Naive question regarding contributions....

bob_dob

Hi.
I'd like to ask a naive question regarding making contributions to my work based defined contribution pension - My employer matches my contribution of 3% of my monthly pay. I can pay more but the maximum they will match is 3%.
I do not fully understand how tax relief works on contributions - I want to know will I get tax relief on any one off contributions that I make towards my pension?

Thank you.

MoneySavingUser

Yes - you will get tax relief on any contributions you make up to the limit of £40,000 or your annual salary (whichever is lower) generally (ignoring carry forward etc.).

Does your employer offer salary sacrifice? (then you would save national insurance too)

bob_dob

MoneySavingUser wrote: »

Does your employer offer salary sacrifice? (then you would save national insurance too)

Thank you very much. I'm not sure what that is but I can ask?

MoneySavingUser

bob_dob wrote: »

Thank you very much. I'm not sure what that is but I can ask?

Yes - ask them.

Bootsox

MoneySavingUser wrote: »

Yes - you will get tax relief on any contributions you make up to the limit of £40,000 or your annual salary (whichever is lower) generally (ignoring carry forward etc.).

Does your employer offer salary sacrifice? (then you would save national insurance too)

Does the £40k not relate to the sum of both employer and employee pension contributions?

atush

yes, and tax relief.

bob_dob

MoneySavingUser wrote: »

Yes - ask them.

I have asked and they do not.

One more question, please:

Am I right in thinking that by choosing to add to my pension contributions using my net pay instead of increasing my contributions from my gross pay, I am losing out as I have already paid tax on my net pay?

jem16

bob_dob wrote: »

Am I right in thinking that by choosing to add to my pension contributions using my net pay instead of increasing my contributions from my gross pay, I am losing out as I have already paid tax on my net pay?

No you're not correct. If you add contributions from net pay, your pension provider would normally add on the basic rate tax relief. If they don't you can claim from HMRC yourself.

If you're adding to your company pension why is your contribution not being taken from your gross pay? What normally happens?

bob_dob

Thank you.

I currently pay 3% and my employer pays 3%, my 3% does come out of my gross pay.

I want to increase my contributions but would prefer to make additional contributions from the/any spare income I have rather than fix my contributions from my gross pay (say, 5% instead of the current 3%). I would prefer to have the freedom of adding when I can rather than fixing the increase, if that makes sense?

jem16

bob_dob wrote: »

I want to increase my contributions but would prefer to make additional contributions from the/any spare income I have rather than fix my contributions from my gross pay (say, 5% instead of the current 3%). I would prefer to have the freedom of adding when I can rather than fixing the increase, if that makes sense?

So presumably you want to make one-off lump sum payments?

Have you asked your employer if you can do this and how it would be paid and how tax relief is handled?

bob_dob

jem16 wrote: »

So presumably you want to make one-off lump sum payments?

Have you asked your employer if you can do this and how it would be paid and how tax relief is handled?

Hi,
I went straight to my pension provider, Scottish Life, and they said that I can make one-off contributions but I must admit, I didn't ask them about the tax relief. Obviously I will now. Thank you.

I think my confusion comes from the fact that my contributions obviously come from my gross pay but I still see that tax relief is added on my pension statement? (Sorry for the naivity, I am trying to learn)