Paying £2880 into pension when retired
Comments
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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.0 -
How much have you already contributed to your pension(s) in 2016-17?0
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Dazed_and_confused wrote: »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 promises0 -
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 year0 -
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?)0 -
Dazed_and_confused wrote: »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?)0 -
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 situation0 -
Dazed_and_confused wrote: »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)0 -
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?
Thanks0 -
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