Additional contributions now I've paid off mortgage

Polly238

I'm a member of USS and last week finished paying off my mortgage. I'd like to put some of that extra money towards something sensible and adding to my pension seemed the best way?

I've been in it since I was 27 and I'm now 42 and currently pay 9.8% plus the 1% match, and employer pays something like 21%.

Is adding another 6.5% to the Investment Builder by salary sacrifice a sensible way to go? 

xylophone

Is adding another 6.5% to the Investment Builder by salary sacrifice a sensible way to go? 

If you wish to increase your retirement provision, it seems to me to be a sensible idea to make additional pension contributions, particularly where tax and NI efficient.

Have you obtained a state pension forecast?

https://www.gov.uk/check-state-pension

Albermarle

Seems sensible enough. Just make sure you have enough readily accessible savings in case of emergencies.
Also if you think there might be some large expenditure in the medium term ( home improvement, new car etc) you could consider investing outside a pension. Most likely not as rewarding as investing in your pension but funds would be available sooner, if needed.

2nd_time_buyer

One of the features of the Investment Builder is that you can take the 25% tax free lump sum on the combined value of the Retirement Builder and Investment Builder elements e.g

Say you have an annual pension of £10k in the Retirement Builder. Then the value of that is £10k X 20 + £30k (lump sum) = £230k 

That would mean you could take a £57.5k lump sum (£230k X 0.25)

Which means you could take the first £27.5k in the investment builder tax free once you take into account the Retirement Income lump sum....

... Except that it you had that money in the investment builder the combined value would be higher and you would be able to take a slightly larger cash free lump sum.

Anyway - that is a good first target in the Investment Builder

PJM_62

2nd_time_buyer said:

One of the features of the Investment Builder is that you can take the 25% tax free lump sum on the combined value of the Retirement Builder and Investment Builder elements e.g

Say you have an annual pension of £10k in the Retirement Builder. Then the value of that is £10k X 20 + £30k (lump sum) = £230k 

That would mean you could take a £57.5k lump sum (£230k X 0.25)

Which means you could take the first £27.5k in the investment builder tax free once you take into account the Retirement Income lump sum....

... Except that it you had that money in the investment builder the combined value would be higher and you would be able to take a slightly larger cash free lump sum.

Anyway - that is a good first target in the Investment Builder

Using that example,
does it mean that someone who is about to retire and has nothing in the IB, could do a 27.5k SS lump sum into the IB,  costing them only 18.7k (27.5 x 0.68) , and when they retire take the full 27.5k out  ?   

Cornish_mum

Congratulations on paying off your mortgage. 

As per previous post; if you had enough in DB scheme built up, yes you could do something similar to what you proposed, but you can only take 25% of the total pot value as a tax free lump sum (combined DB and DC aka investment builder). Also you can’t go over the annual allowance for pensions contribution (which is 40k, and includes your DB benefit for that year (20x additional pension plus additional lump sum). Though you could roll over the previous 3-years allowance). I think there may be some requirements around minimum wage so you can’t sacrifice everything into the pension but I have never pursued that.

I am also USS and suggest you spend a bit of time reading all the info. I would look for the big PDFs not just the little videos on the website.

I have been AVCing into the new scheme for a while, as the salary sacrifice NI savings, ‘ethical fund’ and ease of it is nice. I am aiming to keep below CB and higher tax rate threshold. Currently I put 20% into AVCs, my other half currently puts in 40%. So to address your question yes imo your plan sounds good! 

Post-tax, I also invest in passive index trackers inside a S&S ISA to hedge my bets. As with USS we are investing into a managed fund (which may or may not be managed well). 

Hope that helps