Pension stuff

[Pho]

Interesting that you guys using this benpal service get absolutely no advice whatsoever lol. you may as well have a SIPP and have your employer pay into that.

Some advice, and im no IFA; just someone who has done a bit of research into my own pension over recent months.

* Diversify. That doesnt mean picking a bunch of different funds, it means ensuring the underlying assets those funds invest in are diversified. It means diversified geographically (UK, US, EMEA, Japan etc) and also diversified by market sector (Energy, Banks, Healthcare, Tech etc etc). If benpal wont give you this report automatically then you can get it via trustnet if you type in what you have.

* You should have a split of assetts which are stock, bonds (gov or corp) and property. The usual generic advice is that when your younger you should have more stocks, and when older more bonds. All about risk, and when your in your 20s 30s 90-100% stocks isnt an issue.

* ETFs... dont discount basic tracker funds, rather than the managed funds on the screenshots above. 90% of the time, the managed fund performs worse than the tracker. A balance between the two is good! and trackers have significantly less fees than managed funds.

Awesome, thanks. I really need to do something with mine so that will be a good base for me to start some research from

These are all the options I get to choose from - click for the bigger image(!) Currently 100% of mine is in the selected one, "Universal Lifestyle Collection" - not exactly a simple choice


edit: was linking to small image not the big one

 

[MassiveJim]

yeh there is a lot of choice with benpal.
When we were first switched over to it (around the time government first announced auto-enrolment) we were all taken in to a room and shown how to log in to it.
How to choose different funds etc.

I'll be honest i can bet most of the people in our company probably haven't bothered changing anything.

 

[The_Abyss]

Interesting that you guys using this benpal service get absolutely no advice whatsoever lol. you may as well have a SIPP and have your employer pay into that.

Benpal is a workplace pension offered by JLT, so it is specifically aimed at employers. Employers who want good choice for their employees and also the ease of a relatively simple solution to manage contributions, i.e. not paying into hundreds of different pension schemes chosen by their employees. Few employers offer this, as it is tortuous to administer. However, if the workplace scheme offers the investment choices you want then essentially you've got a SIPP at this stage of your saving. You're choosing the investments.

 

[The_Abyss]

This is always tricky. Unless you need to cash, it seems a good idea to put in what you can, especially if you are on the higher rate of tax (because it then becomes more tax efficient).

Ignoring national insurance and any other deductions, if you get paid £1,000 gross at the higher rate you get £600 in your pocket. The choice is either taking the £600 now and investing / spending as you please, or taking the whole £1000 and investing that in your pension. Sure, you get taxed on your annuity but it does seem a pretty good (albeit speculative) bet to invest the £1,000!

Clearly, annuities are just one option now at retirement, and fast-becoming an unpopular choice for the majority of retirement incomes.

If you've been careful enough to save across a range of tax wrappers throughout your working life, it is relatively simple to avoid / minimise tax through flexi-access drawdown with a pension, especially for retirement pre-State Pension.

 

[Nitefly]

Clearly, annuities are just one option now at retirement, and fast-becoming an unpopular choice for the majority of retirement incomes.

If you've been careful enough to save across a range of tax wrappers throughout your working life, it is relatively simple to avoid / minimise tax through flexi-access drawdown with a pension, especially for retirement pre-State Pension.

That’s interesting - I’ve been reading about this today off the back of your post.

Can you please clarify what you mean by ‘range of tax wrappers’? Do you mean multiple pension pots?

Edit - oh, I see, different ways of shielding funds from becoming taxable.

I’m currently only saving in my pension and wonder whether it would be more efficient (for drawdown reasons) to save in multiple schemes, as I am assume you are inferring.

 

[mikeh501]

Assuming he means pension, Lisa, isa.

 

[The_Abyss]

Saving across different tax wrappers and types of investment can give you more choices, even (if appropriate) using the now old-fashioned life insurance bond where you can take 5% a year that's treated as a return of capital rather than income.

The key mindset change in retirement is to take the money in the most efficient manner. Sometimes that might mean drawing on a pension but at other times it might simple mean drawing down on capital from a savings account. On a simple level, taking taxable income before the State Pension is paid is fine, but afterwards you might want to switch to capital or PCLS to minimise the exposure to income tax.

It gets even more flexible when you're a couple planning for retirement with combined income.

 

[dr_volki]

i currently pay in 8.2% - employer pays in ~19.5% (i think) - final salary scheme.
all to change in april 2019 to career average scheme.

 

[Dirk Diggler]

If I had to up my contributions so that I was paying an extra £140/week, how much of that would I see in a tax rebate if I'm in the 40% band? Is it 40% of £140 i.e £56 back in tax rebate?

 

[Kemik]

If I had to up my contributions so that I was paying an extra £140/week, how much of that would I see in a tax rebate if I'm in the 40% band? Is it 40% of £140 i.e £56 back in tax rebate?

You would need to up your pension contributions by £81 per week net of tax (£140 x (1 - 0.4 - 0.02)) assuming your employer deducts via salary sacrifice.

 

[Dirk Diggler]

You would need to up your pension contributions by £81 per week net of tax (£140 x (1 - 0.4 - 0.02)) assuming your employer deducts via salary sacrifice.

Not sure if we're on the same page there, what I mean is if I pay an extra £140 from salary sacrifice then how much of that could I claim back via self assessment if my pension manager deducts the 20% at source?

 

[mikeh501]

If the pension contributions are coming from your gross pay then you arent due any tax relief, as you never paid tax on it in the first place.

 

[Dirk Diggler]

If the pension contributions are coming from your gross pay then you arent due any tax relief, as you never paid tax on it in the first place.

It doesn't work like that.

https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief

My fund manager claims the 20% tax relief but because I pay 40% rate of tax then I'm due additional tax relief. For this reason, I get a rebate every year on the contributions I already pay so I'll be due further relief if I increase my pension contributions.

I just can't work out how the figures add up.

 

[The_Abyss]

It works exactly like that if your deductions are via salary sacrifice.

 

[Dirk Diggler]

It works exactly like that if your deductions are via salary sacrifice.

HMRC pay me a refund every year due to the higher rate tax.

 

[The_Abyss]

That is not relevant to salary sacrifice.

 

[Dirk Diggler]

That is not relevant to salary sacrifice.

It's taken from my wages directly. Maybe it's a different scheme? I wrote a letter to HMRC upon advice of an accountant who looked at my pension statements and P60 and told me I was due the rebate. HMRC reviewed the figures and sent the cheque. I now input the detail every year via self assessment.

 

[The_Abyss]

Sorry, my earlier answers were short and not terribly helpful.

If your contribution is deducted from your wages that doesn't mean that it is a salary sacrifice scheme. A salary sacrifice scheme also saves on some or all of the National Insurance contributions. Your contribution is not via salary sacrifice, and therefore you still do have the higher rate margin to reclaim back.

To get to your £140 extra a month, you'd pay £105. Your pension would reclaim £35 (basic) and you'd be able to reclaim a further £35 (higher) through your self assessment. Monthly figures, obvs. Then next year pay that extra £35 into your pension to get more mind blowing pension awesomeness by getting tax relief on tax relief (well, not really, but that's how it feels!)

 

[Dirk Diggler]

@The_Abyss Thanks.

 

[izzop]

Quick question that I hope someone might be able to answer for me...

I pay into my current pension though salary sacrifice, which is fine, however should I want to make a one off separate/additional payment into my pension not through my salary am I still eligible to tax relief on that amount I pay in?

I'm presuming the answer is yes, but I just wanted to check.

Thanks