USS - Newbie needing help!

Cobbler_tone

Docbarty66 said:

Cobbler_tone said:

The VS will be classed as earnings and access to the allowance from previous years. We don't know the exact numbers but assume the OP knows this. Judging by the VS being based on 15 months salary, it won't be much of a stretch to lose it in the investment builder.

"Lose it in the investment builder"?????

Sorry, poor choice of word....'lose' as in pay it into there as opposed to actually losing it! 

13FL

A newbie here, but following discussions with interest,  I'm roughly in the same boat here - planning to take VS this year  and with USS and thus assessing pension options. 

I was curious about OP plans to take the taxable element of VS (81K) and add to pension - is this through your employer directly adding to pension or after you receive the VS package?  If after, and this would be in a new tax year, how does this affect you tax bracket? Would this be taxable income and thus push you into 40%, which would then be applied to your AP ?

Apologies if this is a naive question, all a bit new to me.

gwt1965

13FL said:

A newbie here, but following discussions with interest,  I'm roughly in the same boat here - planning to take VS this year  and with USS and thus assessing pension options. 

I was curious about OP plans to take the taxable element of VS (81K) and add to pension - is this through your employer directly adding to pension or after you receive the VS package?  If after, and this would be in a new tax year, how does this affect you tax bracket? Would this be taxable income and thus push you into 40%, which would then be applied to your AP ?

Apologies if this is a naive question, all a bit new to me.

When I did it, my employer wouldn’t do it for me. I had to elect to make a lump sum contribution on the USS website, the same way you would do normally to increase contributions to the IB. Then the amount was deducted from my final salary, which also included the VS payment, before tax.  

Barralad77

13FL said:

A newbie here, but following discussions with interest,  I'm roughly in the same boat here - planning to take VS this year  and with USS and thus assessing pension options. 

I was curious about OP plans to take the taxable element of VS (81K) and add to pension - is this through your employer directly adding to pension or after you receive the VS package?  If after, and this would be in a new tax year, how does this affect you tax bracket? Would this be taxable income and thus push you into 40%, which would then be applied to your AP ?

Apologies if this is a naive question, all a bit new to me.

Assuming the total VS package is approx. £111,000 then they can take £30,000 in cash, tax-free with the remaining £81,000 added to the IB by the employer (assuming they’re ok with doing this - not every employer is). This would mean that neither the £30k nor the £81k will be subject to tax in the first instance. Put another way, if my understanding is correct, there are no tax implications other than paying tax when drawing down the IB (or not pay tax at all if using the IB to buy a SIPP or similar). One thing to highlight, in the context of drawing down the IB pot, is whether the tax payable on it will be at the lower or higher levels, and this is shaped to some degree by where you live as higher rate of tax kicks in at around £50k in England (and Wales?) but at somewhere around £43k if you live in Scotland. If the OP takes a pension of £38k then they can take much more from the IB pot before they start paying HR tax on it than if they live north of the border.

Cobbler_tone

gwt1965 said:

13FL said:

A newbie here, but following discussions with interest,  I'm roughly in the same boat here - planning to take VS this year  and with USS and thus assessing pension options. 

I was curious about OP plans to take the taxable element of VS (81K) and add to pension - is this through your employer directly adding to pension or after you receive the VS package?  If after, and this would be in a new tax year, how does this affect you tax bracket? Would this be taxable income and thus push you into 40%, which would then be applied to your AP ?

Apologies if this is a naive question, all a bit new to me.

When I did it, my employer wouldn’t do it for me. I had to elect to make a lump sum contribution on the USS website, the same way you would do normally to increase contributions to the IB. Then the amount was deducted from my final salary, which also included the VS payment, before tax.  

That makes sense. A collaborative employer would normally facilitate it for you but that sounds like the DIY approach. I have helped my partner increase hers and seen it is a monetary figure as opposed to a %. You just have to time it to put your £81k in! I’d imagine you’ll have a window from the penultimate pay run to your final pay run to do so.
I guess their system needs to be smart enough to recognise redundancy (or severance as they like to call it) and give you the £30k balance tax free.

13FL

Thanks @gwt1965, @Barralad77, @Cobbler_tone, very helpful.

For me it would have to be the DIY approach (a clear no message from employer) but relying on timing and an intelligent system is somewhat worrisome!

Docbarty66

13FL said:

A newbie here, but following discussions with interest,  I'm roughly in the same boat here - planning to take VS this year  and with USS and thus assessing pension options. 

I was curious about OP plans to take the taxable element of VS (81K) and add to pension - is this through your employer directly adding to pension or after you receive the VS package?  If after, and this would be in a new tax year, how does this affect you tax bracket? Would this be taxable income and thus push you into 40%, which would then be applied to your AP ?

Apologies if this is a naive question, all a bit new to me.

So, I have a meeting with my employer's pension team on April 1st and they will fill in the relevant forms with me apparently, BEFORE I receive the VS package. This means that the money I receive on April 30 will be April's earnings PLUS the 3 months tax free element. Apparently it's not 30k tax free, it's up to 30k, depending on your salary. My 15 months severance is 12 months PILON plus an extra 3 months tax free. The PILON is taxable. I pay at the higher rate.

gwt1965

13FL said:

Thanks @gwt1965, @Barralad77, @Cobbler_tone, very helpful.

For me it would have to be the DIY approach (a clear no message from employer) but relying on timing and an intelligent system is somewhat worrisome!

My payroll department gave me a date by which they needed the notification through the USS website. In my case, I made the election on the USS website on Jan 2. All went through on the end of January payday. 

Docbarty66

I'm assuming I will only pay my normal monthly pay tax as the 80k that goes into the Investment Builder is done so tax free. I hope anyway.

Docbarty66

gwt1965 said:

13FL said:

Thanks @gwt1965, @Barralad77, @Cobbler_tone, very helpful.

For me it would have to be the DIY approach (a clear no message from employer) but relying on timing and an intelligent system is somewhat worrisome!

My payroll department gave me a date by which they needed the notification through the USS website. In my case, I made the election on the USS website on Jan 2. All went through on the end of January payday. 

Yes, this is what will happen with me I think.