Pension fund performance - do you monitor yours, how is it doing, do you actively change it?

[danlightbulb]

Your talking about DB schemes not DC schemes.
Giving someone a payrise who is on DC only affects CONTRIBUTIONS

Yeah he probably meant final salary schemes. I've seen this happen in my company final salary scheme when they had one. Of course not everyone got that treatment, only those who were in the clic. It's irrelevant now as the final salary scheme went years ago. The boomers made their wedge then dropped it for everyone else.

"Damien talks money" you tube guy put a solution forward in one of his videos - get rid of state pension for anyone born today and instead give them £5k in a stocks pension fund which will grow for 70 years before they need it. Seems a good idea to me.

 

[ddoubleep]

Exploring my options to increase my pension funding per month and wondering whether it better to up the % via my workplace provider or do it via salary sacrifice and reduce my wage with the rest going into the pension? Is one option necessarily better than the other?

 

[SaBBz]

Exploring my options to increase my pension funding per month and wondering whether it better to up the % via my workplace provider or do it via salary sacrifice and reduce my wage with the rest going into the pension? Is one option necessarily better than the other?

Salary sacrifice will save you NI too

 

[ddoubleep]

Salary sacrifice will save you NI too

Do I simply ask payroll to reduce my salary to £x amount and then monthly they will add the sacrificed portion of my salary to my pension provider and that will then be topped up by the 20% tax relief along with any higher tax relief being claimed via self-assessment tax return?

 

[dlockers]

Do I simply ask payroll to reduce my salary to £x amount and then monthly they will add the sacrificed portion of my salary to my pension provider and that will then be topped up by the 20% tax relief along with any higher tax relief being claimed via self-assessment tax return?

You need to ask if you have a proper salary sacrifice scheme --- salary sacrifice is quite a specific thing, but the phrase "salary sacrifice" often gets used as a verb to describe any contributions you make pre-tax. I pay out of my salary pre-tax but I am not on a salary sacrifice scheme. You don't get any "top up", you simply get the full amount pre-tax paid in and you won't get any SA refunds or anything.

For proper salary sacrifice the employer will "reduce your salary" by the amount and put it in for you, and potentially give you the NI they are saving on your behalf.

 

[slinxy]

Do I simply ask payroll to reduce my salary to £x amount and then monthly they will add the sacrificed portion of my salary to my pension provider and that will then be topped up by the 20% tax relief along with any higher tax relief being claimed via self-assessment tax return?

If you're in the 40% tax bracket, you can reduce your taxable income using salary sacrifice to place you back into the 20% bracket. Like said there's no need to fill out a tax form for a rebate.
also prevously mention, you will not be taxed NI on that amount either and some work places will give you a so called "boost" off upto 13.8% of the amount you have sacifice as that's the NI tax that the company would be paying as NI tax for you if you didn't make the salary sacifice.

if you are doing a SIPP, then from 40% to 20% they should automatically claim it back. if you are dropping from 45% tax to 20%, that's when you have to make a claim with self assement tax form.

 

[ddoubleep]

Thanks @dlockers and @slinxy for your replies.

It sounds like I need to ask payroll how our salary sacrifice scheme works and whether I would get the NI boost added as my first set of questions.

I am looking to get back into the 20% bracket for a number of reasons.

Having read this it states with net pay, whatever rate of tax you pay, you get full tax relief without having to claim it. I had been thinking about relief at source method for 23/24 tax year as will be dropping the £ to bring me under via my SIPP and will get the 20% relief and any additional via a tax return it seems.

I wanted to make it easier for 24/25 tax year hence seeing should I a) Up my % via provider 2) Go down salary sacrifice or 3) In March drop the lump into my SIPP

Appreciate the information to help get a better understanding as there may be others who are thinking this or might consider this after reading about it.

 

[dlockers]

Thanks @dlockers and @slinxy for your replies.

It sounds like I need to ask payroll how our salary sacrifice scheme works and whether I would get the NI boost added as my first set of questions.

I am looking to get back into the 20% bracket for a number of reasons.

Having read this it states with net pay, whatever rate of tax you pay, you get full tax relief without having to claim it. I had been thinking about relief at source method for 23/24 tax year as will be dropping the £ to bring me under via my SIPP and will get the 20% relief and any additional via a tax return it seems.

