Local government pension scheme query

[egor110]

One of my brothers does research work for various universities .

He's currently had a letter from his previous employer ( Bath uni) saying as he's stopped paying in he either has to transfer it to another l.g.p.s or get a refund .

His current employer ( Exeter uni ) isn't affiliated with a lgps so he can't transfer it , if he gets a refund he'll be taxed 20% which would pretty much be equal to the employers contribution .

So what's his best way forward and bearing in mind he changes employer every year is there much point joining the pension schemes when he's going to get stung for 20% tax and loose the employee contribution each time ?

[xeny]

egor110 said:

if he gets a refund he'll be taxed 20% which would pretty much be equal to the employers contribution .

Isn't that 20% the tax he had refunded on his payments the scheme?

[Pheo]

xeny said:

Isn't that 20% the tax he had refunded on his payments the scheme?

Yes but presumably he was paying in for long term pension savings and wants to keep it in long term pension savings / maintain the tax advantGe which seems reasonable.

If you lost your pension every time you moved employer that wouldn’t be very good would it?

[egor110]

Pheo said:

xeny said:

Isn't that 20% the tax he had refunded on his payments the scheme?

Yes but presumably he was paying in for long term pension savings and wants to keep it in long term pension savings / maintain the tax advantGe which seems reasonable.

If you los +








t your pension every time you moved employer that wouldn’t be very good would it?

And that's the crux of the matter.

Are pensions worth bothering with when your on yearly contracts and thus liable to be taxed and effectively end up with just your contribution.

Surely he could put the same money in a stocks and shares isa.

[uknick]

Why doesn't he just set up his own personal pension and pay into that what he would have paid into the employer's scheme? I'd have thought he'd be able to transfer the existing pension into a personal pension, albeit at not a great transfer value.

[egor110]

uknick said:

Why doesn't he just set up his own personal pension and pay into that what he would have paid into the employer's scheme? I'd have thought he'd be able to transfer the existing pension into a personal pension, albeit at not a great transfer value.

And not bother with the employer contribution ?

[Drumroll]

egor110 said:

uknick said:

Why doesn't he just set up his own personal pension and pay into that what he would have paid into the employer's scheme? I'd have thought he'd be able to transfer the existing pension into a personal pension, albeit at not a great transfer value.

And not bother with the employer contribution ?

Nothing to stop him setting up a personal pension and still contribute to his current employers pension.

[uknick]

egor110 said:

And not bother with the employer contribution ?

Fair point, but if you're saying his career pattern means he never gets more than 2 years in the employer scheme, it's possible all he's ending up with at the moment is an amount of cash, albeit more than he actually paid in, and no pension.

Maybe his strategy should be to have a personal pension scheme as well as the employer's. Then, join the employer's to get the contributions and when he leaves, transfer the cash into his personal pension. He'll lose some of its value, but will it be more than the income tax he has to pay if he gets it as a cash refund?

Having said all that, does the cash refund include the employer's contribution?

[egor110]

uknick said:

egor110 said:

And not bother with the employer contribution ?

Fair point, but if you're saying his career pattern means he never gets more than 2 years in the employer scheme, it's possible all he's ending up with at the moment is an amount of cash, albeit more than he actually paid in, and no pension.

Maybe his strategy should be to have a personal pension scheme as well as the employer's. Then, join the employer's to get the contributions and when he leaves, transfer the cash into his personal pension. He'll lose some of its value, but will it be more than the income tax he has to pay if he gets it as a cash refund?

Having said all that, does the cash refund include the employer's contribution?

No , once the tax is paid thats pretty much equivalent to the employers contribution.

[xeny]

egor110 said:

No , once the tax is paid thats pretty much equivalent to the employers contribution.

Can you expand what exactly you mean by this please?

[uknick]

I assume, dangerous thing to do I know, the employer is putting in about 20% of his brother's contributions.

But, I'd be surprised if he gets back the employer's contribution. If he does, he shouldn't be taxed on them as he never received tax relief on them.

Having said that, like like all pension issues the devil is in the detail of the scheme rules.

[egor110]

xeny said:

egor110 said:

No , once the tax is paid thats pretty much equivalent to the employers contribution.

Can you expand what exactly you mean by this please?

So if he gets a refund they take out the tax which leaves him pretty much with the amount he ( not his employer) has paid in .

[xeny]

egor110 said:

So if he gets a refund they take out the tax which leaves him pretty much with the amount he ( not his employer) has paid in .

It will be - that's the way the process works. Have you made clear if he gets to keep the employer's contribution or not?

If so, he could simply run a SIPP, and periodically make lump sum payments which would be increased by his marginal tax rate.

[Mazinbrum]

Why not just set up a SIPP and transfer the pensions into it after he’s left.
Easily done, mine took about 10 days all done online. You can also pay in ad hoc payments and automatically receive 20% from HMRC and another 20% if he’s a 40% tax payer which he’ll have to claim back.