Can a pensioner contribute to a pension

AllTheKs

I took early retirement a while ago. Due to a few changes I now have money that I want to invest as efficiently as possible - one way could be via a personal pension.

Can I contribute to a new personal pension and, if so, does my current pension count as earnings for contribution limits?

dunstonh

Can I contribute to a new personal pension

Yes.

does my current pension count as earnings for contribution limits?

No. If you have no earned income, then you can contribute upto £3600 gross per tax year.

I want to invest as efficiently as possible - one way could be via a personal pension.

It can be very tax efficient but it can also be very inefficient depending on your circumstances. You may get tax relief going in but you will be taxed on the income you take (above your personal allowance). So its given with one hand and taken back with the other. If you have pension credit benefits then the income would reduce those or if you have an income closer to 20,100, then any amount over that would see your age allowance reduced (in effect increasing you to above basic rate tax).

A pension will provide a higher income than an ISA, even after tax. However, you need to note the pros and cons and decide which are important and which arent and make a balanced decision then.

margaretclare

Yes, you can.

I built up a nice little pot in a stakeholder, over 3 years this grew to £8400 thanks to the 22% from the taxman. I transferred it to a SIPP with Hargreaves Lansdown, took 25% tax-free earlier this year to help pay for some essential building work at home (new roof!) and the rest of it is growing quite nicely. This involved putting the SIPP into drawdown but I did have the choice of whether to take yet another annuity or not to take any income from it, leave it to grow. As of today I have £6436.68 in the SIPP and I intend to leave it there to grow until I'm really forced to do something with it (4 years' time, 75th birthday unless the regulations change before then).

A lot of people don't seem to realise that you can save in a pension even after retirement. This is because, until stakeholders were invented, you had to pay into a pension from earned income. Now you can pay in from any kind of income from anywhere and you still get the 22% added i.e. every 78p that you put in, the nice taxman puts in 22p making £1 to be invested.

Of course, they want their cut once you start taking income from it..

Margaret

AllTheKs

Many thanks you two. Answers are very helpful - I now have some pndering to do.