Golfie, for clarity, am I right in thinking that the £40k annual contribution includes the tax relief you get, so you don't personally shall out £40k , e.g. as a 25% tax payer should you pay into a pension £32k the tax relief is £8k thus making up the total £40k .
Also if you are paying into a private pension & a SIPP the £40k limit is split across both.
Yes, £40k in total......whether that is DB, DC or both. To make matters worse the £40k figure for a DB scheme is the amount of "growth" it achieves from one year to the next - nothing to do with employee or employer contributions. Over the past 5 years I have advised virtually all my clients that are in DB schemes to stop any contributions they may be making to DC arrangements. Just too much hassle & not knowing until 6 months after the end of the tax year what they have actually "put in" to their DB scheme.
And PS...... a SIPP is a private pension. Just a fancy name that has stuck over recent years. 90% of people with a "Sipp" dont invest in anything but collectives or insured funds.
Golfy, is this a new ruling regarding the £40,000 limit per annum being the growth in the year. An how is the growth measured, it’s obviously not in actual pension to be paid. As, there is not an actual pension pot I’m intrigued as to how this is measured.
I retired in 2017 and was in Lloyds Bank DB scheme (non contributory) . In my last few years I used salary sacrifice to pay thousands into my AVC. In the last year I think it was over £30,000 into the AVC. Is this no longer possible... ?
I do seem to remember some calculation of the annual pension increase multiplied by some X factor being part of your annual allowance, but buggered if I can remover what this was.
The contributions into a DB scheme only matter if you are an active member, if you are a deferred member then that has no bearing on what you can pay onto a PP, although obviously will have an impact on the Lifetime Allowance.
The way to calculate the "pension savings" amount for a DB scheme is to start with the opening figure for the previous year, so say an Annual salary on 6th April 2019 of £60k. Then you use the number of years of service to date (say 20/60ths) to get your current pension. You then multiply this by 16 & then multiply the answer by last September's CPI figure. This gives your opening figure. You then take the salary & years of service on the 5th April 2020 - say £63kpa and multiply that by 21/60ths (as you have now worked a year) and times that answer by 16.
Eg
£60k x 20/60 = £20k x 16 = £320,000 x 102% = £326,400
£63k x 21/60 = £22,050 16th = £352,800
£352,800 - £326,400 = £26,400
This makes your annual contribution for pension purposes £26,400. Nothing to do with what you or your employer pays, and only known after the end of the tax year.
No idea which clever civil servant dreamed that one up !!
So, I have 2 pensions. A DB which is from an ex employer so no more contributions going in; and a DC from existing. When working out my annual allowance of £40K what should I include? Just what I put into the DC? Or any increase in DB over the year from gain? Thanks.
Golfie, for clarity, am I right in thinking that the £40k annual contribution includes the tax relief you get, so you don't personally shall out £40k , e.g. as a 25% tax payer should you pay into a pension £32k the tax relief is £8k thus making up the total £40k .
Also if you are paying into a private pension & a SIPP the £40k limit is split across both.
Yes, £40k in total......whether that is DB, DC or both. To make matters worse the £40k figure for a DB scheme is the amount of "growth" it achieves from one year to the next - nothing to do with employee or employer contributions. Over the past 5 years I have advised virtually all my clients that are in DB schemes to stop any contributions they may be making to DC arrangements. Just too much hassle & not knowing until 6 months after the end of the tax year what they have actually "put in" to their DB scheme.
And PS...... a SIPP is a private pension. Just a fancy name that has stuck over recent years. 90% of people with a "Sipp" dont invest in anything but collectives or insured funds.
Golfy, is this a new ruling regarding the £40,000 limit per annum being the growth in the year. An how is the growth measured, it’s obviously not in actual pension to be paid. As, there is not an actual pension pot I’m intrigued as to how this is measured.
I retired in 2017 and was in Lloyds Bank DB scheme (non contributory) . In my last few years I used salary sacrifice to pay thousands into my AVC. In the last year I think it was over £30,000 into the AVC. Is this no longer possible... ?
I do seem to remember some calculation of the annual pension increase multiplied by some X factor being part of your annual allowance, but buggered if I can remover what this was.
