Pensions. Earning over 50k

In really basic terms:

With a pension you can take a defined lump sum at retirement, but otherwise considered an income and you get taxed at that point in time on it. I.e. it’s deferred tax.


ISA = you pay tax now but no additional tax up to 20k per year input (I think, can’t quite remember)




Main goal - don’t put eggs in a single basket. Get an independent financial advisor.

Let me know if you want a recommendation :)
 
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mid_gen said:
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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I assume you mean £200 Tax Refund rather than £240? :confused:
 
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mid_gen said:
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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Thanks. This is really clear
 
MrRockliffe said:
In really basic terms:

With a pension you can take a defined lump sum at retirement, but otherwise considered an income and you get taxed at that point in time on it. I.e. it’s deferred tax.


ISA = you pay tax now but no additional tax up to 20k per year input (I think, can’t quite remember)




Main goal - don’t put eggs in a single basket. Get an independent financial advisor.

Let me know if you want a recommendation :)
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I do put away into an isa.
But it seems daft not to put more into pension, get the tax free uplift and then put this into the isa.

Obviously I don't want to put it all indy a pension. Because.. Life.
But as my salary is 55k and I only see, 3k of that 5 I may as well put away that 3k and get the 20pc extra back on it.

(all numbers above are rough principles)
 
413x said:
But it seems daft not to put more into pension, get the tax free uplift and then put this into the isa.
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That depends on a few different things. It’s a complicated, ever changing system


I don’t think you’ll be the advice you need on here - speak to a proper IFA and I think you’ll equip yourself with the knowledge and tools to make the right decision :-)
 
Unless the gov change the rules there is basically no better place to put income than in a pension.
The fact you get to have it earn and grow based on no tax for many years means it cannot really be beaten.

You do need to consider earliest draw down, keeping some liquidity (ie if our of work etc) vs ISAs

The gov have talked about changing the rules. Making it tax deductable at the start, but tax free when drawn down. (Pulls some tax forwards into their coffers in effect)
 
It is annoying that salary sacrifice is both a verb and a noun lol. Some confusion as to what folk mean.

Simple maths 413x - just take your gross, add on any other income that is taxable (e.g. savings interest is considering income and will count towards your 50k limit), subtract from 50k - ensure that amount is in your pension each year. You can do that by getting your employer to increase the amount they take gross, or you can make a payment yourself around March (pre April 6th anyway) and then inform them during self-assessment period.

P.S pensions are terrifying

"Your pot value at retirement age will be £1,098,70. This is equivalent to £612,503 in todays money".

Basically even if you are a baller you are gonna be screwed in retirement.
 
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dlockers said:
It is annoying that salary sacrifice is both a verb and a noun lol. Some confusion as to what folk mean.

Simple maths 413x - just take your gross, add on any other income that is taxable (e.g. savings interest is considering income and will count towards your 50k limit), subtract from 50k - ensure that amount is in your pension each year. You can do that by getting your employer to increase the amount they take gross, or you can make a payment yourself around March (pre April 6th anyway) and then inform them during self-assessment period.
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Yeah that's what I'll do.

Looks like I'm already at the max matched contribution.
So I'll probably just put the rest in a sipp before the new tax year. Do SA and claim some cash I wouldn't otherwise have.

I don't want to put anymore in as I'm not finished moving up property ladder. And such things.

But seems sensible to put anything over 50k in as I'd only be getting taxed on it and bundling it into the isa anyway.

Vanguard looks like it has some simple funds/etfs etc that have done well last 10 years. I already use one in my isa.

I only expect to contribute 2k+ a year to the sipp. (Any work bonuses would allow me to still avoid 40pc this way by just popping it in)

I will look for some advice maybe, but again, it's not loads of cash.
 
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Tbh it is the same at 50k as at 100k. Unless the amount over is life changing, it is pretty risk free to just stick it into a pension.

The difference between 100k and 106k is £200 net cash when you factor in childcare.
 
Just keep in mind if it's not a salary sacrifice pension then it can be a bit of a faff with HMRC. I'm pretty sure they owe me thousands from last year when I was heavily overpaying pension but still being taxed a huge amount (tax was significantly higher than net pay). I used to think the system was smart enough to figure out when you'd paid too much tax and then either update your tax code or send you a cheque but it doesn't seem to [always] work that way with pensions and basically forces you down the route of doing a self assessment tax return which then means looking up savings account interest and other faff.

edit: don't let that you put you off though as it's definitely a good option from tax efficiency perspective, in theory at least.
 
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413x said:
Looks like I'm already at the max matched contribution.
So I'll probably just put the rest in a sipp before the new tax year. Do SA and claim some cash I wouldn't otherwise have.
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You can contribute more than is matched, e.g. you pay 15% they pay 4%
I wouldn't complicate your life with self-assessment over a couple of grand a year.
 
I just salary sacrifice my additional contributions into my work pension scheme. A few times a year, I transfer it all out to my SIPP. This can be done online. However, not all schemes allow partials transfers out.
I do some another additional one off contribution at the end of the tax year too. This I have to claim the relief over 20% back for on my SA.

As per above the £1m lifetime allowance no longer applies.
 
HangTime said:
Just keep in mind if it's not a salary sacrifice pension then it can be a bit of a faff with HMRC.
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Any pension where the employer is able to remove pension contributions from gross should be fine. That includes salary sacrifice and defined contribution. The latter being super common (just go onto your works portal/email HR and ask them to deduct more or less).

jaybee said:
I've always thought of pension fairly simply, just always pay in as much as I can regardless of earnings and thresholds.
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Ya but you can only put 40k a year :(
 
Just one more ask.

Let's say I earn 55k this tax year.
I've been paying in via work 2000 from this via place.
This gets gets the 40pc tax back automatically?

I then pay in another 2k. That I've recieved via my salary (ie 40pc taxed)

Can I literally debit card/Bank transfer this into a SIPP?
And the 20pc gets added automatically?
And I have to SA for the other 20pc (which comes to me via a cheque/bank transfer from hmrc?
 
413x said:
Just one more ask.

Let's say I earn 55k this tax year.
I've been paying in via work 2000 from this via place.
This gets gets the 40pc tax back automatically?
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This £2k would be paid out of gross, so would have never had 40% taken. If you took it as cash, it would only be worth £1200 to you.


413x said:
I then pay in another 2k. That I've recieved via my salary (ie 40pc taxed)

Can I literally debit card/Bank transfer this into a SIPP?
And the 20pc gets added automatically?
And I have to SA for the other 20pc (which comes to me via a cheque/bank transfer from hmrc?
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You can put £2k in via debit card but that £2k would have cost you ~£3.3k in gross salary. You'd then do an SA to claim the tax paid, back (i.e. £1.3k).


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Alternatively, just tell your employer to deduct X% plus a one-off sum closer to the time, and avoid any SA or claiming tax back stuff. I only use my debit card to pay into my pension if I can see on my P60 I've cocked my maths up and need to do an emergency top-up. I then claim the diff back on SA.
 
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Does your workplace offer a Share Purchase type scheme? These are also taken out pre tax and NI and so reduce your taxable burden. The shares become tax free once held in trust for 5 years and are also CGT exempt if sold from the trust, and can also be transferred tax free into an ISA where you have 90 days to go through the process.
 
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