I wanted to make it easier for 24/25 tax year hence seeing should I a) Up my % via provider 2) Go down salary sacrifice or 3) In March drop the lump into my SIPP

Appreciate the information to help get a better understanding as there may be others who are thinking this or might consider this after reading about it.

How do you pay your pension atm? Is it taken from your pay?

If so, all you need to do is tell payroll how much to take. It should automatically be taken pre-tax.

 

[Freddie1980]

I monitor my works DC pension closely, I maintain a spreadsheet detailing my contributions and returns starting from September 2014. It includes annual merit increases, expected investment returns (based on a ROI of 7%) and goes right out to the 2040's when I expect to be retired. I also have my private pension on there but this is a legacy pension that I stopped contributing to in 2010 (I instead put money into a workplace pension).

Given I draw this up 10 years ago the forecast has been fairly accurate. The 2010's had really good stockmarket returns my works pension was £18k ahead of what I was forecasting (but my private pension had lagged behind). The absolute return is about 12.5% and around 9% in real terms (discounted for inflation).

I don't change my investments that often, in the 10 years I've had it I've made maybe 2 changes to where my money gets invested (products have different names but when you dig into the detail and see where you money goes there's often quite a bit of overlap).

 

[ddoubleep]

How do you pay your pension atm? Is it taken from your pay?

If so, all you need to do is tell payroll how much to take. It should automatically be taken pre-tax.

At the moment it is paid monthly automatically into my workplace pension at the basic % rate set by me and the top up by the company.
When I log into the portal I can see the % or value I can input to tell them how much to take / increase it by.

 

[Mercenary Keyboard Warrior]

I monitor my works DC pension closely, I maintain a spreadsheet detailing my contributions and returns starting from September 2014. It includes annual merit increases, expected investment returns (based on a ROI of 7%) and goes right out to the 2040's when I expect to be retired. I also have my private pension on there but this is a legacy pension that I stopped contributing to in 2010 (I instead put money into a workplace pension).

Given I draw this up 10 years ago the forecast has been fairly accurate. The 2010's had really good stockmarket returns my works pension was £18k ahead of what I was forecasting (but my private pension had lagged behind). The absolute return is about 12.5% and around 9% in real terms (discounted for inflation).

I don't change my investments that often, in the 10 years I've had it I've made maybe 2 changes to where my money gets invested (products have different names but when you dig into the detail and see where you money goes there's often quite a bit of overlap).

You have had it all that time and never noticed that you spelt contribution wrongly

 

[Freddie1980]

You have had it all that time and never noticed that you spelt contribution wrongly

... 10 years. Never thought to run a spell check on it in that time.

 

[throwaway4372]

I have a sheet like that too, one row per year, forecast all the way to retirement. Very difficult to know how realistic it is and how much money I'll actually want in retirement. I'm torn between thinking I'm contributing too much and wanting to contribute more to avoid tax.

 

[booyaka]

I have a sheet like that too, one row per year, forecast all the way to retirement. Very difficult to know how realistic it is and how much money I'll actually want in retirement. I'm torn between thinking I'm contributing too much and wanting to contribute more to avoid tax.

Why would you be "contributing too much"? Only reason I could see is that your suffering now in terms of cash flow.

Rarely have I ever seen anyone "contributing too much" to a pension unless they run out of allowances etc but that is fairly rare.

 

[dlockers]

Why would you be "contributing too much"? Only reason I could see is that your suffering now in terms of cash flow.

Rarely have I ever seen anyone "contributing too much" to a pension unless they run out of allowances etc but that is fairly rare.

Suffering now doesn't need to be exclusively expressed in cashflow terms. On hand savings, emergency fund, etc. Putting money into a pension is a pretty "big" decision given how long it is locked away for, and how likely it will be for the accessibility age to increase.

(assuming you meant cashflow in the 'can you still afford to heat/eat/live' terms versus the overall cashflow picture).

 

[slinxy]

Why would you be "contributing too much"? Only reason I could see is that your suffering now in terms of cash flow.

Rarely have I ever seen anyone "contributing too much" to a pension unless they run out of allowances etc but that is fairly rare.

it's also dependant on how you are planning to withdraw from the pot as well. Pensions are advantageous only if you drop down the tax bracket, looking at my forecast there's a chance that may be in the equivalent of whatever the 40% bracket is at the time of withdrawing it, if I plan to use draw-down and take as much out as possible before I kick the bucket. And that's just with the one pot.

