Paying £2880 into pension when retired

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  • Linton
    Linton Posts: 17,064
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    Your understanding of your lump sum payment is incorrect.

    You cannot contribute more than your gross salary into all your pensions in any tax year. I assume you currently pay a employee contribution into your NHS pension. So you can only get £16K minus NHS pension contribution into your SIPP. The process is that you actually pay in 80% of this figure and HMRC refund 20% (25% of 80%).

    So if your NHS pension contribution/year is £1K you can get £16K-£1K=£15K into a SIPP. You pay in 80% of £15K=£12K and HMRC add in 25% of £12K=£3K giving a total of £15K in your pension.

    Your understanding of the £2880 contribution when you aren't working is correct. Though depending on your SIPP provider you may have to wait a year before withdrawing all the money to avoid penalty charges.
  • xylophone
    xylophone Posts: 44,140
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    How much have you already contributed to your pension(s) in 2016-17?
  • You are wrong about taking £11000 without being taxed. As you are earning £16000 tax would be due on the entire £11000.

    This may differ depending on when you take the £11000 but you have given no specifics as to when that would be and the reference to £11000 presumably relates to the current tax years personal allowance.

    From what you have said you would need to wait until 06:04:2018 before £11000 was likely to incur no tax.

    By that point however it may be possible to take £12000 and pay no tax if you genuinely have no other income in that tax year (2018:19) as the personal allowance is on an upward trend, £11500 for 2017:18 and more after per Conservative election promises
    So in the case of my wife who has only a state pension worth approx £7500 and a personal allowance next year of £10,000 (£11500-£1500 which she has transferred to me) am I correct in assuming she could take £2500 without paying tax? If she also had savings interest of £1000 per year would that mean she could only take £1500 without paying tax?
  • In your original post you said retiring around August this year.

    Do you mean stop working for the NHS on salary of £16000 in August?

    If so you will have NHS income of approx £7000 in your next tax year so draw down of £11000 would leave tax due of at least £1300 for the year
  • Dazed_and_confused
    Dazed_and_confused Posts: 6,458
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    edited 14 March 2017 at 1:20PM
    moneyfoolish

    Unless earning over £100k you cannot have personal allowance of £10000 next year. Do you mean £10350 (11500 - 1150 marriage allowance)?

    I fear you are getting confused over all the different tax rates/bands. If allowance is 10350 due to marriage allowance transfer to you then she can have up that amount in pension/wages with no tax.

    She could also have upto £5000 savings interest taxed at the savings rate (0% this tax year and next). This £5000 is reduced if her pension/wages exceed her personal allowance.

    After that she could have another £1000 savings interest taxed at 0% (personal savings allowance).

    If total income, including all taxable savings interest, is less than £16500 in the forthcoming tax year then it is unlikely your wife will benefit from the personal savings allowance (which is what i guess your reference to £1000 referred to?)
  • moneyfoolish

    Unless earning over £100k you cannot have personal allowance of £10000 next year. Do you mean £10350 (11500 - 1150 marriage allowance)?

    I fear you are getting confused over all the different tax rates/bands. If allowance is 10350 due to marriage allowance transfer to you then she can have up that amount in pension/wages with no tax.

    She could also have upto £5000 savings interest taxed at the savings rate (0% this tax year and next). This £5000 is reduced if her pension/wages exceed her personal allowance.

    After that she could have another £1000 savings interest taxed at 0% (personal savings allowance).

    If total income, including all taxable savings interest, is less than £16500 in the forthcoming tax year then it is unlikely your wife will benefit from the personal savings allowance (which is what i guess your reference to £1000 referred to?)
    Sorry. I'm a twerp! I got the marriage allowance transfer figure wrong. I had it in my it was £1500 instead of £1150! So, if I follow you correctly and she has no income other than approx £7500 state pension plus £1000 savings interest then she would be able to take £2850 (£10350-£7500) as income without incurring any tax as her savings interest is well under the £5000?
  • Dazed_and_confused
    Dazed_and_confused Posts: 6,458
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    edited 14 March 2017 at 1:42PM
    Basically yes.

    Pension income would be covered by the remaining personal allowance so no tax due on £10350.

    If that was her only pension/wages type income she would have the full savings rate band available so the £1000 savings interest would all be taxable but at a rate of 0% so ultimately no tax to pay (based on 2017:18 allowances and rates).

    If pension income (in 2017:18) increased to £15350 plus £1000 savings interest she would have no savings rate band available so would then have to rely on the personal savings allowance rate band (also 0%) so still no tax to pay on the savings interest.
    NB. £1000 tax would be due the pension income in this situation
  • Basically yes.

    Pension income would be covered by the remaining personal allowance so no tax due on £10350.

    If that was her only pension/wages type income she would have the full savings rate band available so the £1000 savings interest would all be taxable but at a rate of 0% so ultimately no tax to pay (based on 2017:18 allowances and rates)
    Many thanks for all your help on this topic Dazed and confused.
  • hogweed
    hogweed Posts: 134
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    Sorry guys, I really am confused – and to make matters worse, I’ve over-simplified a few things in the interests of clarity, but the eagle-eyed amongst you have spotted this, and rightly highlighted inaccuracies.

    OK – and thanks, thanks so much for your patience – the situation, as accurately as I can state it, is this:

    For the current tax year, I will earn £16000 gross. I don’t know what my pension contributions will have been, nor how to find them out – have you ever tried getting information out of the NHS bureaucracy… so. My net annual salary is £13,200 (sorely tempted to take an opportunity here to rant to anybody who’ll listen about how underpaid I am, but hey – you've heard it all before).

    So firstly, I want to invest the maximum allowable into a SIPP for this tax year, and I haven’t much time left, which is why I’m rushing a bit and getting even more confused than usual. Is it safe for me to assume that the net figure on my payslip, ie £1100 a month, £13200pa, is at least near as dammit the maximum figure I can invest for this tax year? Should be net of both tax and pensions contributions, right?

    And if so, as soon as the government pay the £3000 or whatever it is in, I can withdraw that again next tax year as a tax-free lump sum, leaving the balance to sit till I need it, after another year or so?

    Thanks :)
  • p00hsticks
    p00hsticks Posts: 12,671
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    hogweed wrote: »
    I don’t know what my pension contributions will have been, nor how to find them out – have you ever tried getting information out of the NHS bureaucracy…

    Surely you get payslips ? Your pension contributions should be shown as a deduction on them .......
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