FInal Year Maximsing Tax Relief

Tiggy777

Hello all


I am hopefully in my final year of employment and would like to retire next year.


I am in the LGPS and have just taken out an inhouse AVC to make extra contributions. I was told I could pay approx £45K based on annual salary plus previuos years allowances. I have 8 months to go and will be short of this amount by gross £21k. I was discussing my case with a pension advisor would basically said that the fees to set up a pension for which I would pay approx £16k would cost to much in fees.


On that basis can I just buy one off the shelve in order I can maxmise my in year tax relief.


Hope that makes sense ?


Many thanks for any advice and time


Regards


Tiggy

bigadaj

Tiggy777 wrote: »

Hello all


I am hopefully in my final year of employment and would like to retire next year.


I am in the LGPS and have just taken out an inhouse AVC to make extra contributions. I was told I could pay approx £45K based on annual salary plus previuos years allowances. I have 8 months to go and will be short of this amount by gross £21k. I was discussing my case with a pension advisor would basically said that the fees to set up a pension for which I would pay approx £16k would cost to much in fees.


On that basis can I just buy one off the shelve in order I can maxmise my in year tax relief.


Hope that makes sense ?


Many thanks for any advice and time


Regards


Tiggy

You are limited in contributions into a pension on which you receive tax relief to your earnings for that year. So if your salary is £45k then you can't contribute any more than that in that tax year. If you earn £60k then you can contribute all of that assuming you have carry forward from previous years, ie contributions are less than the annual allowance for those years by at least the excess you want to contribute for this tax year.

Opening up a new pension costs you nothing, typical costs for simple personal pensions or sipps would run around 0,5% annually, so for your £16k example then the first year total cost could be around £80.

Does you in house avc allow you to take a lump sum that reduces that from your final salary pension?