Royal Mail pension news and discussion.Please note the advise given in this forum is unofficial, please use the links we have for a more detailed response or see an independent financial adviser.
A lot of people are now investing in Vanguard Life strategy funds. These range from 20% equity 80% bonds to 100% equity depending on your risk appetite.
I am invested a bit in these. They are a very low cost fund as they are passively managed and do not have an active fund manager. They track equity markets.
Looks like the ballon will go up tomorrow. Surely there has to be a compromise before its to late.
Interesting. Will take a look at that.
I think you might be right there.
For the record, again not advice, I've invested in these.
Lindsell Train UK Equity Acc
Woodford Equity Income Acc
Fundsmith Equity Acc
Legal & General UK Property Trust Acc
Newton Global Income Acc
Old Mutual Global Equity Acc
Stewart Investors Asia Pacific Leaders Acc
Hes had a bad run recently but hopefully has been buying more Provident Financial to get himself out of a whole.
Funds are very very hit and miss and there are 1000s of them but all things being equal they usually all do well given time. They usually advise a 10 year cycle.
Revisiting an old favourite of our which we have all had problems with. These are Foxyjarvis figures below
My wage slip
Basic 39hours £517.19
Del. Supplement £23.96
PSE Adj RMPP C -£27.16
PSE C Flexi Cash -£220.00
Gross £293.99
Tax £13.80
NIC £16.44
39×£7.50=£292.50
So, I am £1.49 from crossing the threshold at which NIC's are adversely affected. It's worth doing!
If he did a lot of regular overtime say 20 hours per week giving him approx £240 extra he would be paying tax on this overtime.
My question is would he be better off paying this extra £240 into his AVC even though he would fall out of the PSE arrangements.
So would he be better off paying more into his AVC or would the fact that he would lose his PSE NI allowance make it not worth doing.
If someone could provide an explanation sum that would be great.
Thanks
foxyjarvis
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Posts: 39
Joined: Mon Mar 21, 2011 10:53 pm
Gender: Male
Hawkey99 wrote:Revisiting an old favourite of our which we have all had problems with. These are Foxyjarvis figures below
My wage slip
Basic 39hours £517.19
Del. Supplement £23.96
PSE Adj RMPP C -£27.16
PSE C Flexi Cash -£220.00
Gross £293.99
Tax £13.80
NIC £16.44
39×£7.50=£292.50
So, I am £1.49 from crossing the threshold at which NIC's are adversely affected. It's worth doing!
If he did a lot of regular overtime say 20 hours per week giving him approx £240 extra he would be paying tax on this overtime.
My question is would he be better off paying this extra £240 into his AVC even though he would fall out of the PSE arrangements.
So would he be better off paying more into his AVC or would the fact that he would lose his PSE NI allowance make it not worth doing.
If someone could provide an explanation sum that would be great.
Thanks
foxyjarvis
Offline
Posts: 39
Joined: Mon Mar 21, 2011 10:53 pm
Gender: Male
This happened to me for about 3 weeks out of a sequence of 5 or 6 weeks. It hammered me. I reduced my payments. The reason being, I just couldn't afford it due to loss of PSE. . My latest pay slip shows Gross earnings of £553.07. Net earnings of £436.38. I pay £118.88 in AVCs. I think I will be over the figure of 25% of my NRA 60 pension, in time, so will have to think about what to do nearer the time. Probably take a hit on the tax relief, but put the money into my stocks and shares ISA.
With PSE, a £10 per week gross payment only actually costs you £6.80 with £2(tax relief) and £1.20(NI relief/PSE) being paid by the tax man. Therefore it’s not really cost effective to pay in more than the PSE limit because you’ll be paying that £1.20 per £10 yourself instead. If you’re paying in a few hundred pounds a week, that’s going to add up!
The sensible plan would be to make the most of PSE and put anything else into another pension arrangement. That way you’d still be getting the tax relief on your contributions going in, and could potentially be tax free on the way out too. Although that will obviously depend on the amounts involved, age, how you plan to access it, and any other income, etc.
A pension is probably the most efficient way of saving money because of the tax breaks and employer contributions. But it’s not just a case of piling in as much money as possible, you also need to consider what you’re going to do with your money in the future and how much tax if any, you will pay on the way out. There’s no point in taking the tax breaks now, if you’re just going to give them back in the future!
Personally I already have enough in Bonusplan & Flexiplan to fund my tax free lump sums from my NRA60 and NRA65 and will soon be building up more via the DBCBS. Therefore I will be reducing my Flexiplan contributions to a ‘ticking over’ level and putting the rest in my personal pension instead.
That does mean I’ll be missing out on PSE now, but I’d end up paying too much tax later on if I let my AVC’s build up too much. As the personal pension is a drawdown pot designed to fund early retirement without having to touch any RMPP main benefits early, putting more in that seems the best option if I want to meet my aims.
Depending on how long the DBCBS is in operation for, I may transfer my Bonusplan over to the personal pension too.
I am just going to continue putting in as much as I can for the minute via PSE as its so cost effective then transfer out what's needed much nearer the time
Sounds like a plan RobertT. As I started AVCs very late, I intend to treat my S&S ISA as my 25%, plus some. I will draw on this to supplement my income over time. I will take my AVCs and put that away as cash, for those unexpected expenses in retirement. I'd rather be prepared than end up realising too late that the arse has fallen out of the job and I'm skint, but finding it hard going as I get older.
Just to confirm if your AVCs total value are over 25% of your total pension pot, you can transfer the amount left after you have taken your 25% tax free into a SIPP and avoid paying any tax on the way into the SIPP
Hawkey99 wrote:Just to confirm if your AVCs total value are over 25% of your total pension pot, you can transfer the amount left after you have taken your 25% tax free into a SIPP and avoid paying any tax on the way into the SIPP
Hawkey99 wrote:Just to confirm if your AVCs total value are over 25% of your total pension pot, you can transfer the amount left after you have taken your 25% tax free into a SIPP and avoid paying any tax on the way into the SIPP
Is that correct ?
The transfer would be tax free, but you may still pay tax when you access it from your SIPP, depending on your total income at the time.
Hawkey99 wrote:Also if you go outside of the PSE you still get a 20% uplift.
So surely its better to pay extra into your AVC and lose the 12% PSE than it is to end up paying more tax each week.
Does that makes sense or not ??
Let’s say you’re currently paying £100 gross per week into your AVC’s, factoring in tax relief and PSE, that will be a net cost to you of £68.
You want to increase your payments to £200 but as that takes you over the PSE limit, you will only get tax relief, so that will cost you £160 net.
But if you keep paying the original £100(costing you £68) and put the other £100(costing you £80) into your SIPP, then the overall cost to you would be £148.
Surely if you pay the 2nd £100 into a SIPP you would have already have paid 20% tax on it taking it down to £80 and then the SIPP tax relief taking it back to £100.
Therefore is there really any difference in putting it into an AVC or a SIPP.