The contributions into a DB scheme only matter if you are an active member, if you are a deferred member then that has no bearing on what you can pay onto a PP, although obviously will have an impact on the Lifetime Allowance.
The way to calculate the "pension savings" amount for a DB scheme is to start with the opening figure for the previous year, so say an Annual salary on 6th April 2019 of £60k. Then you use the number of years of service to date (say 20/60ths) to get your current pension. You then multiply this by 16 & then multiply the answer by last September's CPI figure. This gives your opening figure. You then take the salary & years of service on the 5th April 2020 - say £63kpa and multiply that by 21/60ths (as you have now worked a year) and times that answer by 16.
Eg
£60k x 20/60 = £20k x 16 = £320,000 x 102% = £326,400
£63k x 21/60 = £22,050 16th = £352,800
£352,800 - £326,400 = £26,400
This makes your annual contribution for pension purposes £26,400. Nothing to do with what you or your employer pays, and only known after the end of the tax year.
No idea which clever civil servant dreamed that one up !!
So, I have 2 pensions. A DB which is from an ex employer so no more contributions going in; and a DC from existing. When working out my annual allowance of £40K what should I include? Just what I put into the DC? Or any increase in DB over the year from gain? Thanks.
Both. What you & any employer pays into your DC and also the "growth" on your deferred DB scheme. The "growth" from your DB scheme in reality shouldn't be that much as you are no longer building up any more years of service nor is your income increasing (both of which are issues in my example above). Your DB pension should grow every year whilst in deferment and different schemes have different rules around how much, but usually its RPI or CPI.
Edit. Thinking about it, deferred pension don't come into the equation. I was thinking about the NHS scheme that has 3 parts to it & most people are now only accruring service in the 2015 Scheme, but their accrued service in the other parts still count - but they are still active members of the whole scheme.
£350m "black hole" in the Arcadia Pension fund. I'm glad I didn't mis-sell that one.
Give me a personal pension over a privare sector DC scheme anyday.
Unless you went to Equitable Life. I went with them many years ago until their GARs destroyed the company - I have no idea what the actuaries were doing with this as it took no account that inflation/interest rates might fall.
Financial regulators are useless as this showed. One of the UK's oldest companies were effectively running a pyramid scheme.
£350m "black hole" in the Arcadia Pension fund. I'm glad I didn't mis-sell that one.
Give me a personal pension over a privare sector DC scheme anyday.
Unless you went to Equitable Life. I went with them many years ago until their GARs destroyed the company - I have no idea what the actuaries were doing with this as it took no account that inflation/interest rates might fall.
Financial regulators are useless as this showed. One of the UK's oldest companies were effectively running a pyramid scheme.
Anyone in the business (like me) knew Equitable Life couldn't keep it up. GAR's were old hat in the early 90's but Equitable kept on pushing them & people kept investing with them......mainly because their ads said that they didn't pay commission to (nasty smelly) salesmen. 🤔
£350m "black hole" in the Arcadia Pension fund. I'm glad I didn't mis-sell that one.
Give me a personal pension over a privare sector DC scheme anyday.
Unless you went to Equitable Life. I went with them many years ago until their GARs destroyed the company - I have no idea what the actuaries were doing with this as it took no account that inflation/interest rates might fall.
Financial regulators are useless as this showed. One of the UK's oldest companies were effectively running a pyramid scheme.
Anyone in the business (like me) knew Equitable Life couldn't keep it up. GAR's were old hat in the early 90's but Equitable kept on pushing them & people kept investing with them......mainly because their ads said that they didn't pay commission to (nasty smelly) salesmen. 🤔
GARs are obviously nonsensical so I'm not really clear how this was allowed to happen? They had been going since 1762 which is perhaps why people thought they might be trustworthy?
There are also plenty of bad financial advisors out there as well - I obviously am not including you in this!
Financial products are a minefield and getting good advice is difficult. Make the wrong decision and you can lose a fortune.
£350m "black hole" in the Arcadia Pension fund. I'm glad I didn't mis-sell that one.
Give me a personal pension over a privare sector DC scheme anyday.
