Our recent blog “Time to Consolidate those old Pension Plans” raised many questions we were able to resolve but there was one query which definitely needs further consideration.
That was: “should I use my workplace pension for consolidation or to receive top-up contributions?” As always the answer is “it depends.” If by making more contributions yourself your employer will up his contribution then rarely would it be the wrong thing to do.
The problem is that workplace pension schemes are not designed with YOU in mind. They are designed for the average employee.
Running a workplace pension scheme is an expensive obligation for employers Ways of managing costs include restricting investment choice, including few bells and whistles and keeping options and alternatives down to a minimum. It is not, therefore, surprising to find that many options permitted by the legislation are not permitted by workplace scheme rules.
And we are not talking about minor issues. If you have built up a personal pension plan from consolidation and top-ups of £100,000 by age 55 you can withdraw up to £25,000 entirely TAX FREE. Are you going to tell your son or daughter that you can’t help them with that house deposit because all your savings are in a pension plan you can’t touch until you retire?
If you would like our guide: “The six biggest mistakes in topping-up your pension plan” just email me with “pension top-up” in the subject line. Yes all this is complicated but if you get it right the tax and investment benefits can be huge.
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