Voluntary redundancy money into pension ?

pm2023

I will soon be taking voluntary redundancy and I've noticed that a part of the info on this says that I can add the payment (approx 24k) to my current work pension pot. I can't really see what benefit this would give me. I am male, 52 y.o and have a reasonable size pension pot already.
The VR payment would probably just sit in a bank account anyway, but would adding to the pension provide any real extra benefit?

skycatcher

My VR also offered to allow a portion of the payment to be added to my DB pension. As i was going self employed i grabbed the opportunity to improve my pension. I think i got an extra 7-8 years added to my service but i can't remember the actual amount of money paid in as it was 20 years ago.... I'm now drawing that pension and very glad i made that decision!

Marcon

pm2023 said:

I will soon be taking voluntary redundancy and I've noticed that a part of the info on this says that I can add the payment (approx 24k) to my current work pension pot. I can't really see what benefit this would give me. I am male, 52 y.o and have a reasonable size pension pot already.
The VR payment would probably just sit in a bank account anyway, but would adding to the pension provide any real extra benefit?

Your VR payment is already tax free, given that it is £24K. If your total earnings give you enough scope to make the pension contribution payment yourself (as opposed to the employer paying it straight to the pension scheme), you could get tax relief on the contribution even though you've not actually paid tax on it. 

Preacher64

It would be worth checking what your contribution would get you.
I added £48K to my AVC’s which were converted to pension at a rate of 12:1, so gives me an additional indexed linked £4K per year. Having retired at 55, I’m hoping this will prove to be good value but if the commutation rate wasn’t so generous, I probably would have thought twice about it.

Albermarle

I am male, 52 y.o and have a reasonable size pension pot already.
The VR payment would probably just sit in a bank account anyway, but would adding to the pension provide any real extra benefit?

It depends what you call a reasonable size pension pot. Often people underestimate how big a pot is needed to produce a decent income. For example a pot of £250 K should safely produce an annual income of only around £8Kpa . You can take more, but then it will probably run out quicker. A guaranteed annuity income would be a bit less.

Regardless of the pension question, you should have some plans on how to use the VR payment. Inflation is the big problem if you just let it sit in a bank account. You could have a ladder of questions;

1) Do I want to just spend it ? -If no then 

2) Do I keep it in a safe savings account and let inflation eat away at its value ? If you think you might need it in the next two or three years, this might be the best option.

3) If you will not need it for some years, then probably best to invest it .

4) If so would it probably be better to invest it via my pension than in other ways? Probably yes ( especially if you can get some tax relief as mentioned in the previous post.