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  • FIRST POST
    • Noobie2011
    • By Noobie2011 2nd May 18, 9:29 AM
    • 272Posts
    • 50Thanks
    Noobie2011
    Actual loss from pay
    • #1
    • 2nd May 18, 9:29 AM
    Actual loss from pay 2nd May 18 at 9:29 AM
    Hi,

    Not sure if this is the right place to post this but I am starting to look into maxing out our Pension contributions in terms of getting the max company contribution but wanted to know if my figures are correct below so I have a good starting point.

    As said the % I used are matching the max we would have to put in to get the max the company would put in and then have tried to work out what is going into the pension pot(before any interest etc) and of that what we would actually be losing from our pay.

    I have stuck my Tax Allowance calculations for my wife below as she not only falls into the 40% for some of her wage but also gets paid every 4 weeks.

    Appreciate any feedback if going wrong and also in terms of the Interest earned I have been told go off 5% and presume this is calculated yearly?

    Wife Tax Allowances - Wage 48,500

    Yearly
    0% 11,850.00
    20% 34,500.00
    40% 2,150.00

    Weekly
    0% 227.88
    20% 663.46
    40% 41.35

    4 Weekly
    0% 911.54
    20% 2,653.85
    40% 165.38

    Wife
    Wage 48,500.00
    Basic 42,800.00
    Car Allowance 5,700.00
    Gross Allowance for Pension(Minus Car All) 3,286.36
    My Pension Contribution 230.05 7%
    40% Tax Relief 66.15
    20% Tax Relief 12.93
    Loss from my pay 150.96
    Company Contribution 230.05 7%
    Total Monthly Contribution 460.09 14%


    Myself
    Wage 31,000.00
    Gross Allowance for Pension 2,583.34
    My Pension Contribution 129.17 5%
    20% Tax Relief 25.83
    Loss from my pay 103.33
    Company Contribution 180.83 7%
    Total Monthly Contribution 310.00 12%
Page 2
    • Novice investor101
    • By Novice investor101 3rd May 18, 3:04 PM
    • 187 Posts
    • 141 Thanks
    Novice investor101
    My works pension system is the same - it always works out an estimate that is more than I actually get. Mainly cos it doesn't take into account other deductions like a share save scheme & student loans etc.
    The online calculator matches my monthly payslip to within a few pence, which is why I use it so often.

    I am a basic rate taxpayer without many payroll complications, so don't know if that is why it's accurate for me.
    Put all your current information in & if it matches your last payslip or not will show whether it works for you.
    Last edited by Novice investor101; 03-05-2018 at 3:08 PM.
    • Noobie2011
    • By Noobie2011 9th May 18, 7:20 AM
    • 272 Posts
    • 50 Thanks
    Noobie2011
    Okay so after a bit more research I have now figired out I am on what they call a net pay pension and my partner a salary sacrifice pension.

    So initially we are planning on putting in what is needed tk get the max company contribution and for mine I would be just getting the basic rate tax relief. So for example my understanding is if I want to contribute 100 then it would actually work out at around 80 out of my net pay.

    So then there is my wifes which is for me anyway a bit more complicated in that she is on salary sacrifice, gets a car allowance and also falls into the high tax rate. But again we worked out to put in the minimum to get the max company contribution which brings her below the high tax rate so would save there. Also she would get the 2% NI savings into her pension. So correct me if I am wrong but if she did a salary sacrifice of 100 then with the high tax saving and NI she would be losing a net pay figure of 58. Then Anything she contributed that would have hit basic tax would get the increase of 12% NI savings so a net loss on pay of 68

    Hopefully I am right to this point so then I am thinking it would benefit more to put anything extra we have into her pension as like above 100 goes a lot further in her scheme than mine in terms of impact on net pay anyway and then the high tax rate and NI savings. However the high tax rate would end once she was paying in over a certain amount.
    Last edited by Noobie2011; 09-05-2018 at 8:00 AM.
    • Brynsam
    • By Brynsam 9th May 18, 9:05 AM
    • 1,677 Posts
    • 1,228 Thanks
    Brynsam
    Sounds about right - well done for battling through to a sensible conclusion!
    • Noobie2011
    • By Noobie2011 9th May 18, 9:45 AM
    • 272 Posts
    • 50 Thanks
    Noobie2011
    Sounds about right - well done for battling through to a sensible conclusion!
    Originally posted by Brynsam
    Thanks and it was a battle and has made me feel like I need to go back to maths class ha.

