Re: NI contributions if buy added pension

penwise

I'm on a final salary scheme.

I am thinking about paying most if not all of my salary each month to buy added pension (as my current pension amount is not great and needs topped up.)

What affect will this have on my NI contributions?

I do not have enough years to get the new full state pension at 67 and really need to keep paying into this.

Also when buying added pension is the figure you give them to take to be the gross figure or net .

Thanks

jem16

penwise wrote: »

I'm on a final salary scheme.

I am thinking about paying most if not all of my salary each month to buy added pension (as my current pension amount is not great and needs topped up.)

What affect will this have on my NI contributions?

None at all unless you are using a salary sacrifice scheme.

I do not have enough years to get the new full state pension at 67 and really need to keep paying into this.

How many years do you have and how many are contracted out?

Also when buying added pension is the figure you give them to take to be the gross figure or net .

Thanks

It would be the gross amount.

penwise

Thanks for that

I do not have salary sacrifice.

So for example for simplicity say Gross pay @1500 and net pay @1000
What is maximum I pay into pension (and NI still ok)
Thanks

penwise

Hi
I have @29 years and most of them are contracted out.

jem16

penwise wrote: »

Thanks for that

I do not have salary sacrifice.

So for example for simplicity say Gross pay @1500 and net pay @1000
What is maximum I pay into pension (and NI still ok)
Thanks

You could pay £1500 but if you pay from gross pay, which is more than likely, you won't get tax relief on all of it unfortunately.

penwise

Thanks

Yes I think it would be gross .

If I paid 1500 I would not be paying any NI contributions - as there would be no money left in my pay after the pension is taken out?

I need to pay NI for my state pension.

Is the reason I would not get full tax relief if I paid in all my salary due to the fact I am paying from gross and I have a tax free allowance so @10000 and that 10000 did not get taxed from my pay.?
Thanks

penwise

Could anyone give me a simple calculated example of this
Thanks

Dunnit

oops wrong calc and going out so no time to fix!

DELETE THIS.

AlanP_2

You can't avoid paying NI so you can't pay in so much that there is ZERO left for you employer to pass to HMRC as NI payment.

You can only get Tax Relief on the income you have earned, it can't become negative as such.

Look at your payslips and see hat is taken off for NI and any other deductions that will still take place (Sports & Social Club or anything like that).

The remainder COULD be paid into your pension but it will only attract Tax Relief on that part over and above your Tax Allowance i.e. the bit you pay 20% tax on.

So taking your 1500 pm Gross that will be have NI deducted at about 10% so £150.

Residual Amount = £1350 p/m = £16,200 per year.

Basic Tax Allowance (check you coding on payslip and add a zero to end of number e.g. 500L or 500T would be £5,000 allowance) is £10,000 I think.

So you pay tax on £16,200 - £10,000 normally. If you paid £4,200 into your pension you would pay £0 tax saving £840 per year.

Paying the whole £16,200 in would also only save you £840 in tax for this tax year.

You would be adding to your pension but not in a position where you can gain the full tax relief.


NOTE - Figures above may not be exact but should show you the calculation method to work through.

Try it on your latest payslip, put the figures up on here and someone can check that they are correct for you.


Remember you need to live now though and you can't get pension contributions back from a DB scheme until you retire so your current situation re savings and the like needs to be considered.

jem16

penwise wrote: »

If I paid 1500 I would not be paying any NI contributions - as there would be no money left in my pay after the pension is taken out?

NI is always calculated on the gross amount, not the taxable amount. So your NI will not change just because you are making pension contributions.

The only time you pay less is when you use salary sacrifice and you said you don't have that.

penwise

Thanks for that example it really helped.

The only tax code I can see is br/cumulative.

I think I can assume the normal tax allowance of 10000.
So -
With gross about 1545 and NI about 105 this works out at about 1456 tax paid on 7282 (gross). So mthly I can pay @600 in and get the full tax
Relief.

If I had been for example paying into a private pension not through my salary could I have got tax relief on more than this.?

I thought I had read that you automatically got 20% tax relief in private pensions even though you may not have paid tax on some of it e.g. Your tax allowance.

Thanks