Tax relief on pension contributions

kelloggs36

Can somebody tell me what (if any) tax relief there is on pension contributions? I am a newly qualified teacher, and I am required to pay 6.4% of my gross salary into the teacher's pension scheme. I am trying to work out my money for the next couple of years (our increases have already been sorted out) and if there is no tax relief, along with my student loan repayments, it looks like despite being on over 6k per year gross income better off, I only get to keep 30% of it! In 5 years' time when I reach the top of the main teacher scale, I will be on paper 11.5k per year better off, but actually only get to keep 4k of it - that doesn't seem very much considering I will still be way under the 40% tax threshold! In essence I will be marginally better off than now, but not much despite my earnings being 11.5k more!

So basically, what tax relief do I get on the pension contributions, and is there any relief on the student loan contributions which stand to increase from £42 per month to 4 times that amount over the next 4 years.

pandora205

I think teachers superannuation (pension) comes off gross salary before tax, i.e. you already have the tax relief for this.

ceeforcat

Well, you have baffled me!

If you pay 6.4% of your salary in pension contributions, having received tax relief at source, this will effectively cost you about 4.5%.

If you pay, say, £128 in contributions, your net pay will only reduce by about £90. This is because the pension contribution element of your gross salary has neither tax nor NIC applied to it.

Student loan contributions are levied at 9% on earnings over £15000 currently (happy to stand corrected on this).

To me, you will lose approximately 13.5% of any increase in your salary which is completely at odds with your estimations.

kelloggs36

OH good, that means that my calculations are wrong then - phew!!

kelloggs36

I have just recalculated - meaning that I was about £200 per month out! Thank goodness. I was also using current tax allowances which I kinow will change between now and then, but was just trying to work out a budget on how much we could save towards the mortgage to get it down as quickly as possible!

jem16

Pandora is correct. The Teacher's pension contributions are taken from from your gross salary before any tax is taken off so you are already getting full tax relief at 20%.

Student loans to not have tax relief.

kelloggs36

That's great thanks! I at least know that I was not using the correct figures with my projected calculations.

presh_2

I work in the NHS and also in a private sector. I have invested in NHS pension when I was working exclusively in NHS, but now I am self employed. I would like to pay into the NHS pension at the end of this year i.e. April 2009. Is this payment into pension tax deductible?