Pension Contribution or Offsett Mortgage Repayment?

madeinireland_2

A quick question just to clarify a point

If I make a £32k contribution - the pension provider will add to that to claim basic rate tax - so for the purposes of the annual allowance - Is the amount of allowance used £32k or £40k ?

Thanks.

jamesd

40k [STRIKE]if a basic rate tax payer. 48k if it's all higher rate.[/STRIKE]

madeinireland_2

oh damm - that limits me a bit then

madeinireland_2

Are you sure about the £48k bit for higher rate.

60% of £48k is not £32k

Thanks.

bigadaj

madeinireland wrote: »

Are you sure about the £48k bit for higher rate.

60% of £48k is not £32k

Thanks.

It's easier to think of it the other way round. The limit is £40k gross, so if you're totally into higher rate then the net contribution is £24k.

There's of course nothing to stop you contributing more, you just don't get tax relief on it.

madeinireland_2

I think you are supporting my thought that Jamesd has the wrong figure for what would be considered the higher rate contribution in the previous comment as 60% of £40k is £24k and I agree with your numbers

I was just checking as I want to be sure of getting it right.

When you say I can pay in what I like then precisely what would happen if I went over the annual allowance limit (including carry over) - I presume the pension company would still apply a 20% uplift ? so how does that get recovered from me / the pension scheme ?

jamesd

Sorry about that, yes I was wrong and it's 40k at both higher and basic rate. If you want to check any number, try this calculator.

It's 32k paid in plus 8k for basic rate tax = 40k in the pension pot on which you're entitled to tax relief. 60% of 42k is 24k so you get 8k from HMRC to take your net cost down from 32k to 24k.

spartacus173500

Having decided that not keeping money in Offsett Mortgage is not a good idea, and investing in more Pension is a better idea - the next question is where?

I already have a Stakeholder Personal Pension with AEGON, and now contribute to NHS Pension by monthly salary deductions. (Previous recommendaiotn NHS Pension = no brainer!)

Current Age = 58
Desired Pension Age = 60

An NHS Pension Calculator online quote to gain £1,000 per year pension was £15,040.
An Annuity Quote for £15,040 gave a figure of circa £750/year.

Have i interpreted correctly?

If so i could possibly contribute my full years salary, less annual deductions for employee contribution, in lieu of Offsett Mortgage savings.

As always thoughs apreciated.

kidmugsy

Was the annuity level or index-linked? Did it bring (and do you want) widow's pension?

Mind you, whatever your answers you're likely to be told that NHS is best.

Linton

spartacus173500 wrote: »

Having decided that not keeping money in Offsett Mortgage is not a good idea, and investing in more Pension is a better idea - the next question is where?

I already have a Stakeholder Personal Pension with AEGON, and now contribute to NHS Pension by monthly salary deductions. (Previous recommendaiotn NHS Pension = no brainer!)

Current Age = 58
Desired Pension Age = 60

An NHS Pension Calculator online quote to gain £1,000 per year pension was £15,040.
An Annuity Quote for £15,040 gave a figure of circa £750/year.

Have i interpreted correctly?

If so i could possibly contribute my full years salary, less annual deductions for employee contribution, in lieu of Offsett Mortgage savings.

As always thoughs apreciated.

Is the extra NHS pension you would get index-linked? If so the Annuity quote seems very high - is it correct?. But if it is index-linked the NHS one is extremely generous.