Tax and pensions

soontobemrsg

I'm a little confused and wouldn't mind a little clarity with regards to what would be the best way for me to maximise my benefits both now and in the future.

I'm employed part time earning £10500 p/a and currently pay 5% contributions to my pension pot. I'm in my early 30s but have very little in the pots to date due to leaving work to raise a family.

I'm a single parent so am currently entitled to some housing benefit and for their calculation they use what I pay into my pension.

I'm on tax code 1000L - If I pay more into the pension pot now - say increase to 8% - how will that effect me now?

Would it mean that I have less income for housing benefit purposes - and also less taxable income for tax purposes or am I completely misunderstanding it all?

I know the more I pay in now the better off I'll be in the future so plan to up to 8% for next pay run regardless but if it does mean that I am actually better off at the moment as well may increase my contributions further whilst the kids are still young and I have to remain working part time.

Any help or clarification would be great.

Thanks

zagfles

What kind of pension is it? If it's a normal workplace pension which deducts pension contributions before applying tax then you might not get any tax relief putting more in since you'd go below the allowance.

But if it's a stakeholder type where after-tax money is taken and the scheme claims the relief (like a personal pension) you will since the tax relief is reclaimed from HMRC and you can still get it even if you pay no tax!

Housing benefit allows a 50% deduction for pension contributions, tax credits 100%. So for HB purposes your wage is net wage before pension conts deducted minus half what you put into the pension. For tax credits it's gross wage minus all you put into the pension (gross, inc tax relief).

Under UC it'll be 100%.

soontobemrsg

Its deducted before tax