    I am sure there are drawbacks somewhere but at the moment my view is if every 1 is worth more on my wifes pension as opposed to mine then any overpayments above what we need to get the max employer contribution should go towards her contributions rather than mine. The only drawback there is her pension pot would be large as opposed to mine not being and I retire 1st in the plan so would be drawing on my pension 1st for 9 years until she retires.

    Saying that we do have other factors such as a mortgage free house and other savings we plan to have by then which could be drawn on if needed.
    • MallyGirl
    • By MallyGirl 9th May 18, 10:43 AM
    • 2,999 Posts
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    MallyGirl
    If you are planning to retire at 55 you want to make sure that there is enough in your pension (as opposed to hers) that you can get it as close to the personal limit as possible and pay no tax. There is reduced value in getting hers too bulked up for the tax breaks on the way in if it means she is going to have to pay tax getting it out again whereas you might not.
    It is a balancing act to be getting as much as possible out from each pension without paying tax on it.
    • cloud_dog
    • By cloud_dog 9th May 18, 11:09 AM
    • 3,866 Posts
    • 2,302 Thanks
    cloud_dog
    OP, does your partners additional contributions go in to the main scheme or are they treated separately, i.e. in an AVC account (additional voluntary contributions)?

    Accessing the money, and accessing it as tax efficiently as possible, as MallyGirl mentions, is also just as critical.

    I am in a similar position to you and your partner insofar as I will have a DB pension (approx 21k), so all other income will be taxable. OH, works part time with a LGPS very small pension plus a SIPP. I am a HRT payer and my company operates SS so it makes very good financial sense to utilise my tax/SS savings for additional contributions.

    The complexity then becomes how do we access my pot flexibly and efficiently. I am tied in to only being able to access the company pension at age 65. But, the additional payments are all going in to a separate AVC account and I have obtained confirmation (in writing) that were I to leave the company before my NRA I could transfer out only the AVC pot and leave the main scheme in place until NRA.

    The plan at the moment (will be reassessed based on any taxation/circumstance changes etc), would be to 'retire' early, transfer my AVCs to a SIPP and then draw down these monies until my main scheme kicks in. This approach gives me the flexibility I am looking for, whilst maximising the tax/SS efficiencies available to myself and hopefully minimising the taxation on the way out.
    Last edited by cloud_dog; 09-05-2018 at 11:24 AM.
    Personal Responsibility - Sad but True

    Sometimes.... I am like a dog with a bone
    • Noobie2011
    • By Noobie2011 9th May 18, 1:52 PM
    • 272 Posts
    • 50 Thanks
    Noobie2011
    If you are planning to retire at 55 you want to make sure that there is enough in your pension (as opposed to hers) that you can get it as close to the personal limit as possible and pay no tax. There is reduced value in getting hers too bulked up for the tax breaks on the way in if it means she is going to have to pay tax getting it out again whereas you might not.
    It is a balancing act to be getting as much as possible out from each pension without paying tax on it.
    Originally posted by MallyGirl
    Good point, have not worked the figures yet in the way of putting more to my wifes pension but have looked at what we would need to bridge the gap between her wage and what we would need between my retirement and hers as we do have other potential sources of money availbke then with out plan

    I see your point, have only just started understanding starting a pension and not the means of withdrawal although I see the standard way is take a 25% tax free lump sum and then buy an annuity. Does the ongoing yearly money get taxed then so if my wife had built up a lot there would be a lot of tax to pay on it?
    • Noobie2011
    • By Noobie2011 9th May 18, 1:56 PM
    • 272 Posts
    • 50 Thanks
    Noobie2011
    OP, does your partners additional contributions go in to the main scheme or are they treated separately, i.e. in an AVC account (additional voluntary contributions)?

    Accessing the money, and accessing it as tax efficiently as possible, as MallyGirl mentions, is also just as critical.

