Is Paying £2,880 Into A Pension Moral For The Better Off

Albermarle

In terms of the admin involved, its once bank transfer to the pension company, and one line in the tax return. that's worth £720 of most people's money. 

I think quite a lot of people put the money in than take it out again. In which case you have to fill a form(s) in and have a conversation with the provider and go through all the warnings . Then you have to be careful that you do it in a way so you don't get hit with exit fees , extra drawdown charges etc. Plus of you do pay tax on it the benefit is only £15 a month.

So worthwhile for some people but for others maybe better precious time used in more productive ways .

zagfles

drumtochty said:

There are a number of posters on this forum retired or getting there who either themselves or their partners will have retirement incomes just below £10,000, That person pays £2,880 a year into a Sipp to get the £720 tax relief. If one of the partners has no earned income. They can both do that .

Let's say for this discussion that one partner in retirement will have a combined state and occupational pension income over £30,000 a year.

Is it reasonable for the that couple to take that tax relief for the lower earner in retirement when in a lot of cases the tax has been paid by breadwinners in a family who are bringing up kids on a salary less that the retirees partner?

Just a thought for the day!

Yes. If one partner isn't using up their PA and the other partner is way over it, they are being screwed by our system of independant taxation/non-independant benefits - which says a low earner can't claim benefits because of their partner's income but also can't use their PA against that same income which the govt expects to support them. Most civilised countries aren't so hypocritical, they assess couples for benefits and tax in the same way.

Also compared to other OECD countries we have far lower pensioner benefits and far higher working age family benefits.  

Mr_Countdown

Andrew31 said:

Mr_Countdown said:

Hi. Is anyone able to tell me a) what is the maximum pension I could take per year and b) the most I could earn gross/net per year and still be able to pay £2880 into a Sipp to get £720 tax free?
I’m just a few years from 55 and am considering reducing hours to around minimum wage at 55 or even retiring if I can afford it hence why I ask if anyone can help with these figures so I can plan a bit. 
Many thanks. 

Your question doesn't make any sense.  Reducing hours to minimum wage?   
You dont get £720 tax free, contribution tax relief is added.   
Under age 75 you can pay in £3600 no matter what you earn as long as you dont see it as morally unscrupulous. 

Sorry if it doesn’t make sense - I’ll try and rephrase things. 
I plan on dropping my hours at work to about 18 per week which will take my earnings per month to about £1,000. Obviously not minimum wage so apologies for the confusion. What it will mean is I will be earning a net yearly income of £12,000. If I did this would I still be able to get £720 tax free with’contribution tax relief’ added or would I be over the tax threshold?
Hopefully that makes more sense. 

Crabby

If you draw down the whole £3600, £900 is actually tax free, and £2700 is classed as income. So to avoid paying any tax, you would have to have an income of £2700 less than your tax code.

Mnd

Mr countdown, if you are earning 12000 a year you can actually pay in 9600 (I think) and get 25% tax relief added to bring you up to your earnings.
You have to reduce this if you have a works pension
If you have taken any taxable money from a pension (DC) in the past you are limited to £4k gross
The 2880 is open to anybody under 75 even if they have zero earnings
Hope this helps 

xylophone

I’m just a few years from 55 and am considering reducing hours to around minimum wage at 55 or even retiring if I can afford it 

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm044100

Even with no earnings at all, you may contribute £2880 to a personal pension and receive tax relief of £720.

Are you currently contributing to a workplace pension?  If so, what kind?

jacksmith93

If someone earns £10k they could contribute £10k to a pot and will get a tax reclaim within their pension on the whole amount not just £2880. The £2880 relates to someone either not working at all or earning less that £3,600. 

Mr_Countdown

Thanks for thanks for all the kind replies. I’ve probably not made myself clear and for that I’m sorry. 
Xylophone I do pay into a public sector workplace pension which I plan to take when I retire at about 57. This will be worth about £9000 pa with a TFLS of about £60k. I’m also paying into an AVC through work with L & G which at 57 will be worth about £35k. 
My plan was to cut my hours at 55 for medical reasons and make up the loss of earnings for a couple of years by using some of my AVC money. 
So my £2880 SIPP query was could I still do this and get the £720 tax free if I was firstly earning about £12000 a year and if at 57 I retire and take my pension of about £9000 pa?

fred246

We have been paying £3600 into a pension for my housewife wife for years. Do we withdraw it to avoid income tax or leave it there to potentially avoid inheritance tax?

xylophone

Is the idea that you will reduce your hours at 55, continue to contribute to the main CS  DB pension but take benefits from the AVC?
You will still be able to contribute to a SIPP from your salary. See https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/pension-contributions-qa/
under 
 My client is an active member of his employer’s defined benefit pension scheme. He also wants to make a personal pension contribution. How do I calculate the maximum personal contribution allowed for tax relief?
When you give up paid employment and have only pension income, while under 75, you can still contribute up to £2880 to a SIPP and tax relief of up to £720 will be claimed by the provider.