So by keeping myself in the 20% bracket now, I could be forcing myself to take out an amount that places me in the 40% in the future but my plan is to quit this job and take a noddy job once I have a good amount in the pension pot.

 

[throwaway4372]

Why would you be "contributing too much"? Only reason I could see is that your suffering now in terms of cash flow.

In terms of having more than I need in retirement, so it would be better to have the money now rather than money I don't need later.
Don't really want to be earning enough retirement income to pay higher tax, otherwise may as well have not put it in a pension to begin with.
Currently won't be able to access it until 57, which is 20 years away, so maybe that ends up being 60ish by the time I get there.
Might end up having cash sat about, and being and old chap not really wanting to do anything with it.
Basically it's a question of not really knowing how much I'm going to need/want in retirement.
Let's do a hypothetical number to aid the discussion... say I forecast a pot of £1.5m at 60, is that too much or too little?

 

[Raymond Lin]

In terms of having more than I need in retirement, so it would be better to have the money now rather than money I don't need later.
Don't really want to be earning enough retirement income to pay higher tax, otherwise may as well have not put it in a pension to begin with.
Currently won't be able to access it until 57, which is 20 years away, so maybe that ends up being 60ish by the time I get there.
Might end up having cash sat about, and being and old chap not really wanting to do anything with it.
Basically it's a question of not really knowing how much I'm going to need/want in retirement.
Let's do a hypothetical number to aid the discussion... say I forecast a pot of £1.5m at 60, is that too much or too little?

That's plenty surely? even if you take out £50,000 every year and draw it down, you get 30 years out of it until you are 90. That is even assuming there is no interest earn on the £1.5mil all that time. Even assuming inflation, it should be enough for a comfortable, headache free retirement.

But I don't think there is too much...just because you have it, doesn't mean you have to spend it.

 

[ddoubleep]

At the moment it is paid monthly automatically into my workplace pension at the basic % rate set by me and the top up by the company.
When I log into the portal I can see the % or value I can input to tell them how much to take / increase it by.

Having dug deeper and found:

Tax on your private pension contributions

Tax you pay and tax relief you get on contributions to your private pension - annual allowance, lifetime allowance, apply for individual protection

www.gov.uk

How is tax relief calculated | Nest pensions

It's important to understand how is tax relief calculated. This will help you to send Nest the right amount of worker contribution. Find out more in our employer help centre

www.nestpensions.org.uk

I looked into my contributions and it is currently relief at source:
The tax relief method we use is relief at source (RAS), which means that we claim tax relief at the basic rate of 20% back from HM Revenue Customs (HMRC) on behalf of an eligible worker after contributions are paid to us.

So my pension contribution is after I am taxed for the month which means @dlockers if I just up my % rate or the value I would have to do it minus the 20% and wait for the relief to come in from pension provider? It also means if you are a higher tax payer you would need to claim extra relief also via HMRC.

My intention is to solely get back below the threshold in the best possible way utilising my workplace pension.

I was going to up my % contribution anyway and this forces me to do it and just wanted the most efficient way to go about it.

 

[dlockers]

Having dug deeper and found:

Tax on your private pension contributions

Tax you pay and tax relief you get on contributions to your private pension - annual allowance, lifetime allowance, apply for individual protection

www.gov.uk

How is tax relief calculated | Nest pensions

It's important to understand how is tax relief calculated. This will help you to send Nest the right amount of worker contribution. Find out more in our employer help centre

www.nestpensions.org.uk

I looked into my contributions and it is currently relief at source:
The tax relief method we use is relief at source (RAS), which means that we claim tax relief at the basic rate of 20% back from HM Revenue Customs (HMRC) on behalf of an eligible worker after contributions are paid to us.

So my pension contribution is after I am taxed for the month which means @dlockers if I just up my % rate or the value I would have to do it minus the 20% and wait for the relief to come in from pension provider? It also means if you are a higher tax payer you would need to claim extra relief also via HMRC.

My intention is to solely get back below the threshold in the best possible way utilising my workplace pension.

I was going to up my % contribution anyway and this forces me to do it and just wanted the most efficient way to go about it.

Yeah that makes sense. Is there no way to move to a gross payment scheme with your employer?

This scheme seems simple enough at 20% but annoying AF at 40% lol.