    I am in a similar position to you and your partner insofar as I will have a DB pension (approx 21k), so all other income will be taxable. OH, works part time with a LGPS very small pension plus a SIPP. I am a HRT payer and my company operates SS so it makes very good financial sense to utilise my tax/SS savings for additional contributions.

    The complexity then becomes how do we access my pot flexibly and efficiently. I am tied in to only being able to access the company pension at age 65. But, the additional payments are all going in to a separate AVC account and I have obtained confirmation (in writing) that were I to leave the company before my NRA I could transfer out only the AVC pot and leave the main scheme in place until NRA.

    The plan at the moment (will be reassessed based on any taxation/circumstance changes etc), would be to 'retire' early, transfer my AVCs to a SIPP and then draw down these monies until my main scheme kicks in. This approach gives me the flexibility I am looking for, whilst maximising the tax/SS efficiencies available to myself and hopefully minimising the taxation on the way out.
    Originally posted by cloud_dog
    Will have to look into that as above as sounds like any gains we may make in piling her pension up would be irradicated whwn it comes to getting access to that money.

    Now I know how our actual pension work in terms of in esting I will look into the options for withdrawal and see what implications that has based on the amounts we would be putting in
    • MallyGirl
    • By MallyGirl 9th May 18, 2:39 PM
    • 2,999 Posts
    • 8,005 Thanks
    MallyGirl
    I see your point, have only just started understanding starting a pension and not the means of withdrawal although I see the standard way is take a 25% tax free lump sum and then buy an annuity. Does the ongoing yearly money get taxed then so if my wife had built up a lot there would be a lot of tax to pay on it?
    Originally posted by Noobie2011
    Annuities have their place but I don't think they are the norm any more.

    You can take 25% tax free and then draw down from the remainder. The remainder will be liable for income tax but if you keep it under 11,850 (current 0% band, changes year on year) then you pay no tax on it.

    You can take no lump sum and just have each drawdown amount 25% tax free and 75% taxable

    There are many, many options here.
    • Noobie2011
    • By Noobie2011 9th May 18, 2:45 PM
    • 272 Posts
    • 50 Thanks
    Noobie2011
    Annuities have their place but I don't think they are the norm any more.

    You can take 25% tax free and then draw down from the remainder. The remainder will be liable for income tax but if you keep it under 11,850 (current 0% band, changes year on year) then you pay no tax on it.

    You can take no lump sum and just have each drawdown amount 25% tax free and 75% taxable

    There are many, many options here.
    Originally posted by MallyGirl
    Okay I get you now, will consider the drawdown but dont think we have it in our plans. So on the drawdown aslong as both of us were never drawing more than 11,850 each then would be tax free.
    • MallyGirl
    • By MallyGirl 9th May 18, 5:42 PM
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    MallyGirl
    yes - you can each drawdown 11,850 tax free, plus 25% tax free as pension commencement lump sum (PCLS) or as more drawdown with each installment.

    Some company pensions don't allow flexi drawdown but they will contact you something like a year before retirement age giving you options. One option would be to transfer somewhere that does offer flexible drawdown. I am talking about defined contribution pensions here - not DB / final salary ones. Transferring those is a whole different kettle of fish.
    Some schemes allow you to partially transfer out to a personal pension/SIPP along the way.
    • Noobie2011
    • By Noobie2011 9th May 18, 7:30 PM
    • 272 Posts
    • 50 Thanks
    Noobie2011
    yes - you can each drawdown 11,850 tax free, plus 25% tax free as pension commencement lump sum (PCLS) or as more drawdown with each installment.

    Some company pensions don't allow flexi drawdown but they will contact you something like a year before retirement age giving you options. One option would be to transfer somewhere that does offer flexible drawdown. I am talking about defined contribution pensions here - not DB / final salary ones. Transferring those is a whole different kettle of fish.
    Some schemes allow you to partially transfer out to a personal pension/SIPP along the way.
    Originally posted by MallyGirl
    Thanks, is all making much more sense now so going to factor this in too and hopefully find a good percentage range to pay into my wofe pension which makes the most of the early tax and NI savings but does not penalise us when come to start using
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