Pension questions from a newbie

bavli

atush wrote: »

So you've only lost 3200 or more employers conrtribs plus any tax relief and growth on yours.

Who is your FA? Are they independent or Tied? Did they advise cash isas or S&S isas for your savings?

If they didn't mention a pension to you (for tax relief) and advised on cash isas instead fo some S&S isas then they may not be the right advisor and you could be better with another. If they advised S&S isas, and you are happy with what you paid them and how they are doing (and they are an IFA) get home to ehlp you with your pension.

I am very happy with my FA. I have a S&S ISA which I have been investing into for many years and it has done very well. I was not a higher rate taxpayer until very recently and from what I read online there is a lot of discussion about whether ISA's are better than pensions and the consensus seemed to be that for lower rate taxpayers ISA's are better, probably why they were recommended by my IFA.

atush

Personally, I think given the new regulations about pensions and how you can draw the money, the consensus has changed.

S&S isas still have a role, but they are/were limited in what you can pay in, and the money is vulnerable to outside in many cases incl means testing, seizure, spending etc.

But you are starting a pension and it is better late than never. So join the company one today, and call your IFA and set up an appt for a personal pension.

And if you dont NEED the CB, then set up Junior ISas for the children with the CB money you will now get?

bavli

Ok, thanks for all your replies. Can someone please confirm that my sums below are correct (if I were to put £30k into the private pension scheme of my company);

Total salary pre tax: £80,000
Salary after tax: £53,541
Money into pension: £30,000
4% matched by company: £3,200
Total pension from contributions from my salary and company contributions = £33,200
20% basic tax relief claimed by pension company gets added to pension £6,000 (I have calculated this on my contribution only, not that of the company, is this correct)?
Total in pension: £30,000+£3,200+£6,000=£39,200
Do tax return, claim back 20% tax as higher rate taxpayer = £6,000

So, total pension is: £39,200
Total after tax income in bank is: £23,541+£6,000 = £29,541.

Have I calculated this correctly assuming my company will match my contribution to a maximum of 4%

When I do it on the listentotaxman.com website, my net wage comes out as: £35,541. I know this is a pre-tax pension calculator but what am I doing wrong in my calculations as that is a big discrepancy of £6,000?

jem16

bavli wrote: »

20% basic tax relief claimed by pension company gets added to pension £6,000 (I have calculated this on my contribution only, not that of the company, is this correct)?

It's correct to only use your contributions.

However the tax relief will be £7,500 on a £30k net contribution. This is because the tax relief is worked out on the gross payment, not the net payment which you used.

if you are using the net payment to calculate tax relief, it's 25% of it - ie 25% of £30k is £7500.

Total in pension: £30,000+£3,200+£6,000=£39,200
Do tax return, claim back 20% tax as higher rate taxpayer = £6,000

No it would be £30k + £3,200 + £7500 = £40,750.

You would then claim back another £7500 from HMRC.

As I said earlier, if you want to pay £30k into your pension to take your net adjusted income down to £50k, you must pay in a £24k net contribution.

When I do it on the listentotaxman.com website, my net wage comes out as: £35,541. I know this is a pre-tax pension calculator but what am I doing wrong in my calculations as that is a big discrepancy of £6,000?

You're working out tax relief on net contributions when you should be using gross.

Snakey

Don't forget there is a maximum limit on which you can get tax relief, and for this tax year it's £40,000 (and this includes tax relief, employers contributions etc - every penny that goes in to your pension is counted towards this limit).

There is no point in making pension contributions above this amount. Put the extra in an ISA.

gadgetmind

Those who were in a registered pension scheme during the previous three years can use carry forwards, but it doesn't sound like the OP was in one.