We’d like to remind Forumites to please avoid political debate on the Forum.

This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.

📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!

Silly question on pension allowance

24

Comments

  • HappyHarry
    HappyHarry Posts: 1,848 Forumite
    Tenth Anniversary 1,000 Posts Name Dropper
    You don't need to inform the provider.

    They would not pay the excess direct to HMRC without confirming with you first. (If indeed, they would at all).
    I am an Independent Financial Adviser. Any comments I make here are intended for information / discussion only. Nothing I post here should be construed as advice. If you are looking for individual financial advice, please contact a local Independent Financial Adviser.
  • greenglide
    greenglide Posts: 3,301 Forumite
    Part of the Furniture Combo Breaker Hung up my suit!
    You don't need to inform the provider.
    But surely the excess money, even without tax relief, cannot remain in the pension otherwise when it is crystallised it will attract 25% PCLS to which it is not entitled? Having said that the other 75% would be subject to tax which it shouldn't be.

    Only the provider can sort this out, they must see this regularly.
  • zagfles
    zagfles Posts: 21,548 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Chutzpah Haggler
    samscash wrote: »
    I don't mind paying the extra. What I don't want to happen is the the provider pays back the tax and I then pay it over. Effectively twice , if you see what I mean
    You can ask the scheme to refund the excess payment. See https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm045000#Refundeclslta
  • zagfles
    zagfles Posts: 21,548 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Chutzpah Haggler
    greenglide wrote: »
    But surely the excess money, even without tax relief, cannot remain in the pension otherwise when it is crystallised it will attract 25% PCLS to which it is not entitled? Having said that the other 75% would be subject to tax which it shouldn't be.

    Only the provider can sort this out, they must see this regularly.
    You are entitled to contribution more that 100% of earnings/£3600 to a pension, you just aren't entitled to tax relief on excess contributions.

    So what about the 25% PCLS - if it's not had tax relief going in then it's like putting the money in an ISA. And the 75% will get taxed twice!
  • samscash
    samscash Posts: 26 Forumite
    So in effect I managed to quote stupidly lose out the benefit of tax relief and get taxed on the amount in my pension twice ! Great
  • zagfles
    zagfles Posts: 21,548 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Chutzpah Haggler
    samscash wrote: »
    So in effect I managed to quote stupidly lose out the benefit of tax relief and get taxed on the amount in my pension twice ! Great
    If you leave it in. But why do that when you can ask for it back - see post #14.
  • AnotherJoe
    AnotherJoe Posts: 19,622 Forumite
    10,000 Posts Fifth Anniversary Name Dropper Photogenic
    Just picking up on the "silly question" which wasn't silly at all, if the OP was in an employers scheme and the total put into the pension by the employer including employees contribution is £32k then wouldn't that include the tax allowances as thats been taken care of by adjusting tax code?

    So, if at the end of the year £32k has been contributed to the pension scheme, that is gross, and so there is still £8k left so the employee could still put in £8k gross?

    Or did I misunderstand? I'm thinking of most employers schemes, including my own, where the deduction is made before tax, so what i see going into my DC fund each month is what the gross amount is?
  • samscash
    samscash Posts: 26 Forumite
    I think I will ask for it back from the fund manager. It's so confusing when I was reading up about this I could not find any references that the £40k was gross of tax. Should have asked before I jumped, sigh
  • zagfles
    zagfles Posts: 21,548 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Chutzpah Haggler
    AnotherJoe wrote: »
    Just picking up on the "silly question" which wasn't silly at all, if the OP was in an employers scheme and the total put into the pension by the employer including employees contribution is £32k then wouldn't that include the tax allowances as thats been taken care of by adjusting tax code?

    So, if at the end of the year £32k has been contributed to the pension scheme, that is gross, and so there is still £8k left so the employee could still put in £8k gross?

    Or did I misunderstand? I'm thinking of most employers schemes, including my own, where the deduction is made before tax, so what i see going into my DC fund each month is what the gross amount is?
    Usually. But some employers have a group stakeholder type scheme where pension conts are taken from net pay like a personal pension.
  • zagfles
    zagfles Posts: 21,548 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Chutzpah Haggler
    samscash wrote: »
    I think I will ask for it back from the fund manager. It's so confusing when I was reading up about this I could not find any references that the £40k was gross of tax. Should have asked before I jumped, sigh
    I think you're getting confused. £40k is the annual allowance, I thought your problem was you contributed more than 100% of earnings?

    What exactly did you contribute to what type of pension? What were your earnings?
This discussion has been closed.
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 352.1K Banking & Borrowing
  • 253.5K Reduce Debt & Boost Income
  • 454.2K Spending & Discounts
  • 245.1K Work, Benefits & Business
  • 600.7K Mortgages, Homes & Bills
  • 177.5K Life & Family
  • 258.9K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16.1K Discuss & Feedback
  • 37.6K Read-Only Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.