We'd like to remind Forumites to please avoid political debate on the Forum. This is to keep it a safe and useful space for MoneySaving discussions. Threads that are - or become - political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
We're aware that dates on the Forum are not currently showing correctly. Please bear with us while we get this fixed, and see Site feedback for updates.

Tax treatment of preferential pension transfers

Looking into some options at the moment with a potential change of employer whose pension scheme is in the same overall scheme as my current employer, just a different section. I won’t know the details till I get there but it sounds like there may be some preferential transfer options for a limited time that might give year for year service despite the new role having an increase in salary.

Was just wondering if anyone knew the potential tax treatment- annual allowance etc - as I’m assuming this would suddenly increase the potential pension when being calculated on a new higher salary? Or is outside of the normal DB pension input calcs as it’s the result of a transfer quote?

Thanks

Comments

  • LHW99
    LHW99 Posts: 4,951 Forumite
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    Presumably as a transfer, it would only be any contributions to that pension in the current tax year that have any effect on the current tax year's allowable contributions going forward?
  • AlanP_2
    AlanP_2 Posts: 3,499 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    LHW99 said:
    Presumably as a transfer, it would only be any contributions to that pension in the current tax year that have any effect on the current tax year's allowable contributions going forward?
    DB pensions calculate a Pension Input Amount based on the increase in benefits over the year. This isn't the same as contributions made in the tax year.

    Not sure how transfers would interact with that calculation but @hyubh or @Silvertabby might know.
  • This sounds similar to what happens in the public sector when a member takes a Club transfer.

    This linked page sets out the Annual Allowance treatment in those circumstances, particularly the section entitled Final Salary schemes on page 2 that includes the text:
    When an individual takes a Club Transfer their years of service may be actuarially adjusted to reflect differences between schemes. This adjustment is not an enhancement, hence the policy intent is to remove the impact of the adjustment from the pension input. 

    Separate to any actuarial adjustment, members will benefit from any salary increase between their employments. This increases the value of their pension, and the policy intent is that the value of this increase should result in a pension input, as it would do for individuals experiencing an increase in final pensionable salary without changing schemes. 
  • This sounds similar to what happens in the public sector when a member takes a Club transfer.

    This linked page sets out the Annual Allowance treatment in those circumstances, particularly the section entitled Final Salary schemes on page 2 that includes the text:
    When an individual takes a Club Transfer their years of service may be actuarially adjusted to reflect differences between schemes. This adjustment is not an enhancement, hence the policy intent is to remove the impact of the adjustment from the pension input. 

    Separate to any actuarial adjustment, members will benefit from any salary increase between their employments. This increases the value of their pension, and the policy intent is that the value of this increase should result in a pension input, as it would do for individuals experiencing an increase in final pensionable salary without changing schemes. 
    Thank you. It’s not this scheme but I suspect it’s along the same lines. Likely to be an expensive pension input year but probably worth it. I’ll see when I get the details 
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 348.3K Banking & Borrowing
  • 252.1K Reduce Debt & Boost Income
  • 452.4K Spending & Discounts
  • 240.9K Work, Benefits & Business
  • 617.2K Mortgages, Homes & Bills
  • 175.7K Life & Family
  • 254.1K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16K Discuss & Feedback
  • 15.1K Coronavirus Support Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.