Unless you went to Equitable Life. I went with them many years ago until their GARs destroyed the company - I have no idea what the actuaries were doing with this as it took no account that inflation/interest rates might fall.
Financial regulators are useless as this showed. One of the UK's oldest companies were effectively running a pyramid scheme.
Anyone in the business (like me) knew Equitable Life couldn't keep it up. GAR's were old hat in the early 90's but Equitable kept on pushing them & people kept investing with them......mainly because their ads said that they didn't pay commission to (nasty smelly) salesmen. 🤔
GARs are obviously nonsensical so I'm not really clear how this was allowed to happen? They had been going since 1762 which is perhaps why people thought they might be trustworthy?
There are also plenty of bad financial advisors out there as well - I obviously am not including you in this!
Financial products are a minefield and getting good advice is difficult. Make the wrong decision and you can lose a fortune.
Who can you trust?
Obviously I would say this but......always speak to a Financial Advisor, preferably a "whole of market" one (the term has now sadly superseded "Independent"). Either by referral from a friend or colleague or failing that by looking up the FCA register.
The advisor market has really been cleaned up since the 1980's. No more dodgy ex-car salesmen (yes, I've worked with a few of them in the past) as the level of Compliance & testing that goes on now has weeded them out.
£350m "black hole" in the Arcadia Pension fund. I'm glad I didn't mis-sell that one.
Give me a personal pension over a privare sector DC scheme anyday.
Unless you went to Equitable Life. I went with them many years ago until their GARs destroyed the company - I have no idea what the actuaries were doing with this as it took no account that inflation/interest rates might fall.
Financial regulators are useless as this showed. One of the UK's oldest companies were effectively running a pyramid scheme.
Anyone in the business (like me) knew Equitable Life couldn't keep it up. GAR's were old hat in the early 90's but Equitable kept on pushing them & people kept investing with them......mainly because their ads said that they didn't pay commission to (nasty smelly) salesmen. 🤔
GARs are obviously nonsensical so I'm not really clear how this was allowed to happen? They had been going since 1762 which is perhaps why people thought they might be trustworthy?
There are also plenty of bad financial advisors out there as well - I obviously am not including you in this!
Financial products are a minefield and getting good advice is difficult. Make the wrong decision and you can lose a fortune.
Who can you trust?
Obviously I would say this but......always speak to a Financial Advisor, preferably a "whole of market" one (the term has now sadly superseded "Independent"). Either by referral from a friend or colleague or failing that by looking up the FCA register.
The advisor market has really been cleaned up since the 1980's. No more dodgy ex-car salesmen (yes, I've worked with a few of them in the past) as the level of Compliance & testing that goes on now has weeded them out.
I need a review of my pension arrangements from somebody in my local area, SE10 - hard to know who to go to as recommendations may not be objective. Difficult to know where to start.
On a non pension note I see Bitcoin is now $19.4K with a projection to double by 2030. Have to admit I just can’t get my head around Crypto Currencies & mining companies, anyone know a decent link that explains it a very simply logical way. I am not looking to invest directly into Bitcoin but am interested in the technical aspects of mining.
I just want to expand my very limited understanding, I have a few shares in ARB (UK mining company) which are showing a healthy return but in all honesty bought these not through any research from myself but from a recommendation from an old mate.
On a non pension note I see Bitcoin is now $19.4K with a projection to double by 2030. Have to admit I just can’t get my head around Crypto Currencies & mining companies, anyone know a decent link that explains it a very simply logical way. I am not looking to invest directly into Bitcoin but am interested in the technical aspects of mining.
I just want to expand my very limited understanding, I have a few shares in ARB (UK mining company) which are showing a healthy return but in all honesty bought these not through any research from myself but from a recommendation from an old mate.
I think I've lost more money investing in miners than any other way, particularly small ones.
Even if you avoid the charlatans and crooks, they are effectively an option on the commodity they mine due to high, more or less fixed costs. Once the commodity goes above the cost of production, they can go up quickly. If the price sinks below cost, they plummet.
The explorers are even riskier - some of them are binary on finding sources and then require huge amount of capital to set up and often chew through early equity investors and end up getting owned by the banks.
