Pension payments - getting tax back?

Xbigman

If I make extra pension payments into an AVC do I get the tax and NI back, or just the tax?

Also, how is this calculated? Do I pay in an amount and get the tax added to it afterwards OR pay a larger sum and get the tax back (which is worth more).

Any help gratefully recieved.
Regards


X

Debt_Free_Chick

I'll assume this is an AVC scheme attached to your employer's pension scheme.

AVCs are normally deducted from your pay, so you get the tax relief in your pay packet. If you paid an AVC of £100, the net amount deducted from your pay would be £78 (if you pay basic rate tax) or £60m if you're a higher rate taxpayer.

AVCs or any other pension contributions have no effect on NI.

Check the details of your pension scheme and if it's any other kind of scheme post back with more information as different treatment might apply.

EdInvestor

£60m if you're a higher rate taxpayer

If only

dunstonh

Make sure you know what you are letting yourself in for if you do decide to go down the AVC route. I tend to find people often regret doing AVCs due to the inflexibility at retirement.

Xbigman

Debt_Free_Chick wrote:

I'll assume this is an AVC scheme attached to your employer's pension scheme.

AVCs are normally deducted from your pay, so you get the tax relief in your pay packet. If you paid an AVC of £100, the net amount deducted from your pay would be £78 (if you pay basic rate tax) or £60m if you're a higher rate taxpayer.

AVCs or any other pension contributions have no effect on NI.

Check the details of your pension scheme and if it's any other kind of scheme post back with more information as different treatment might apply.

Yes it is an AVC linked to my final salary pension. I'm looking to the future and trying to rough out some plans. The charges are supposedly very low and its seen as quite a good option. My current thinking is to put some money into this as a top up to my pension but put the bulk of my savings somewhere riskier but with more potential.

With that in mind here's another really basic question, how much tax do you pay on share dividends? I'm assuming 22%.
Regards




X

Xbigman

dunstonh wrote:

Make sure you know what you are letting yourself in for if you do decide to go down the AVC route. I tend to find people often regret doing AVCs due to the inflexibility at retirement.

I assume you mean the fact it must be taken at the same time as your occupational pension, and if annuities and poor at that time you can lose out.
Regards


X

dunstonh

Xbigman wrote:

I assume you mean the fact it must be taken at the same time as your occupational pension, and if annuities and poor at that time you can lose out.
Regards


X

Correct.

Charges are not as low as they used to be when compared with modern alternatives and with the investment options of most in-house AVCs being quite poor, you can often find the inflexibility is not worth the hassle of AVCs.

EdInvestor

With that in mind here's another really basic question, how much tax do you pay on share dividends? I'm assuming 22%.

Nothing if you're a basic rate taxpayer, 25% if higher rate.

Xbigman

Wow. So when you see headlines about a particular share yielding 5% a basic rate taxpayer like me would actually get it all. Hmmm.
Regards



X

dunstonh

Xbigman wrote:

Wow. So when you see headlines about a particular share yielding 5% a basic rate taxpayer like me would actually get it all. Hmmm.
Regards



X

Yes and No. If you are talking an in house AVC, then the pension funds on offer will be accumulation units only and there is no explicit distributions on these. Unless the pension holds direct investments such as unit trusts or shares, then you should see no reference to yield. The unit price of the pension funds reflects the income distributions within the fund.

EdInvestor

Xbigman wrote:

Wow. So when you see headlines about a particular share yielding 5% a basic rate taxpayer like me would actually get it all. Hmmm.
Regards
X

Correct. Re capital gains, you only get taxed on these if you sell your shares and you have an annual allowance of 9k before any tax kicks in.It's really pretty easy for a basic rate taxpapyer to avoid any tax liability on share gains these days, even if the shares are not in an ISA ( though it's a good idea to use the ISA allowance for the long term).