Balancing finances - am I putting too much into pension

barnstar2077

Your combined pension pot is already very, very substantial compared to the average at retirement, never mind at your age.

If you squirrelled away a bit into an ISA now you could easily still retire at 55 as you had hoped, without much trouble at all.

hugheskevi

britishboy said:

I'm assuming there would be fee's for the transfers?  Both into a protected scheme and back out of it (if I chose to return to my current SIPP provider, who im very very impressed with.

Yes, the extent of these depends on the arrangement, with transfer-out fees, stamp duty costs and buy-sell costs key.

In practice, it may well be preferable to open a pension in a protected scheme, and make new contributions or transfer only what is needed for the period between 55-57, which should be much less than the full pot.

Albermarle

I have a long term partner, but not married, so have never looked into the tax reliefs available (if any).  Their pension wont be anywhere near mine in terms of value so may be worth looking into

The usual advice is to make sure your partner has a large enough pension that they can make full use of their personal tax allowance ( currently £12570) and not waste it . Taking into account the state pension is taxable but that will not pay until her late sixties/70.

I’ve had this ‘discussion’ with colleagues who say avoid it at all costs, do everything I can to miss hitting it.  But paying 55% tax on anything over it would still mean more pension for me, for doing very little (SIPP wise, it’s growing anyway.  I’m not actually physically working extra hours to build it up) 

The 55% is only on lump sums . If you take the pension as income the LTA charge is 25% . If you are a basic rate tax payer in retirement ( even relatively well off people do not usually pay 40% tax in retirement ) then you effectively pay back the 40% tax relief you originally gained - no gain- no loss .
Also of course you only pay on the amount above LTA ,and only when you actually take enough pension to go over it . For many people the LTA charge is delayed until they are 75.
So going over it is not as big an issue as some people make out, but you would probably want to avoid going over it by a large margin.

[Deleted User]

A pension fund is more advantageous than ISA if you are below LTA. It is equivalent to ISA in terms of tax advantages on the amount exceeding LTA.  You still get tax-free growth until withdrawal.  

The advantage of ISA is added flexibility. Also, future marginal tax  rates on pension withdrawals are uncertain, which makes ISAs less risky.  

longwalks1

barnstar2077 said:

Your combined pension pot is already very, very substantial compared to the average at retirement, never mind at your age.

If you squirrelled away a bit into an ISA now you could easily still retire at 55 as you had hoped, without much trouble at all.

Thanks barnstar2077 - I realise I’m in a very fortunate position, value and age wise.  I’ve watched too many family members have to work well into their 70’s/80’s even, and I’m determined to not do the same.  

Hadn’t even considered my ISA’s being able to use to bridge the gap between leaving work and drawing my pension (no idea why) 

longwalks1

Yes, the extent of these depends on the arrangement, with transfer-out fees, stamp duty costs and buy-sell costs key.

In practice, it may well be preferable to open a pension in a protected scheme, and make new contributions or transfer only what is needed for the period between 55-57, which should be much less than the full pot.

Thanks again.  I’m hoping to not need to make many more contributions given my pot values, but could I possibly transfer a sum from my current SIPP to allow it to grow to bridge the gap between 55-57?  Maybe transfer out £50k into a protected scheme and let it grow independently for 11 years? 

How would I know what schemes are protected? Just ask the providers, or is there a list? 

hugheskevi

britishboy said:
could I possibly transfer a sum from my current SIPP to allow it to grow to bridge the gap between 55-57?  Maybe transfer out £50k into a protected scheme and let it grow independently for 11 years? 

If you existing provider permits partial transfers-out, then yes

How would I know what schemes are protected? Just ask the providers, or is there a list? 

Too early to tell at this stage, it was only announced last week. Even individual providers are very unlikely to have determined the status of their scheme yet. 

MallyGirl

britishboy said:

dunstonh said:

Just for clarification, you don't appear to have an AVC.   An AVC is a specific pension plan type.   So, its probably best to stop referring to it as an AVC.      Making additional contributions is not an AVC.

Morning Dunstonh.  Apologies, we've always referred to them as AVC's in work, 'making Additional Voluntary Contributions' 

My company pension portal also calls them AVCs - that is also what it is labelled as on my pay slip.
Whilst it does seem to have a specific meaning related to DB pensions it is also used in common parlance relating to paying more that the required amount required to get max employer match.

Alexland

MallyGirl said:

My company pension portal also calls them AVCs - that is also what it is labelled as on my pay slip.
Whilst it does seem to have a specific meaning related to DB pensions it is also used in common parlance relating to paying more that the required amount required to get max employer match.

Yes once we have specified our base contribution (3, 4 or 5%) for employer double matching our employer asks us to specify both AVCs and ASCs (swap) percentages to go into our workplace DC scheme (they default to 0%). AVC terminology is not exclusive to DB schemes so there's no need to keep correcting people who might be right.

cfw1994

britishboy said:

dunstonh said:

Spouse/partner provision?

I have a long term partner, but not married, so have never looked into the tax reliefs available (if any).  Their pension wont be anywhere near mine in terms of value so may be worth looking into

Just another quick on this one: two pals I’ve know for over 35 years, been together longer than that, retired last year.

Some research later (they both have DB pensions) led them to get a civil partnership recently PURELY to ensure the surviving partner would get something from the schemes when one of them passes away.
A series of small “Pension Parties” followed 🎉😎👍