commencing PAYE employment

P

pmfarrelly

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What should you do with personal pension plan (insurance policy) when sole trader commences PAYE employement.

I have a personal pension plan and employer has a company pension plan open to employees.

Can I have a personal pension plan and contribute to company pension plan?

Should I transfer my existing personal pension to a PRSA?

Should I continue to pay monthly premium to personal pension plan as well as contribute to new company pension plan?
 
I have a personal pension plan and employer has a company pension plan open to employees.

Is the company scheme an occupational scheme or a PRSA. If your employer will match contributions up to some level then it would generally make sense to take advantage of these contributions and join the scheme.

Can I have a personal pension plan and contribute to company pension plan?

You can retain the personal pension plan and leave it invested but you cannot contribute to an occupational pension scheme and a personal pension scheme at the same time as far as I know.

Should I transfer my existing personal pension to a PRSA?

That depends on (a) whether or not that is possible under the PRSA rules (b) whether or not you can find a company willing to accept the inward transfer of a personal pension fund to a PRSA and (c) what advantages there may be in effecting such a transfer (e.g. lower charges, more flexibility etc.)

Should I continue to pay monthly premium to personal pension plan as well as contribute to new company pension plan?

As above I don't think that this is possible or at least that that you cannot claim tax relief on contributions to multiple pension plans.

Note that it is not unusual for people to accumulate multiple pension funds (e.g. personal, PRSA, occupational, buy out bonds etc.) over their working lifetime these days and is is not necessarily advantageous a priori to "merge" them unless the (cost, flexibility, fund choice, administrative ease etc.) advantages are clear.

Does this make sense to you?
 
Footnote...

One small clarification to ClubMan's post above, which doesn't really change the thrust of the advice any...

It is in fact permissible to continue making contributions to a Personal Pension while simultaneously being part of an Occupational Pension Scheme, but you won't get tax relief on them. As such, I'd rarely recommend such a course of action, as the proceeds of the Personal Pension may well be taxed (at least in part) in retirement.

Liam D Ferguson
[broken link removed]
 
Re: Footnote...

It is in fact permissible to continue making contributions to a Personal Pension while simultaneously being part of an Occupational Pension Scheme, but you won't get tax relief on them.

Thanks for that clarification Liam - as I said I wasn't sure if you couldn't do that at all or just that you wouldn't get tax relief.
 
Tax relief on Personal Pension Plan

Liam,

Do you know if tax relief is still available on the RAC where the occupational pension scheme is non-contributory? Surely in this circumstance the continued RAC is recommended?

Thanks

Obi wan
 
Obi Wan,

Although it would seem logical to allow tax relief in the circumstances you describe, at present this is not the case.

If you're in an Occupational Pension Scheme (contributory or non-contributory) and want to supplement your benefits, you have only two choices which will allow you tax relief - (1) start making an Additional Voluntary Contribution (AVC) to the scheme, if the scheme facilitates such a contribution or (2) start an AVC PRSA of your own choosing.

Liam D Ferguson
[broken link removed]
 
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