How much lump sum can i put into new pension ?

Paulie29

Hi

I'm looking at starting a pension although I've left it late I'm 42.

Is there a max lump sum I can open pension with ? Considering paying £30k lump sum in from my ISA thus getting 40% tax relief on top.
Does this make sense ?
I can only afford to pay in £200 a month into pension going forward.
Would hope to have a pension of about £10k per year. Would this be achievable ?

Cheers Paul.

westy22

The maximum you can pay in this tax year (and again in the next tax year) is £50k per annum. This drops to £40k per annum from 6 Apr 2014.

This is a Gross limit so if you actually paid in £30k then that would equate to a £37,500 contribution (£30k + 25%). You would then have to claim the additional tax relief back using SA or by a letter to HMRC.

You need to ensure that you can meet relevant earnings criteria (you need to have earned £37,500 in the year to contribute £37,500) and that you have paid sufficient HR tax to reclaim.

mania112

100% of salary up to £50k. That's dropping to £40k in 2014/15.

£10k a year pension could be achievable by contributing £30k and £200 a month for the next 23 years (65).

I ran a dummy quote (but with a real provider).

If the fund grew by 5.9% per annum and interest rates are 2.9% when you retire, you would have a pension of £11,100 pa.

Alternatively you could take a lump sum of £56,900 and a lower pension of £8,370.

So your contributions might be a bit low (because that level of growth might not be possible). But its a good foundation, and in the future you could begin to increase your contributions.

Don't forget, with inflation £10k when you retire is not worth as much as £10k today.

jem16

Paulie29 wrote: »

Considering paying £30k lump sum in from my ISA thus getting 40% tax relief on top.

Do you earn at least £72,475? To get full 40% tax relief on £30k you will need to be. However if you we're only into the high rate tax bracket by £5k you would only get 40% tax relief on £5k and 20% on £25k.

atush

Also, do you have any non ISA savings to put in instead?

Losing ISA status on funds should not be your first step, which would instead mean investing funds outside of ISA wrappers.

Also, how much does your employer contribute? If they don't now, when will they be starting?

AS for how much pension would be paid, look at a calculator and fiddle around to see what is your best option:

http://www.hl.co.uk/pensions/interactive-calculators/pension-calculator