Need advice on my wife's pension and extra contributions.

2pints

In Scotland and my wife has been employed in the local council for 20(ish) years and wants to retire at 60 (10 years from now). She is in the 42% tax bracket and is a few hundred £ short of going into 45% tax bracket which will happen with the next pay rise.

I have been saying to her to pay extra into her pension and she said she'll look into it but hasn't as yet.

Her pension is with Strathclyde Pension Fund. After all deductions she clears approx £3.5k every 4 weeks. I'm assuming all pension AVC are similar,so any extra contributions come off before tax is calculated, so for every £100 only costs £58.

Can any of wonderful people give me some figures and advice so that I can show her to get the ball moving.

Thank you

Linton

2pints said:

In Scotland and my wife has been employed in the local council for 20(ish) years and wants to retire at 60 (10 years from now). She is in the 42% tax bracket and is a few hundred £ short of going into 45% tax bracket which will happen with the next pay rise.

I have been saying to her to pay extra into her pension and she said she'll look into it but hasn't as yet.

Her pension is with Strathclyde Pension Fund. After all deductions she clears approx £3.5k every 4 weeks. I'm assuming all pension AVC are similar,so any extra contributions come off before tax is calculated, so for every £100 only costs £58.

Can any of wonderful people give me some figures and advice so that I can show her to get the ball moving.

Thank you

As she is earning over £60K the total gross contributions both by an individual and their employer to all her pensions are normally  limited by the £60K annual Pension Allowance.  However there is carry over from 1-3 previous years.  She personally  cannot contribute more than her gross income in total to all her pensions in any one tax year  but in this case it is unlikely to be a problem.  To be pedantic she can contribute more but she wont get tax relief on the excess which makes it rather pointless.

For the DB pension the Pension Input Amount provided on the annual statement is used to compare with the Allowance  rather than actual employee and employer contributions.  This gives rise to a slight problem since she wont be told the Pension Input Amount until after the end of the tax year when it is too late to do anything about it.  So some judgement is required in determining how much can be paid into an AVC or a separate personal pension.

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LHW99

Has she / you checked state pension provision? If contracted out for 20 years (I assume Scottish council pensions were) then she may need additional NI years for a full NSP (though hopefully will have enough time if she continues working).

However if she is short, and there is any possibility of wanting to retire early, then buying past years can be useful.

Sarahspangles

2pints said:

In Scotland and my wife has been employed in the local council for 20(ish) years and wants to retire at 60 (10 years from now). She is in the 42% tax bracket and is a few hundred £ short of going into 45% tax bracket which will happen with the next pay rise.

I have been saying to her to pay extra into her pension and she said she'll look into it but hasn't as yet.

Her pension is with Strathclyde Pension Fund. After all deductions she clears approx £3.5k every 4 weeks. I'm assuming all pension AVC are similar,so any extra contributions come off before tax is calculated, so for every £100 only costs £58.

Can any of wonderful people give me some figures and advice so that I can show her to get the ball moving.

Thank you

There’s a calculator on the Scotland LGPS website for APCs https://www.scotlgpsmember.org/help-and-support/tools-and-calculators/buy-extra-pension-calculator/

Armed with a figure for the enhanced pension, you can search Early Retirement Reductions on the same site to work out how much the pension would pay if taken at 60 rather than Normal Retirement Age. That may not be entirely accurate given her length of service but unless the scheme she belongs to has a calculator - she’d need to log in to use it, if so - it’s a start.

And there is information here about the AVC provider https://www.mandg.com/pru/workplace-pensions/employees/public-sector-avc-schemes/local-gov