Personal pension

CathA

Hi all

I've got a lump sum of money coming my way next year and am thinking of putting some into a personal pension. I work (very) part time and I don't pay tax. If I put in the same amount as my annual earnings, do I receive tax relief on all of it or is it limited to £2880? Also any recommendations of which company to use please? I don't want a SIPP. Thank you.

kidmugsy

CathA wrote: »

If I put in the same amount as my annual earnings, do I receive tax relief on all of it

Yes. Suppose you earn £8000 p.a. You write your cheque for the pension provider for 80% of that (therefore for £6400) and they claim the missing £1600 from the taxman and add it into your pension "pot". You might object that there is no missing £1600, since you are not a taxpayer anyway, but that's how it works.

UPDATE: you would be wise not to take the word of an anonymous bloke on the internet. Just choose your intended pension provider and check with them that I've got this right. But it has worked for my wife in the past!

CathA

kidmugsy wrote: »

Yes. Suppose you earn £8000 p.a. You write your cheque for the pension provider for 80% of that (therefore for £6400) and they claim the missing £1600 from the taxman and add it into your pension "pot". You might object that there is no missing £1600, since you are not a taxpayer anyway, but that's how it works.


I read the HMRC rules and thought that was how it worked, just seems strange to get tax relief when you don't pay tax!

UPDATE: you would be wise not to take the word of an anonymous bloke on the internet. Just choose your intended pension provider and check with them that I've got this right. But it has worked for my wife in the past!

Will do, just don't know which pension provider to pick! Definitely not Virgin, that's one thing I know.

CathA

I don't know my year end final earnings until late in March, as we get a bonus every year but we don't know what it is until it's announced just before pay day. If I put that figure straight into a pension, before the end of the tax year, is that enough time to get the tax added? I presume the dates of the tax year coincides with pension companies dates?

atush

The pension provider claims the money back and it may day a day or so, but you wont be penalised if they drag their heels. March is fine.

kidmugsy

CathA wrote: »

I don't know my year end final earnings until late in March, as we get a bonus every year but we don't know what it is until it's announced just before pay day. If I put that figure straight into a pension, before the end of the tax year, is that enough time to get the tax added? I presume the dates of the tax year coincides with pension companies dates?

i) I like the service from Hargreaves Lansdown. I note that BestInvest are a smidgen cheaper, at least on annual charges; I've not heard anything to their disadvantage.

ii) Just add the last of the 80% as late in the tax year as you like. Memory says that HL have the phones manned until almost the last moment, accepting contributions by debit card. I assume that's from existing customers so it might be wise to open a pension in January and then "top up" later in the tax year. Just check their minimum size of top-up before you make your opening contribution.

iii) Don't worry about the fact that it can take them a few weeks to get the tax relief: the date that counts is the date you made your contribution.

iv) If you do opt for HL be sure to register to get your statements etc online: they charge you if you get paper statements through the post.

kidmugsy

By the way, suppose you earn only £3000 p.a. No matter: you are allowed to contribute up to £3600 gross (= £2880 net) annually however low your earnings, or even if you have no earnings. Yippee!

CathA

kidmugsy wrote: »

By the way, suppose you earn only £3000 p.a. No matter: you are allowed to contribute up to £3600 gross (= £2880 net) annually however low your earnings, or even if you have no earnings. Yippee!

As I said, I work VERY part time and my annual earnings are pretty close to the £3600 amount, but whichever figure is bigger is the one I can invest, that is the way I read the HMRC rules. No doubt if this is wrong someone will correct me on that!

kidmugsy

CathA wrote: »

As I said, I work VERY part time and my annual earnings are pretty close to the £3600 amount, but whichever figure is bigger is the one I can invest, that is the way I read the HMRC rules. No doubt if this is wrong someone will correct me on that!

To the best of my knowledge you are spot on; just remember to multiple by the 0.8 before you write your cheque or deploy your debit card.