Telegraph pension: how to get a £11000 for £2250

dwhl

Dear all,

Re the link below from the Telegraph, does anyone know how this works?
http://www.telegraph.co.uk/finance/personalfinance/pensions/9087610/How-to-get-an-11000-pension-for-just-2250.html

I am grateful for any thoughts on this.

Linton

Its just the same as paying into a pension to get below the higher rate tax band, but at the £100K tax band instead. At this tax band there is a very high marginal tax rate as you start to lose your tax allowance. So all you need is an income of say £120K and then put £20K gross into a pension. Hardly economic rocket science.

peterg1965

This is almost my situation, i say almost as I am not yet 55 but will be in this position (income over £100K and putting money into a SIPP to get below the £100K threshold) when I hit my 55th birthday in 5 years time. That article was from 2012, its a case of seeing if the same taxation structure is in place in 2020!

Is the basis of the article that you put money into your PP/SIPP and immediately crystallise it to take the 25% TFLS? (UPFLs?) If you do that with the current rules does that not reduce your Annual Allowance to £10k?

Linton

peterg1965 wrote: »

This is almost my situation, i say almost as I am not yet 55 but will be in this position (income over £100K and putting money into a SIPP to get below the £100K threshold) when I hit my 55th birthday in 5 years time. That article was from 2012, its a case of seeing if the same taxation structure is in place in 2020!

Is the basis of the article that you put money into your PP/SIPP and immediately crystallise it to take the 25% TFLS? (UPFLs?) If you do that with the current rules does that not reduce your Annual Allowance to £10k?

I dont think the article is bothered about taking the money out - the title says a £11000 pension from £2250. However taking a 25% TFLS doesnt affect your Annual Allowance - see here. Its anything beyond that which kicks in the reduction.

dwhl

Thanks everyone for the replies.
sorry, i am very ignorant with pensions ....I think that I may fall into this category. I work within the NHS. How do I go about getting this pension?
thanks again

agarnett

You work within the NHS in the £100,000 + pa category ?

dwhl

Yes, that's correct.
Does the article relate to the state pension?
thanks

greenglide

You get paid n excess of £100,000 per annum yet seem to have difficulty grasping even simple pension concepts?

Really?

dwhl

yes, am fairly naive to pensions. have always been a saver but have no idea about the how to make pensions work. I do pay into my NHS pension on a monthly basis but have little idea about it aside from that it is supposed to be a good scheme
any help would be appreciated

arbster

greenglide wrote: »

You get paid n excess of £100,000 per annum yet seem to have difficulty grasping even simple pension concepts?

Really?

In fairness, "simple" pension concepts when combined with tax legislation are rarely really "simple" at all! The principle appears to be that if you earn over £100,000, you should ensure that your pension contributions bring your income down to below £100,000. So, if one earns £105,000 and make an AVC of 8% of salary this would make ones taxable income £96,600. Is this correct?