Starting a new job is a natural time to reassess your long-term financial goals and review the strategies you’re using to achieve them. Here we cover some important factors to consider when starting a new job.
Review pension contributions
Your salary is likely to have changed, so it’s prudent to review the amount you are contributing to your pension plan. If your salary has increased, you may be able to pay in more each month. Contributions to your workplace pension are deductible against income tax, subject to limits and restrictions. Basic rate taxpayers save 20%, while higher and additional rate taxpayers save 40% and 45% respectively on their contributions.
The tax-free personal allowance of £12,570 is reduced if your adjusted net income (total income after pension contributions) is over £100,000. If you earn between £100,000 and £125,140 you are effectively paying 60% income tax on that portion, but pension contributions can see you regain some (or all) of your personal allowance and make substantial tax savings – see example in the table below.
It’s also worth understanding what your employer’s contribution levels are. Your new employer could have a more or less favourable contribution scheme – for example they may match your contributions, or stick to the statutory levels. This may dictate the amount you contribute to your plan.
Old workplace plans
Changing jobs can also be a good opportunity to consolidate your previous workplace pension plan within your new scheme, or unite older workplace pension plans within a self-invested personal pension (SIPP). Combining multiple old schemes into a SIPP plan allows you to set one ‘master’ investment strategy that matches your risk profile and retirement goals. It can also reduce the administrative burden of monitoring multiple plans, lead to savings on fees, and enable you to access your savings more flexibly (some of your old pension plans may not offer flexi-access drawdown).
However, due care should be given to existing pension benefits. These may include valuable safeguarded benefits that would be lost on transfer.
Review your employee benefits
When taking up a new role there may be a change to your employee benefits, such as ‘death in service’ cover. This means it’s important to review your existing insurance cover to check whether it’s still suitable. New workplace provisions might mean you no longer need existing insurance policies.
A job change can open up a range of new financial planning opportunities and options to boost your income in retirement. Call 03300 564 446 or get in touch via our contact form to learn more.
This article is for general information purposes only and does not constitute financial advice or a personal recommendation. Past performance is not a reliable indicator of future results. Investments can rise or fall in value, and you may receive less than you originally invested. Tax treatment depends on individual circumstances and may change in the future.
