Pensions query
Discussion
Some advice from resident PH bods much appreciated.
1. I worked for Employer A (private sector) for a few years.
- Employer A have a defined-contribution pension scheme, into which they made contributions on my behalf while I worked there.
2. I left Employer A, and joined Employer B (public sector).
- Employer B have a defined benefit scheme (career average), of which I was a member whilst I worked there
- I contributed ~8% of my salary, and my employer made contributions of ~22% of salary into the scheme
- Employer B's rules state that if you work for them for less than 2 years, then you can't keep your pension with them, you must either transfer the entitlement out when you leave, or get a refund of contributions.
- I worked for employer B for pretty much exactly 1 year, from March 2014-March 2015.
- In this time, my and my employer's combined contributions were ~£20k.
3. I left Employer B a week ago, and returned to Employer A
- Employer B will only transfer my entitlement to another career average scheme. Given that I don't have access to such a scheme, I get a refund of contributions.
Questions:
- What tax liability might I potentially have from a refund of contributions? I am a higher rate taxpayer.
- I am unlikely to receive a refund of contributions before 6th April. If there is a tax liability, which tax year would this refund fall into? (given that the refund relates to work undertaken in tax year 14/15)
- In an ideal world, I'd like to take the contributions refund and stick it straight back into a pension pot (because otherwise I'd have no pension for my year with employer B). What is the best way of doing this, and would it have tax implications?
- How much should I be looking to pay someone to give me proper professional advice on this kind of thing?
1. I worked for Employer A (private sector) for a few years.
- Employer A have a defined-contribution pension scheme, into which they made contributions on my behalf while I worked there.
2. I left Employer A, and joined Employer B (public sector).
- Employer B have a defined benefit scheme (career average), of which I was a member whilst I worked there
- I contributed ~8% of my salary, and my employer made contributions of ~22% of salary into the scheme
- Employer B's rules state that if you work for them for less than 2 years, then you can't keep your pension with them, you must either transfer the entitlement out when you leave, or get a refund of contributions.
- I worked for employer B for pretty much exactly 1 year, from March 2014-March 2015.
- In this time, my and my employer's combined contributions were ~£20k.
3. I left Employer B a week ago, and returned to Employer A
- Employer B will only transfer my entitlement to another career average scheme. Given that I don't have access to such a scheme, I get a refund of contributions.
Questions:
- What tax liability might I potentially have from a refund of contributions? I am a higher rate taxpayer.
- I am unlikely to receive a refund of contributions before 6th April. If there is a tax liability, which tax year would this refund fall into? (given that the refund relates to work undertaken in tax year 14/15)
- In an ideal world, I'd like to take the contributions refund and stick it straight back into a pension pot (because otherwise I'd have no pension for my year with employer B). What is the best way of doing this, and would it have tax implications?
- How much should I be looking to pay someone to give me proper professional advice on this kind of thing?
Regarding the tax on refund point, before payment of the refund to you the plan administrators are obliged to apply the tax charge of a straightforward 20% (assuming the refund is below £10,800) so you will receive 80% net. There is no facility for any reclaim of this tax by you. As this is the standard procedure the question of the year the contributions have been paid and the relevant tax rate is not an issue to consider. The administrators are responsible for accounting for the tax to HMRC. So, simplicity itself!
R.
R.
The Leaper said:
Regarding the tax on refund point, before payment of the refund to you the plan administrators are obliged to apply the tax charge of a straightforward 20% (assuming the refund is below £10,800) so you will receive 80% net. There is no facility for any reclaim of this tax by you. As this is the standard procedure the question of the year the contributions have been paid and the relevant tax rate is not an issue to consider. The administrators are responsible for accounting for the tax to HMRC. So, simplicity itself!
R.
Thanks. What if the refund is above £10,800? (~£20k?)R.
k.sidicks said:
The Leaper said:
And what public sector scheme was it? Most are unfunded so where did you get the 22% figure from?
R.
Notional employer contribution (real world required contribution is much higher!!)R.
Need to investigate whether I get employer conts back or just mine...
I disagree. You had the option to join and you should have read all about the CSPS which includes the situation for short service. You've made a bundle too on a short term investment if you care to work it out allowing for the full tax relief on your own contributions and the amount refunded net of tax at a favourable rate. As a tax payer, why should I pay for you to get what you expected rather than what you are actually entitled to? Unfortunately, too often people have assumed expectations rather than considered actual rights. You also took the decision to leave employer B and bring into play the short service provisions.
Sorry to sound harsh but that's the way things are.
I do agree, though, that prohibiting you from taking a transfer value equal to the capital value of your accrued benefits is not really fair.
R.
Sorry to sound harsh but that's the way things are.
I do agree, though, that prohibiting you from taking a transfer value equal to the capital value of your accrued benefits is not really fair.
R.
The Leaper said:
I do agree, though, that prohibiting you from taking a transfer value equal to the capital value of your accrued benefits is not really fair.
R.
This is where I have been done over.R.
When I joined the scheme, they said I could do transfer out if I wished, and I joined on that basis.
However they now say that because I didn't notify them by 6th Jan this year that I was leaving (I didn't know I was leaving until Feb), I *can't* transfer.
The capital value of my accrued benefits is ~£25k. I was expecting to be able to transfer this out when I left. Instead silly rules are preventing that transfer, and so I end up with £6k.
Those silly rules cost me £19,000. That's why I'm not happy.
The rules of the specific pension scheme may be "silly" regarding the availability of a transfer. The situation regarding a refund comprised of your own contributions is enshrined in pensions law going back a long time.
Maybe the new legislation about the availability of pension assets coming into force next month will help people in your situation; no good to you though, I think.
R.
Maybe the new legislation about the availability of pension assets coming into force next month will help people in your situation; no good to you though, I think.
R.
brickwall said:
Employer B will only transfer my entitlement to another career average scheme. Given that I don't have access to such a scheme, I get a refund of contributions.
Can employer B's pension scheme impose such a restriction? You have a statutory right to a transfer value - as long as it is an approved pension arrangement, I can't see why pension scheme B can specify what sort of pension scheme it goes to.The Leaper said:
Maybe he could ask if his own contributions could be transferred and see what CSPS says.
How does that differ from refund of contributions from one scheme followed by re-investment into a new employer's scheme or alternatively some sort of private pension? I can't see a difference myself.The first employer may refuse such a transfer because of the administration involved and/or setting a precedent.
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