Another pension quesion

[CaptainSlow]

I'm in the fortunate enough position to have a final salary pension. I would like to increase my pension contributions but am however unable to pay more into the final salary pension.

I do have some older defined contr. pots that I can pay more into or I guess I could find a new one.

My question is what are the tax treatments of paying more into a defined contr pension? Am I right in thinking the scheme will gross up the contribution to recover the 20% tax credit ie I pay £80 in and they reclaim £20, and them I put in a claim on my coding for the other 20% (I'm a higher-rate payer)?

[ringram]

Yep pretty much.
But check your equivalent level on your final salary to make sure you dont exceed the annual allowance.
You might be better off maxing out an ISA instead.. In fact there is probably a good argument for that anyway.

[Zigster]

Agree with ringram's comments.

But are you sure you can't pay direct into your company's pension plan via AVCs (Additional Voluntary Contributions)? It's not quite the same as paying extra into your defined benefit scheme (i.e. it typically doesn't give you the same guarantees and is more like paying into a separate pension plan) but perhaps less hassle (and perhaps cheaper) than paying into a separate pension plan.

[Cheib]

Zigster said:

Agree with ringram's comments.

But are you sure you can't pay direct into your company's pension plan via AVCs (Additional Voluntary Contributions)? It's not quite the same as paying extra into your defined benefit scheme (i.e. it typically doesn't give you the same guarantees and is more like paying into a separate pension plan) but perhaps less hassle (and perhaps cheaper) than paying into a separate pension plan.

AVC's have lower fees generally but also quite often have a worse selection of funds you can invest in.

The key thing for pensions is flexibility of investment. For example if you contribute to a pension through a flexible platform you can invest in ETF's rather than managed fund.....the lower fees on ETF's vs the managed funds will far outweigh the cost saving of investing through an AVC.

[Zigster]

Cheib said:

AVC's have lower fees generally but also quite often have a worse selection of funds you can invest in.

The key thing for pensions is flexibility of investment. For example if you contribute to a pension through a flexible platform you can invest in ETF's rather than managed fund.....the lower fees on ETF's vs the managed funds will far outweigh the cost saving of investing through an AVC.

I guess it varies between companies but many will now offer their employees quite a wide range of AVCs with low fees - my company offers employees a range of funds with a 0.15% pa TER and it's hard to see ETFs being much cheaper than that (if at all).

Plus, the overwhelming majority of people neither need nor care about a wide range of funds. If you analyse fund choices made, virtually everybody sticks with the defaults.