Pension Help

gadgetmind

mania112 wrote: »

Back to the pension - HMRC will top up your pension to £62,500 (20%) and you'll get a rebate for the extra amount (because you're not a basic rate taxpayer) at the end of the year which WILL GET PAID BACK TO YOU, NOT THE PENSION.

And then you'll get a 50% tax charge on the £12,500 you have overpaid into your pension. It's £50k gross, and in this case it looks like carry forwards won't be an option.

mania112

gadgetmind wrote: »

And then you'll get a 50% tax charge on the £12,500 you have overpaid into your pension. It's £50k gross, and in this case it looks like carry forwards won't be an option.

sorry, i didn't realise it was gross. That's a bit misleading then, surely it would make more sense to arrange a pension limit based on what the contributor is contributing and not the total after HMRC's input too.

am i right in thinking that this member would still receive a rebate on the £50k gross (does HMRC contribute a max of 20% at contribution)?

gadgetmind

mania112 wrote: »

surely it would make more sense to arrange a pension limit based on what the contributor is contributing and not the total after HMRC's input too.

Sense? From the tax man? Actually, this is the only way they could do it as some people do contribute gross and the 50k also includes employer contributions.

am i right in thinking that this member would still receive a rebate on the £50k gross (does HMRC contribute a max of 20% at contribution)?

Max they can do is a £40k net contribution, which gets grossed to £50k, and they then claim back whatever is appropriate for their tax band. Shame they weren't in a pension three years back as this would let them double this.

sandsy

mania112 wrote: »

Earnings of £250,000
minus your pension contributions £50,000
minus tax allowance of £7,475

total taxable sum at the end of the year of £192,525.00

you'll pay at the end of the year 20% tax on the first £27,525 (because we've already taken out the allowance)

you'll then pay 40% on the next £107,525

and you'll pay 50% on the rest

- this is after you made your deductions of course.

Back to the pension - HMRC will top up your pension to £62,500 (20%) and you'll get a rebate for the extra amount (because you're not a basic rate taxpayer) at the end of the year which WILL GET PAID BACK TO YOU, NOT THE PENSION.

I thought there was no personal allowance for earnings over £120k?

gadgetmind

sandsy wrote: »

I thought there was no personal allowance for earnings over £120k?

I think it's £114960 as you lose £1 of allowance for every £2 over £100k, so £100k+2x£7480=£114960. This costs a 40% tax payer £2992 pa (£57.54 a week) and a 50% tax payer £3740 (£71.92 a week)

One might hope that this particularly nasty trick, and the pension annual allowance, will both be repealed as part of ditching the 50p tax band, but I don't think anyone is feeling too optimistic.

[edit]

Sorry, sums slightly wrong, allowance is £7475, so £114950. Other figures not far off.

stringer_bell

Thanks for words guys. Now only thing to do is work out best online platform, and what to invest in. are stakeholder pensions worthwhile?

dunstonh

are stakeholder pensions worthwhile?

Stakeholder pensions are not platforms. They only offer a very limited range of insured funds. Typically they are not the cheapest option either. They are designed to be simple. Not best.

mania112

Personal Pensions offer a wider fund choice and aren't necessarily more expensive than a Stakeholder.

The cheapest PP's seem to be with Aviva at the moment.

Best thing is to contact a financial adviser and they'll sort it out for you.

www.unbiased.co.uk will show you the nearest IFA's in your area.

mania112

yeah over £114,950 you'll receive no allowance.

i've made a mess of my workings! Here's a refresh:

Earnings of £250,000
minus net pension £40,000 (£50,000 gross)

leaves you with £210,000

20% tax on £35k = £7,000
40% tax on £115k = £46,000
50% tax on £60k = £30,000

Leaves you with £127,000

then you'll get some rebate on the extra contributions on the pension. I believe all the £40k should be at 50% tax rate because they put pension at the top of the 'tax heap' so it's considered in the over £150k bracket.

dunstonh

The cheapest PP's seem to be with Aviva at the moment.

It's up there but its not the cheapest. Depends on fund value of course but I am typically finding Aviva appear in the top 10 frequently, often top 5, but i ahvent seen it come out cheapest for some time.