Paying into a pension

funkyskunky

Hi There,

i would like to increase my payments into my pension.

Is it right that i can pay into a pension and this is offset from my tax paid from my gross salary rather than coming out of my salary?

so my salary stays the same?

Very new to this, so any advice would be grateful

AlanP_2

First of all - what type of pension are you talking about and how do current payments get in there?

If it is a workplace Defined Contribution (money pot) scheme, and your employer allows you to pay extra in it could come out of Gross Pay or out of Nett Pay.

The majority are Gross Pay so I will assume that for now.

Your GP won't decrease but your Nett Pay (take home) will reduce by 80% of what extra you pay in.

Say you want to put an extra £100 pm in. £80 will be provided by you so reducing your take home pay. £20 will be provided by the tax man, so you will pay £20 less tax (assuming you are a Basic rate taxpayer).

The full £100 will end up going into your pension.

If your situation is different, if you explain I am sure we can help more.

xylophone

You are a member of a workplace pension scheme?

Are you contributions made on a net pay or relief at source basis?

http://www.scottishwidows.co.uk/extranet/literature/doc/fp0491

aloiseb

I would like to ask the same question and from the useful Scottish Widows link, I've concluded that I am on a net pay scheme - so my pension contributions come from my gross salary.

I would like to pay more if this is more sensible than paying more into my SIPP?

MallyGirl

if you have the option of salary sacrifice with your employer then that is best as you save on NI as well as Tax, plus your employer will often match (or better) your contributions