Question?

cheghead

I understand that it is possible to pay a lump sum into a stakeholder personal DC pension up to your annual salary amount.

Question is what would happen if you did do this and:
1. say you had a job and paid it at the beginning of year and then lost your job? or
2. started a new job and paid it in then but decided the job was not suitable and left?

TH1878

cheghead wrote: »

I understand that it is possible to pay a lump sum into a stakeholder personal DC pension up to your annual salary amount.

Question is what would happen if you did do this and:
1. say you had a job and paid it at the beginning of year and then lost your job? or
2. started a new job and paid it in then but decided the job was not suitable and left?

You wouldn't receive tax relief on the amount of contribution above your annual earnings.

In practice, probably best waiting until the end of the tax year.

cheghead

So say your salary was £12k pa and you put in a £6k lump sum you would receive an additional 25% (tax relief ) on the £6k making £7.5k into the pension. So back to original questions would you then have the tax relief taken back if you lost your job in the same tax year?

dunstonh

So say your salary was £12k pa and you put in a £6k lump sum you would receive an additional 25% (tax relief ) on the £6k making £7.5k into the pension.

Generally, pension contributions are considered gross first and you pay the net amount. So, you dont get 25% tax relief. you get 20% tax relief. i.e. you pay £7500 into the pension of which £1500 is tax relief and £6000 is the net contribution.

So back to original questions would you then have the tax relief taken back if you lost your job in the same tax year?

If your earnings were not sufficient to cover the contribution then you would have to contact HMRC to let them know. They will find out and take a couple of years to tell you (its all recorded under your NI number). If you failed to tell them then they could add a penalty charge and interest.