Pensions. Earning over 50k

413x

413x

413x

Caporegime
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Much needed look at my pension status.

This tax year I've moved Into the 50k+ 40pc tax band (not by much before you ask!)

Its enough that it's probably sensible for me to put the entire amount over 50k into a pension.

Apart from maxing out work place percentage, is it better to just increase my contribution here?
Or get some personal Product?

Importantly.. How does tax relief work over on the proportion that would be hit by 40pc if it goes into pension?

What I've read is slightly confusing. Some places have said it requires a self assessment to get over the basic relief? But this could be nonsense as they look like sites trying to sell something.
 
If you do it via a SIPP, anything above the 20% tax relief will need to be claimed back via self assessment, as far as I am aware.

If you do it through a workplace pension, it's invested into the pension pre tax (in most cases), so you get the full tax relief straight away.
 
413x said:
What I've read is slightly confusing. Some places have said it requires a self assessment to get over the basic relief? But this could be nonsense as they look like sites trying to sell something.
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This basically depends on whether you're contributing pre-tax or post-tax to a pension.

If you're doing it via your employer, it normally goes in pre-tax.

If you're doing it via a SIPP post-tax, then your SIPP provider will claim 20%, and then you claim the other 20% via self assessment.
 
How is it you guys are clearer than the Internet.

That's what I thought. But the top few hits either didn't use the 50k+ as a clear example or were saying about having to do SA.

I will look into SIPP options vs work place and see what my options are.

To my shame, I've been fairly passive on pensions to date.
 
413x said:
If I put my salary and contribution into the MSE calculator.. It comes to exactly the figures in the calculator. Probably easier to wait for payroll to reply
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I am not familiar with that but assuming its not assuming sal sacrifice then sounds like it is not.

You can try writing to the tax man at the end of the tax year.
Include a schedule of payments from your provider.
A pretty good chance they will just refund you the tax. Outside chance they may set you up for SA.
 
Note that there's a pensions lifetime allowance of just over 1m. if you end up earning 70k+ you'll find that following this strategy with modest forecasting would put you over the limit (albeit super hard to predict the future). The tories are scrapping that limit (to get doctors back into work), but labour said they'd bring it back, so who knows...

It's worth making spreadsheets for calculating your:
- income, pension contrib, taxable income, tax paid at each band, ni paid at each band, net income
- pension forecast: contribs + company contribs, investment growth, payrises, key ages (ni credits, private pension, state pension)
 
I tell a lie.
Taxable income is lower than base salary on the slip. I assume this means salary sacrifice? Looks like it from a online calculator.

So looks Like I can increase contribution to get under?

This may be too late this tax year. Unless I change it now and again in April 2024
 
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throwaway4372 said:
Note that there's a pensions lifetime allowance of just over 1m. if you end up earning 70k+ you'll find that following this strategy with modest forecasting would put you over the limit (albeit super hard to predict the future). The tories are scrapping that limit (to get doctors back into work), but labour said they'd bring it back, so who knows...

It's worth making spreadsheets for calculating your:
- income, pension contrib, taxable income, tax paid at each band, ni paid at each band, net income
- pension forecast: contribs + company contribs, investment growth, payrises, key ages (ni credits, private pension, state pension)
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I'm so far from 1mln I can't see that being am issue!

I'm 38 and think I have about 60-70k?

I worked in some super rubbish jobs for fat too long.
 
413x said:
I'm so far from 1mln I can't see that being am issue!
I'm 38 and think I have about 60-70k?
I worked in some super rubbish jobs for far too long.
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That's hard to say really, very much depends on your future success and contributions, and investment growth, and when you want to retire. It's worth going through the exercise of making a spreadsheet on a rainy weekend, I think you'd enjoy the process anyway. Even if you find you're not going over a limit, it's useful to have a sense of how much you're likely to have in your pot at various ages.
 
throwaway4372 said:
That's hard to say really, very much depends on your future success and contributions, and investment growth, and when you want to retire. It's worth going through the exercise of making a spreadsheet on a rainy weekend, I think you'd enjoy the process anyway. Even if you find you're not going over a limit, it's useful to have a sense of how much you're likely to have in your pot at various ages.
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Yeah I know it needs some attention.
And you're right. I do love a finance spreadsheet! :D
 
throwaway4372 said:
If it's salary sacrifice (probably is) then increase your contribution such that you have no income taxable at the higher rate.
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This is the easiest solution.

But tbh, doing it yourself and claiming the tax relief is easy, it takes 5 minutes to pull the contribution history from your SIPP provider and bang it in your self assessment, job done, get your payment from HMRC August time, if I remember rightly from the last couple years.
 
mid_gen said:
This is the easiest solution.

But tbh, doing it yourself and claiming the tax relief is easy, it takes 5 minutes to pull the contribution history from your SIPP provider and bang it in your self assessment, job done, get your payment from HMRC August time, if I remember rightly from the last couple years.
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I guess this would allow me to make a lump sum contribution?
And then get paid some of the tax back that I've paid throughout the year?
 
413x said:
I guess this would allow me to make a lump sum contribution?
And then get paid some of the tax back that I've paid throughout the year?
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You pay 1k from your net salary into your SIPP. Your SIPP provider gets the 20% tax relief added for you. £1200 in your SIPP.

At the end of the year, you declare that contribution on your self assessment (it's the amount you contributed, PLUS the tax relief), and you will then get a further 20% tax refund, (£240).
 
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For what it's worth, the £1m limit is not a hard "limit", it just means that anything above that gets taxed.

There's no real sensible forecasting that you can do in my opinion on this.

Like, most alternatives to a pension people talk about normally involve ISAs or buy to let, and for somebody in their 30s. You have 30 years of political change, investment performance, tax changes, etc that would impact any spreadsheet you can do.

Important thing is to put something away, ideally in as many different things as possible.
 
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