pension, salary and tax!!

merseyscouse

Some advise please;

I Am 54 and receive a private pension of £18909.
I started a new job in april of this year, my salary is £27,052 I joined the LGPS and contribute 6.5%.
I would like to stay under the 40% tax band.

Can anyone who understands pensions tax etc please advice on options to keep me under this band.

CLAPTON

why?


as you only pay 40% on a very small part of your income why are you concerned?

however if it matters that much

you can give it to charity and get tax relief
or pay extra into a pension

merseyscouse

HI
Without going in to detail, being a 40% tax payer will inpact on my savings ie 40% tax instead of the normal 20%

Its the pension part ie arcs, avcs,fsavcs and additional life cover which is what i do not understand!
I will also have to fill in tax returns??

sleepless_saver

I reckon you'll be paying less than £140 in higher rate tax. Instead of grappling with more pension provision, you could give your pay over the higher rate threshhold to charity through Give as You Earn so it comes off your pre-tax salary.
You will normally have to fill in a tax return when you move into the higher rate band, though they may well decide after a couple of years that it's not necessary if your tax affairs are reasonably straightforward.

markr007

You could of course just pay the tax and effectively give to the UK gov't deficit charity - it's needed at the moment! ;-)

jem16

I'm in exactly the same position as you are with a private pension and a salary. If you want to avoid higher rate tax this is what i do.

Add up all your gross income, private pension payment and savings interest ( this must be counted as it's taxable). Once you have your total take off the LGPS contributions that you make (as they are paid before you are taxed) and your personal allowance. Then take off the £37,400 which is where basic rate tax ends. Anything above that will be taxable at 40%. If you want to avoid paying higher rate tax on that then that is the amount that you pay into more pension or give to charity.

As to extra pension provision with LGPS.

Arcs is a way of buying extra pension, up to £5000, in multiples of £250. It's treated in the same way as your final salary pension so no risk to you.

AVCs are stock market linked and therefore does have a risk and you have to decide on an investment strategy. However the good thing with LGPS AVCs is that your total pot is added to your final salary pension and then you can take your 25% tax-free lump sum. So effectively it is possible to get all of your AVCs back tax-free.

FSVCs is where you choose a private pension which has no association with LGPS. You would not be able to add the pot in the same way as AVCs.

I doubt you need extra life insurance as you will be well covered by your LGPS benefits.