Private pensions on top of company pensions

[insecure123]

I get a decent (I think) pension from my work 9civil service) but I am considering also paying into a private pension to top it up. What are the pros and cons of this (ie will it mean higher tax etc)

Is there a recommended amount to pay in? How do I know I am getting the best deal etc?

I am 32 and earn £31k....

Can you pay any extra into your work pension?

Does it have to be a private pension? I have a stocks and shares ISA managed via HL. Over 10 years it has consistantly out performed my company pension.

No I don't suppose it does. I am just not clued up on these kind of things and htought it was th eonly option...... maybe I need to explore further.

I probably could pay more into work pension but I was thinking it would be more sensible not to have it all in the one pie so to speak...

First thing would be to look at what exactly you get with your existing pension, and then think about your needs.

If your existing pension is decent, I think I would prefer the flexibility of an ISA or something along those lines.

If on a civil service defined benefit pension look carefully at the issues around lifetime allowance and annual allowance tapering that are affecting higher earners and consider very carefully if you might fall into the trap later in your career.

Lifetime isa May make more sense if there is any doubt.

A Lifetime ISA might be better than a standard ISA if you’ve never owned a property and / or are unlikely to need to get to the money before you’re 60.

Does it have to be a private pension? I have a stocks and shares ISA managed via HL. Over 10 years it has consistantly out performed my company pension.

This is consequential. You could have the same funds in an ISA as in a private pension and therefore they would perform the same. ISA / pension is just the tax wrapper, it doesn't relate to performance.

OP, you could open a private pension, with the likes of HL, and that way you can benefit from tax relief and have control over which funds you invest in (if you feel comfortable with that).

Alternatively, speak to the scheme administrator if your work pension and ask about making additional voluntary contributions (AVCs). The advantage to this is they will be placed in your work pension, your employer is already paying the costs of administering the pension.

At £31k I don't think you need to worry about annual/lifetimes allowances.

I have a DCS pension through my employer which I pay 23% of my salary into I.e. far more than the minimum expected. I think this is often the cheapest

I do also have a HL SIPP which I opened in a panic at the end of a tax year when it was too late to organise an AVC to my workplace pension. If the money you are saving is definitely for a pension and you can live with not being able to access until you are 55/57 (age is due to rise so depends when you were born) then a SIPP makes more sense than a stocks and shares ISA as you will get a 25% tax rebate automatically added. You can shelter exactly the same funds or securities in either.

Suggest paying the most possible in your company pension to earn the extra top up (for example my company matches an extra 7% for my 7%). Then maximise your tax free allowances via a stocks and shares ISA. HL is a good starting point due to their top funds list if you’re okay with not withdrawing funds for 5 years. Regular contributions lower returns but minimise risk and suggest you start with this while you’re getting used to investing. When you become more experienced You could then look for other options to maximise growth - eg unit trusts, investment trusts etc.

I'd get a Lifetime ISA first of all. You'll get a 25% top up from the government so it'll be equal to the tax relief on pension contributions in your tax bracket. The advantage is that you won't be taxed when you pay it out (pensions get taxed if high enough). You'll also be in charge of the money so you'll be able to release the funds as you please (once you're over 58, penalty before then).