Paying into SPP while not working

honest_john

Hi
I have recently left work and have no immediate plans to start another full time job, maybe some part time pocket money work in the future. I am hoping to transfer some of my savings into my stakeholder pension plan i had with my last employer but i'm not clear how much i can put in as a personal contribution and do i get any tax relief if i'm not earning up to the tax threshold.
After just speaking to the pension provider they said it would be £2880 net minus any contributions already paid in this tax year, but reading on here i've seen a maximum figure of £40000/yr.
I am 52 so not worried about locking money away until 55 at least and have other savings to live off, i'm just looking to use the pension as an investment as it has outperformed my other savings and investments over the last 6 yrs (i know past performance isn't a guarantee).
Appreciate if someone could explain my options in simple layman's terms please:beer:

Thanks in advance.

HappyHarry

You can contribute up to your earnings each year, with an upper limit of £40,000.

If your earnings are below £3,600, then you can contribute £3,600.

If your earnings are above £40,000, you can contribute up to your earnings by using unused allowances from the previous three years.

Example
If you have earned £7,000 this tax year, and have contributed £300 to a pension already, then you can contribute a further £6,700. This would be a net contribution of £5,360 from yourself, with £1,340 claimed in tax relief by the provider.

AnotherJoe

What HH said.

honest_john

Thanks for the replies, just check I've got this right then.
Earnings this year £10450.04
Pension contributions £456.14 (assuming payment on 4 April is last tax year)
Possible max contribution £9993.90
Net contribution from me £7995.12 with £1998.78 claimed in tax relief by the provider.
Can i just pay this in one lump sum now?


If i am not earning going forward do i pay in £3600/yr or £2880/yr, do i still get the tax relief?


Thanks

HappyHarry

honest_john wrote: »

Thanks for the replies, just check I've got this right then.
Earnings this year £10450.04
Pension contributions £456.14 (assuming payment on 4 April is last tax year)
Possible max contribution £9993.90
Net contribution from me £7995.12 with £1998.78 claimed in tax relief by the provider.
Can i just pay this in one lump sum now?


If i am not earning going forward do i pay in £3600/yr or £2880/yr, do i still get the tax relief?


Thanks

Your calculations look right to me, providing your contribution of £456.14 is the gross figure.

In future years, you contribute £2880, and your pension provider claims the £720 tax relief.

honest_john

Your calculations look right to me, providing your contribution of £456.14 is the gross figure.

I guess so, this is the monthly amount paid by my employer into the plan, not the amount deducted from my wages.
Thanks again Harry

HappyHarry

If that's an employer contribution, it can be ignored from your calculations. In your situation it is only your contributions and any associated tax relief that needs to be taken into account. Any emoloyer contributions at that rate are allowable, and in addition to your income limit.

honest_john

HappyHarry wrote: »

If that's an employer contribution, it can be ignored from your calculations. In your situation it is only your contributions and any associated tax relief that needs to be taken into account. Any emoloyer contributions at that rate are allowable, and in addition to your income limit.

Your losing me a bit now, the £456.14 was the only amounts paid into the plan each month, it says on the statement "what your employer paid" and "these payments were made by or on behalf of your employer". I was deducted £152 each month from my salary for pension, i assumed the company then made it up to £456.14 and then paid it into the pension fund, or is that not how it works?


so would my maximum personal contribution then be £10450.04 (total salary)-£152.05 (MY contribution this tax yr) =£10297.99-20% =£8238.39
Sorry if i'm being a bit dim, thanks for your help so far:T

HappyHarry

It sounds like you were in a salary sacrifice scheme.

This is where your employer reduces your pay, and in return, makes a larger contribution to your pension. This is very tax efficient, and saves on National Insurance Contributions.

The good news for you is that this type of contribution is not counted as a personal contribution, rather, it only counts as an employer contribution

As far as your pension is concerned, this means that you have made no contributions this tax year, and have the full £10,450.04 that you can still contribute.

PensionSort

Sorry I am confused.

Does that mean for example if I had a salary of 30k and I salary sacrifice 15k (which is recorded as a deduction from my base pay on my payslip) which goes in to the pension as part of a gross payment made by employer) can I then still make a further 24k contribution ( ie 80%) into my pension or not?

HappyHarry

Probably best to start your own thread.

However, the answer to your question is: No.

If, in your example, the employer contribution was £10k, then yes, you could contribute £30k gross yourself.

However, the annual allowance of £40k would apply in your example.

So, if your employer contributed £15k, then you could only contribute another £25k.

** Edit ** As Dazed and confused points out below, if you have a salary of £30k and salary sacrifice £15k, you are only left with a remaining salary of £15k that you can contribute.