Can any of you point me to a working pension advice forum? Google just comes up with way out of date or none working links.
Or does anyone know the answer to this question?
Can I make voluntary contributions to my work pension taking advantage of the tax concessions then (providing its less that 25% of the fund value) draw out all the extra I've paid in as a lump sum in 4 years time. I'm thinking this would make more sense than saving over my remaining 4 planned working years.
Mike
Quite probably, but I suggest that you ask the work pension provider or work pension coordinator. I have made additional voluntary contributions in the past which added to my pension.
Try The Motley Fool forum - although it isn't as active as it was.
For your specific question, (and I am not a pensions adviser), if you can afford it then pushing money into your pension at the end of your working life can be a good deal depending on your circumstances.
Paying in money which would be taxed at 40% then drawing it back out at
20% tax is a simple gain.You do get 25% of your 'pot' tax free if you want it so this can be a very good deal if you want to swerve a significant amount of cash around the tax man.
However, if you are only paying 20% tax then putting cash into an ISA may give you much the same result as paying into a pension tax free then drawing out and paying 20%.
The big word of warning - pensions are a bit of a nightmare at the moment and you need to be sure that the money you put in over the next four years will still be there for you to take out - for example if it is saved in cash (or the equivalent, whatever that is).
The stock market is at an historical high and if you invest in stocks and shares in your pension, the value after four years could be a lot lower if the next government (of whatever persuasion/mix) manages to upset the economy and/or the market.
This also ignores the "buggeration factor" waiting in the wings such as another banking collapse.
Traditional pension investing was to go with the market in the early to mid years then lock in your gains by moving over to less volatile things - mainly bonds and cash.
However the bond market is artificial at the moment - the prices have been forced high by "quantitative easing" and if this stops in the next four years the bond market could "correct" so that the value of individual bonds could fall significantly. So with a four year outlook do you want your money in bonds?
Cash is getting bugger all interest at the moment, but with inflation quite low you may suffer only minor errosion.
TL;DR - probably O.K. but not if you invest in the stock market; your time frame makes this too high risk and short term.
Hope this is more of a help than an additional source of confusion.
Cheers
Dave R
I'd start here...
And niether am I.
Unless you are also getting Working Tax Credit or Child Tax Credit. Then any pension contributions reduce your household income used to calculate how much WTC or CTC you get.
Agreed.
Depends on the bond surely? Not all are "unitised" some are "give us £x for n years and we will pay you y% interest guaranteed".
Agreed 4 years is borderline for investing in the markets. 3 years definately too short, 5 should be OK. One would have to look closely at the performance of the investment over the last 10+ years in rolling 4 year segments.
As to AVC's when I was paying into a final salary works scheme AVC's didn't really help very much at the end of the paying in period compared to the begining. This is ancient though I stopped paying into that scheme in 1992...
Thanks Adrian I've joined and received some sensible sounding advice already.
Mike
You are assuming that the 25% tax-free allowance will still be there in 4 years time. Given past changes to the pension rules I would not be too sure about that.
Robert
I've already heard rumours about Wallace & Ballsup removing it if they get in.
I'm thinking about the next ISA; waiting until a bit after the election might well make a tracker better value if the market falls.
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