Teachers 'Additional Pension'

kidmugsy

jem16 wrote: »

It's still basic rate tax though, no matter what the rate is.
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That misses the point. Contributing to a pension when you avoid 35% tax is better than avoiding 20% tax: the labels aren't important, the tax rates are.

jem16

kidmugsy wrote: »

That misses the point.

Of course it doesn't but then you know that anyway.

Contributing to a pension when you avoid 35% tax is better than avoiding 20% tax: the labels aren't important, the tax rates are.

The whole point of pension planning is to pay a lower rate in retirement to what you gained in tax relief when you were contributing.

Unfortunately as you can't possibly know what tax rates are going to be around in your retirement, basing your decision on what the current tax rate is, isn't going to help. You can only base your decision on basic and higher rates of tax.

You mostly cannot avoid the basic rate of tax, whatever it is, unless you are a very low earner. You can, however, try to avoid paying a higher rate of tax than basic rate and that is the whole point of planning.

I'm quite sure that if MSE forums were around in 1976 you would not have been telling me to make additional payments into my pension just because the basic rate of tax was 35%. You would, just as you always say, tell me to wait until I was paying higher rate tax and meanwhile to use something else that gave me flexibility.

Of course, as it turns out, that would have been the wrong choice as I would have got 35% tax relief then and would only be paying 20% tax on it. Pity I didn't have a crystal ball back then.

kidmugsy

jem16 wrote: »

Of course, as it turns out, that would have been the wrong choice as I would have got 35% tax relief then and would only be paying 20% tax on it. Pity I didn't have a crystal ball back then.

A little bit later than '76, but my crystal ball - as I call my fluke-ometer - had me buy a Retirement Annuity Policy that did get a tax rebate in the 30s%. Yahoo. So all Viola has to do is to ask herself whether it's likely that successive governments, which will struggle to escape the curse of Broon for a couple of decades or longer, are more likely to reduce her income tax rate, or increase it. Are you feelin' lucky, non-punk?