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Pension contribution cap for non earners
gadgetmind
Posts: 11,130 Forumite
Currently the gross annual amount someone can pay into a pension is £3600 pa or 100% of their taxable earnings. Nest allows up to £4400 pa from 2012, but I've seen no mention of the cap being raised for non-Nest pensions.
The good old back of an envelope calculation suggests that going via Nest will get an extra £160pa from HMRC in tax relief ((4400-3600)*0.2) but that 1.8% Nest up front charge will take away £79.20 of this. AMC is good at 0.3% but fund choice is basic to say the least!
Summary: Not worth someone moving from a PP or stakeholder to Nest just for the extra government contribution, but it would be nice if the annual cap was raised for non-Nest pensions.
The good old back of an envelope calculation suggests that going via Nest will get an extra £160pa from HMRC in tax relief ((4400-3600)*0.2) but that 1.8% Nest up front charge will take away £79.20 of this. AMC is good at 0.3% but fund choice is basic to say the least!
Summary: Not worth someone moving from a PP or stakeholder to Nest just for the extra government contribution, but it would be nice if the annual cap was raised for non-Nest pensions.
I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
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Comments
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Currently the gross annual amount someone can pay into a pension is £3600 pa or 100% of their taxable earnings. Nest allows up to £4400 pa from 2012
Different caps.
The £4,400 is the limit on the total amount that can go into NEST. So earn £50,000 and the most that can go into NEST is £4,400 (ie if your employer wanted to offer 5% employer contributions, 5% employee then for this person they couldn't do that using NEST).
That cap is in addition to the £3,600 and 100% of earnings limits.0 -
hugheskevi wrote: »That cap is in addition to the £3,600 and 100% of earnings limits.
So, a self employed person could put £3600 into a stakeholder *and* £4400 into a Nest scheme? Would they then get tax relief on the whole load even if their earnings were pretty much negligible?I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
The NEST cap applies at the same time as the £3600 cap and you can only use the lower of them.
NEST has some substantial additional penalties to consider, notably the ban on transferring out to get more investment choices and higher costs compared to those available in the private sector.0 -
The NEST cap applies at the same time as the £3600 cap and you can only use the lower of them.
Thanks. Looks like it's not an option for my wife, but it was worth exploring.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
If your earnings are less than £3600, that's the most you can put into a stakeholder. But, for others even though not applicble for you, if your self employment earns you, say, £12,000pa gross, you can put up to £12,000 into a stakeholder.gadgetmind wrote: »So, a self employed person could put £3600 into a stakeholder ...0
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