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Company Pension

Including Financial Independence and Retiring Early (FIRE)
AsleepInYorkshire
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Company Pension

#283516

Postby AsleepInYorkshire » February 10th, 2020, 11:31 pm

Recently I moved to a new position.

So far I am enjoying the atmosphere I work in.

My employer has an employee pension scheme.

They will match my own contributions to a maximum of 5% of salary. I can pay more than that. I believe I can pay through "salary sacrifice".

I propose to pay the amount of my salary that is in the 40% tax bracket into my pension. SO in other words anything over £50K p.a.

However, I have not included within my calculations for any bonus payments. They will amount to an additional 10-15% of my salary if I perform well.

The safe bet is to assume no bonus and that is what I will do. But ... is it possible to put the company pension into draw-down (I am over 55) and still continue adding to it under the company pension scheme?

Thank you for any answers in advance

AiYn'U

xxd09
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Re: Company Pension

#283521

Postby xxd09 » February 11th, 2020, 12:15 am

Company Pension Schemes by definition are run by the Company
They should give you a projection of you final pension every year ie the income you will receive on retiral
Personal Private Pension schemes are run by you and feature Drawdown amongst their retiral income payments
Two very different schemes
xxd09

JohnB
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Re: Company Pension

#283528

Postby JohnB » February 11th, 2020, 5:25 am

Research salary sacrifice and whether the company give you the benefit of the employer NI they no longer pay. The combined tax and NI relief can be significant. If you think there will be a period when your income will be under the personal allowance, because you retire early, better to fund that from a pension too, so pump it from savings

Strong chance the Chancellor will reduce the tax reliefs this budget, so be prepared to act quick.

Chrysalis
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Re: Company Pension

#283531

Postby Chrysalis » February 11th, 2020, 6:46 am

xxd09 wrote:Company Pension Schemes by definition are run by the Company
They should give you a projection of you final pension every year ie the income you will receive on retiral
Personal Private Pension schemes are run by you and feature Drawdown amongst their retiral income payments
Two very different schemes
xxd09


That’s no longer the case, I think you are confusing ‘company scheme’ with defined benefit/final salary type pensions. Most company schemes these days are defined contribution schemes that have more in common with personal pensions, and can be accessed flexibly, including via drawdown.

Chrysalis
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Re: Company Pension

#283532

Postby Chrysalis » February 11th, 2020, 6:52 am

It can be complicated, but not impossible, to withdraw from a pension you are actively paying in to.
That’s because it’s necessary to separate any funds in drawdown from the untouched, or ‘uncrystallised’ pension.
Check your scheme rules to see if it’s possible. An alternative might be to make partial transfers into a personal pension which you can then put into drawdown.
Regardless, you need to be aware of the Money Purchase Annual Allowance (MPAA). If you withdraw any taxable money from a defined contribution pension, whether using drawdown or the lumps sums (UFPLS) method, then your subsequent annual allowance for tax relief on pension contributions is reduced permanently to £4K per year. If you only take tax free cash, and leave the drawdown pot completely untouched, this restriction doesn’t apply.
However, I’d question why you want to withdraw from a pension when you are earning well and making pension contributions - surely better to allow the funds to grow?

fca2019
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Re: Company Pension

#283539

Postby fca2019 » February 11th, 2020, 8:19 am

As Chrysalis says your limit drops from 40k pa to 4k MPAA if you take taxable funds from the pension. You can take the 25% tax free lump sum (not touch 75%) and continue to invest in to 40k limit. The limit is ees and ers contribution and tax relief. It's your choice.

NeckPain
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Re: Company Pension

#283561

Postby NeckPain » February 11th, 2020, 10:27 am

Both my current and previous employer allowed you to put your bonus straight into your pension via salary sacrifice so you may be able to do that.

Alternatively can you alter your monthly pension contributions as you go? If so you can alter the amount to take the bonus into account, when you know what it is, it might have to be a month later so you might end up overpaying tax but it will all come out in the wash with your tax code.

As others have said, if you draw on your pension while paying into it, it alters the amount you can pay in quite considerably. I wouldn't recommend it.

All the best.

tjh290633
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Re: Company Pension

#283574

Postby tjh290633 » February 11th, 2020, 10:56 am

Back when I was working, our bonuses were paid in December, so I could decide how much needed to be paid into my then FSAVC to stay out of the 40% tax range.

Is that a possibility?

TJH


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