How Much Can I Put In Post A-Day?

Strike_Team

As far as I understand, after A-day I can put in a maximum of either £3600, or my full salary, whichever is greter pre-tax, per year.

Question is, can I put in more than these limits into a pension, without getting the tax advantages on the amount over and above these limits, or are these absolute limits on what I can put in?

ReportInvestor

I can't think of (m)any reasons to lock money away in a pension if you didn't get tax relief!

The HMG site says that you can contribute more, Strike_Team.

"...providing your pension scheme agrees there are is no limit on the amount that can be put into your pension.

- But there are limits on the tax relief you can get."

Very rich moneysavers should also take into account an annual contribution limit of £215K that attracts tax relief, and the fact that they will also get clobbered for tax if their fund goes over £1.5 million (rising with inflation - so it won't keep pace with current earnings).

If your fund is likely to be over £1.5m at April 2006 then register it with the government to keep the April 2006 value as your maximum fund value (rising with inflation).

£1.5m in an annuity would give a pension of about £90K pa.

Link to more details about the new regime from HM Goverment

Nick_C_4

The way I interpreted "If....your contributions exceed(s) the annual allowance, there is a tax charge of 40% of the excess" was that you could pay more than the allowance in, but you'd lose the tax relief. But I agree with ReportInvestor, I can't see why you'd be wanting to put money in you don't get tax relief on.

There are two different ways of protecting your existing rights, to be used in different circumstances. Like the HMRC document says, if you're likely to be affected, you should probably be getting advice.

dunstonh

In any case I can't think of (m)any reasons to lock money away in a pension if you didn't get tax relief!

I can only think of one,possibly two. One would be to make the fund up to a level where the annuity rate increases into the next rate band or a better rate becomes available from another provider.

The other is that the pension fund is currently held outside of your estate in the event of your death. So no IHT is payable on it. So, paying in and not getting tax relief but then being able to get it paid out on your death with no IHT liability could be beneficial to some. Mainly those that are terminally ill and have to worry about those things.

Not exactly common occurances though.

ReportInvestor

You're right Nick. And it sounds like you can put in more than your salary, just that you don't qualify for tax relief.

I'll change my earlier post to avoid confusion.