can I take out a pension

nowreetired

I am 68 - retired drawing a state pension and a company pension.

I also still work a little at a good job which can net me £600 pm

I know that the pension rules have changed recently and wonder if it now worth putting my part time earnings (all of them) into a pension until I 'retire' from my part-time job.

My simplistic understanding is that I can take the whole of this pension as a lump sum and will get tax relief on the payments.

Is my naive assumption correct? Or is this too good to be true?

jem16

nowreetired wrote: »

My simplistic understanding is that I can take the whole of this pension as a lump sum and will get tax relief on the payments.

Is my naive assumption correct? Or is this too good to be true?

Your assumption is correct. You can pay 100% of your earnings into a pension and receive tax relief.

After April you will then be able to take 25% tax-free and the rest taxed as normal income.

xylophone

Does your current employer have a pension scheme?

If you open a personal pension, the provider should operate "relief at source" - if you earn £7200 a year, you contribute £5760 to the pension and the provider claims £1440 from HMRC.

https://www.hl.co.uk/partners/search/new-pension-rules-changes-2015?theSource=PCGSI&Override=1&adg=G+SIPPENI+BDG&gclid=COGM8sLDrcMCFczMtAodtDoAfA


http://www.hl.co.uk/pensions/sipp?theSource=PCHLS&Override=0&adg=G+HLBS+SIP&gclid=CK7joN7DrcMCFcvJtAodCQYA9A
might be worth a look.

atush

Plus, if your employer has a scheme, join it and take free money from them on top?

kidmugsy

jem16 wrote: »

Your assumption is correct. You can pay 100% of your earnings into a pension and receive tax relief.

After April you will then be able to take 25% tax-free and the rest taxed as normal income.

And, you may welcome the thought that if you don't withdraw all your money before you die, it can be passed to your beneficiaries on good terms if you are over 75, and on excellent terms if you die before 75.

kidmugsy

nowreetired wrote: »

I am 68 - retired drawing a state pension and a company pension.

I also still work a little at a good job which can net me £600 pm

Another possibility is to live off that £600 p.m. while deferring your state pension for a year or two. The latter gives you a reward of 10.4% extra pension for each year of deferral - which is a pretty good return, unless you have some objective reason to think you'll be short-lived.

nowreetired

kidmugsy wrote: »

Another possibility is to live off that £600 p.m. while deferring your state pension for a year or two. The latter gives you a reward of 10.4% extra pension for each year of deferral - which is a pretty good return, unless you have some objective reason to think you'll be short-lived.

too late for that I made the mistake of drawing it. Too complex to go into here I was earning much more in the part-time job, then, which took me into 40% band. Didn't know this at the time .....

atush

No, it isn't too late. You can defer once after taking your SP

McKneff

Im impressed by your confidence that you will live long enough to break even at least with this new pension.


If you put your 600 a month in for say 5 years. you would then be 73.


Have you worked out how much that would be that you have put in and how long you would have to live to get all this money back in pension form.


That's just me being simplistic

jem16

McKneff wrote: »

Have you worked out how much that would be that you have put in and how long you would have to live to get all this money back in pension form.

About a day possibly? Perhaps even less?

You are aware that from April 2015 you can cash in the whole amount of your pension pot?

jamesd

McKneff wrote: »

Have you worked out ... how long you would have to live to get all this money back in pension form.

Up to about seven weeks. It depends on how long the pension firm takes to accept a payment into the pension then pay it out as a lump sum if requested. HMRC pays firms the tax relief late in the month after the contribution so the exact time depends on whether the firm will wait for that before paying out.

Before 6 April 2015 the small pots rule can be used up to £10,000 in the pension, from 6 April the UFPLS or flexi-access drawdown allows access to the whole pot of any size as a lump sum.

For deferring the state pension the break even period ranges from about 9 years to about 12 years depending on income tax rate, the lower end within the personal allowance, the upper at basic rate. This is for those who reach state pension age before the flat rate comes in and who get the 10.4% a year deferral rate.

Deferring is good if you want to increase income. Just putting the money into a pension is good if you want to build up a lump sum either for later use or for inheritance. If you're in normal good health you'd do better on average by deferring then investing the higher income - you'd build up a bigger lump sum this way before you die. On average, of course.

Unless your don't have good health or need a lump sum quickly I suggest that you defer the state pension then either spend or invest the extra income when you take it. Odds favour up to three years being good for men, five for women. More can pay but there's an increasing chance of dying before getting ahead as you increase those times. Longer times can be good if you want to use this to create what is effectively long life income insurance, since this is inflation-linked for life. At 68 you're already into the over three years range since these numbers are based on starting at state pension age. Still a year or two is a good deal and well worth doing.