the 40% tax rate.

morganbach75

Black hole ...
I was a late starter with pension around early thirties and still have a steady 10% contribution through my employer, the council. I'm now 45 and on a reasonable 40k.

The rub is I frankly don't trust the terms on my retirement pension from the government will be honoured in the spirit I save. as the women's retirement pension age move demonstrates. 

Yes, I will get the amount I save if I live long enough, but vehemently believe the generational baby boomer & Brexit black hole will mean we will see even more of the slide in pension age/ terms. which has already gone from 65 to 67 since contributing.

When my wife started with the NHS in her 20's - her retirement pension age was 60 - now its 67? To me she has basically lost 7 of the best and most active retirement income years and will lose the added benefit promised on the amount she takes during that time?

I'm seriously considering stopping my pension and looking to aggressively double and clear mortgage, loans, invest is house energy solar etc. (religiously in addition to typical spending) to instead minimise any liability and likely save boatloads of interest and energy bills instead; because if the pension claim rate hits 70 - I may already be through the best part of my retirement living on scraps ... with outstanding mortgage, high energy bills etc.

Appreciate you won't advocate for the majority - but could this work. Am I crazy?

Ed_Addis

You don't say what the minimum contribution is for the employee?  Only the minimum total and minimum employer contributions.  Working on these figures, if you contribute nothing, your employer will have to contribute 8%!  Surely not?!

fiojim

I'd just like to point out that you can be auto-enrolled into a final salary scheme, contrary to what I understood Martin to be saying. Auto enrollment applies to all employers, whether or not they have a scheme of their own.
I would presume, therefore, that pension money in that case would be at risk if the employer went bust, but also understand that that risk has now been mitigated, or even eliminated, by the existence of the PPF (Pension Protection Fund), to which all(?) schemes contribute, and which was set up to avoid such pension issues occurring in future.
Apologies if some of that was unclear, pensions are a very complicated and constantly evolving topic!

Brian3357

I agree with Martin on private pension payments, taking advantage of employers and tax support 
However maybe wise to wait until the budget in October. Some think these pension support policies might change

artyboy

Why? Give up free money in the meantime because of endless unsubstantiated speculation? As though we need any more of that on here...

Hoenir

The only view that matters is the Chancellor's. Until then carry on regardless.