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17 July 2018
Managing an increase in contributions towards final salary scheme.
My 57-year-old client is one of a group of employees whose employer has realised that the rules of its final salary pension scheme have discriminated against them.
While denying any wrongdoing the employer has made an offer to take into account ten years of non-pensionable bonuses in calculating the benefits under the scheme. The employee will have to make a contribution of £27 000 towards this after which her expected annual pension at 60 will rise from £40 000 to £60 000. Her salary is currently £115 000.
This is a threefold question:
- Can the £27 000 be contributed from an additional voluntary contribution (AVC) fund she set up during the ten years to create some pension benefits from those bonuses?
- What can be done about the massive annual allowance charge? The tax will be well over £100 000 if this all happens in 2018-19. I have suggested negotiating a phased increase...
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