On top of that they operate in challenging environments and subject to all sorts of disruptions due to the weather, wars, strikes, accidents, disputes with local government, etc. I'm going back to mining pooled funds ....
Bitcoin, you can think more of as a gold alternative. Add in that the jury is still out on whether its a safe store of value, hence the wild gyrations.
On a non pension note I see Bitcoin is now $19.4K with a projection to double by 2030. Have to admit I just can’t get my head around Crypto Currencies & mining companies, anyone know a decent link that explains it a very simply logical way. I am not looking to invest directly into Bitcoin but am interested in the technical aspects of mining.
I just want to expand my very limited understanding, I have a few shares in ARB (UK mining company) which are showing a healthy return but in all honesty bought these not through any research from myself but from a recommendation from an old mate.
I think I've lost more money investing in miners than any other way, particularly small ones.
Even if you avoid the charlatans and crooks, they are effectively an option on the commodity they mine due to high, more or less fixed costs. Once the commodity goes above the cost of production, they can go up quickly. If the price sinks below cost, they plummet.
The explorers are even riskier - some of them are binary on finding sources and then require huge amount of capital to set up and often chew through early equity investors and end up getting owned by the banks.
On top of that they operate in challenging environments and subject to all sorts of disruptions due to the weather, wars, strikes, accidents, disputes with local government, etc. I'm going back to mining pooled funds ....
Bitcoin, you can think more of as a gold alternative. Add in that the jury is still out on whether its a safe store of value, hence the wild gyrations.
£350m "black hole" in the Arcadia Pension fund. I'm glad I didn't mis-sell that one.
Give me a personal pension over a privare sector DC scheme anyday.
Unless you went to Equitable Life. I went with them many years ago until their GARs destroyed the company - I have no idea what the actuaries were doing with this as it took no account that inflation/interest rates might fall.
Financial regulators are useless as this showed. One of the UK's oldest companies were effectively running a pyramid scheme.
Anyone in the business (like me) knew Equitable Life couldn't keep it up. GAR's were old hat in the early 90's but Equitable kept on pushing them & people kept investing with them......mainly because their ads said that they didn't pay commission to (nasty smelly) salesmen. 🤔
GARs are obviously nonsensical so I'm not really clear how this was allowed to happen? They had been going since 1762 which is perhaps why people thought they might be trustworthy?
There are also plenty of bad financial advisors out there as well - I obviously am not including you in this!
Financial products are a minefield and getting good advice is difficult. Make the wrong decision and you can lose a fortune.
Who can you trust?
Obviously I would say this but......always speak to a Financial Advisor, preferably a "whole of market" one (the term has now sadly superseded "Independent"). Either by referral from a friend or colleague or failing that by looking up the FCA register.
The advisor market has really been cleaned up since the 1980's. No more dodgy ex-car salesmen (yes, I've worked with a few of them in the past) as the level of Compliance & testing that goes on now has weeded them out.
I need a review of my pension arrangements from somebody in my local area, SE10 - hard to know who to go to as recommendations may not be objective. Difficult to know where to start.
Something I should have done a few years ago.
Are you suggesting that a financial advisor might recommend a course of action that is not in your best interests and merely trying to line his own pocket ?
£350m "black hole" in the Arcadia Pension fund. I'm glad I didn't mis-sell that one.
Give me a personal pension over a privare sector DC scheme anyday.
Unless you went to Equitable Life. I went with them many years ago until their GARs destroyed the company - I have no idea what the actuaries were doing with this as it took no account that inflation/interest rates might fall.
Financial regulators are useless as this showed. One of the UK's oldest companies were effectively running a pyramid scheme.
Anyone in the business (like me) knew Equitable Life couldn't keep it up. GAR's were old hat in the early 90's but Equitable kept on pushing them & people kept investing with them......mainly because their ads said that they didn't pay commission to (nasty smelly) salesmen. 🤔
GARs are obviously nonsensical so I'm not really clear how this was allowed to happen? They had been going since 1762 which is perhaps why people thought they might be trustworthy?
There are also plenty of bad financial advisors out there as well - I obviously am not including you in this!
Financial products are a minefield and getting good advice is difficult. Make the wrong decision and you can lose a fortune.
