Thoughts on current standings

Zola.

jamesd wrote: »

Yes, the 75% is taxable income when you take it out. You don't have to take it out when you take the tax free part, you can leave it until you actually retire.

Continuing with the £68 paid in, you'd be able to take out £25 as a tax free lump sum, leaving £75 in the pot. If taxed at 20% that'd be worth £60 net. So £68 in, at least £85 out.

But that's assuming it's all taxed. You may start to draw it before state pension age and be able to get your whole personal allowance out tax free. And you may defer your state pension for a while to increase that and continue to take more out tax free. We routinely suggest that people do these things and more, like VCT buying, to get rid of the tax on the way out.

Excellent, that's good to know, thanks.

As of this morning I have upped my pension to 12% combined.

I will up it again in a short while, aiming for 15% or more

jamesd

A trick worth knowing about salary sacrifice. If you're a higher rate tax payer it's best to sacrifice as much as possible, down to minimum wage, for a few months to do all of the sacrificing for the whole tax year. If your employer allows changes. Doesn't matter if it's basic rate.

The reason for this is the difference between NI being calculated for each individual pay period while income tax is an annual calculation. Doing the sacrifice in big chunks means that you get the basic rate range 12% employee NI saving instead of 2% higher rate range on more of the money that you're sacrificing.