Pension Contribution

berbatov10

I retire in october this year. I earnt around £45K 2018/2109 with other income from property rental of £15K. Up to I retire I have been and will be paying into my Local Govt, FS pension Scheme.


Am I correct in thinking I can pay £45K into a pension scheme from the tax year 2108/2019? Would this be subject to 40% tax releief?



I am 57 just short of 58 when I retire and am thinking of putting the sum, if allowed a VLS 60/40



Thoughts and advice are more than welcomed

atush

No.

You only get 40% relief on contributions over the HRT limit. The 15K rental is unearned income.

You can however, get BR relief on more of your income up to 40K or more if you have unused allowances from previous years. But only up to your total earned income.

Dox

See https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/pensions-and-tax/carry-forward

which covers both parts of your question.

berbatov10

Thanks guys and in relation to it being a good investment for my age etc?

Linton

Err we are now in the 2019-2020 tax year. You cannot backdate pension contributions. Your contribution in the 2019/2020 tax year is limited by your earned income in that year. Note that the £40K limit includes a calculated amount to cover your DB pension. I suspect you may not know what that is for the 2019/2020 tax year until next tax year.

berbatov10

Linton wrote: »

Err we are now in the 2019-2020 tax year. You cannot backdate pension contributions. Your contribution in the 2019/2020 tax year is limited by your earned income in that year. Note that the £40K limit includes a calculated amount to cover your DB pension. I suspect you may not know what that is for the 2019/2020 tax year until next tax year.

Linton thanks for your input I retire about half way through the tax year (October) I take it that if I just draw my pension between October and April 2020 it will be based around my earnings up until October

Linton

berbatov10 wrote: »

Linton thanks for your input I retire about half way through the tax year (October) I take it that if I just draw my pension between October and April 2020 it will be based around my earnings up until October

Correct, your earnings from April to October. The £40K limit will include a calculated something to cover your and your employers DB pension contributions up to October. Your actual DB pension contributions will be counted against the earned income limit.

swindiff

You can backdate (or carry forward) pension contributions.

https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/pensions-and-tax/carry-forward

Linton

swindiff wrote: »

You can backdate (or carry forward) pension contributions.

https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/pensions-and-tax/carry-forward

No. You can carry forward any of the £40K pension allowance you havent used. But the pension contribution remains allocated to the year in which you pay it. You cannot carry forward the earnings limit which is what I guess will be the limiting factor in the OPs case where he is retiring in October.

swindiff

To use carry forward, you must make the maximum allowable contribution in the current tax year (£40,000 in 2019/20) and can then use unused annual allowances from the three previous tax years, starting with the tax year three years ago.

Does this not mean you can make a contribution which exceeds £40k in a single year?

Linton

swindiff wrote: »

To use carry forward, you must make the maximum allowable contribution in the current tax year (£40,000 in 2019/20) and can then use unused annual allowances from the three previous tax years, starting with the tax year three years ago.

Does this not mean you can make a contribution which exceeds £40k in a single year?

Under those circumstances you can make a contribution of more than £40K as long as it is covered by your gross earnings in that year. There are two separate limits and you are constrained by the lower of the two.