Who can you trust?
Obviously I would say this but......always speak to a Financial Advisor, preferably a "whole of market" one (the term has now sadly superseded "Independent"). Either by referral from a friend or colleague or failing that by looking up the FCA register.
The advisor market has really been cleaned up since the 1980's. No more dodgy ex-car salesmen (yes, I've worked with a few of them in the past) as the level of Compliance & testing that goes on now has weeded them out.
I need a review of my pension arrangements from somebody in my local area, SE10 - hard to know who to go to as recommendations may not be objective. Difficult to know where to start.
Something I should have done a few years ago.
Are you suggesting that a financial advisor might recommend a course of action that is not in your best interests and merely trying to line his own pocket ?
£350m "black hole" in the Arcadia Pension fund. I'm glad I didn't mis-sell that one.
Give me a personal pension over a privare sector DC scheme anyday.
Unless you went to Equitable Life. I went with them many years ago until their GARs destroyed the company - I have no idea what the actuaries were doing with this as it took no account that inflation/interest rates might fall.
Financial regulators are useless as this showed. One of the UK's oldest companies were effectively running a pyramid scheme.
Anyone in the business (like me) knew Equitable Life couldn't keep it up. GAR's were old hat in the early 90's but Equitable kept on pushing them & people kept investing with them......mainly because their ads said that they didn't pay commission to (nasty smelly) salesmen. 🤔
GARs are obviously nonsensical so I'm not really clear how this was allowed to happen? They had been going since 1762 which is perhaps why people thought they might be trustworthy?
There are also plenty of bad financial advisors out there as well - I obviously am not including you in this!
Financial products are a minefield and getting good advice is difficult. Make the wrong decision and you can lose a fortune.
Who can you trust?
Obviously I would say this but......always speak to a Financial Advisor, preferably a "whole of market" one (the term has now sadly superseded "Independent"). Either by referral from a friend or colleague or failing that by looking up the FCA register.
The advisor market has really been cleaned up since the 1980's. No more dodgy ex-car salesmen (yes, I've worked with a few of them in the past) as the level of Compliance & testing that goes on now has weeded them out.
A Thai friend went on a course two weeks ago. Three days. She now has cards and a Facebook page with the term Financial Advisor as the job description. I prefer to refer to her as an unqualified insurance salesperson.
Comments
Edit. Thinking about it, deferred pension don't come into the equation. I was thinking about the NHS scheme that has 3 parts to it & most people are now only accruring service in the 2015 Scheme, but their accrued service in the other parts still count - but they are still active members of the whole scheme.
Give me a personal pension over a privare sector DC scheme anyday.
Financial regulators are useless as this showed. One of the UK's oldest companies were effectively running a pyramid scheme.
There are also plenty of bad financial advisors out there as well - I obviously am not including you in this!
Financial products are a minefield and getting good advice is difficult. Make the wrong decision and you can lose a fortune.
Who can you trust?
The advisor market has really been cleaned up since the 1980's. No more dodgy ex-car salesmen (yes, I've worked with a few of them in the past) as the level of Compliance & testing that goes on now has weeded them out.
Something I should have done a few years ago.
I just want to expand my very limited understanding, I have a few shares in ARB (UK mining company) which are showing a healthy return but in all honesty bought these not through any research from myself but from a recommendation from an old mate.
On another note, Premium bond day tomorrow. Good luck everyone who holds some.
Still a few £100k one's up for grabs though ........
https://apple.news/Am5z8F4MuRJC2qH0JqzWrxg
Even if you avoid the charlatans and crooks, they are effectively an option on the commodity they mine due to high, more or less fixed costs. Once the commodity goes above the cost of production, they can go up quickly. If the price sinks below cost, they plummet.
The explorers are even riskier - some of them are binary on finding sources and then require huge amount of capital to set up and often chew through early equity investors and end up getting owned by the banks.
On top of that they operate in challenging environments and subject to all sorts of disruptions due to the weather, wars, strikes, accidents, disputes with local government, etc. I'm going back to mining pooled funds ....
Bitcoin, you can think more of as a gold alternative. Add in that the jury is still out on whether its a safe store of value, hence the wild gyrations.