Near retirement age

BellaJess

I'm 60. Work part time, income under £5k p.a. 

I have a private pension putting £50pm in to it.  Only started 6 yrs ago. I need to decide whether to make a £2k lump sum into it before the end of tax year or just keep it in a savings account with 1.4% interest rate. 
i only have about £9000 pension value which will not give me much of an annual income. Is it worth adding money to the pension. I'm not sure what to do!! Any help appreciated thank you

Linton

You can pay £2K into your private pension and HMRC will add the basic rate tax relief even if you hadnt paid any tax, making it £2500.  If you are not a taxpayer when you withdraw the money you are £500 up.  Rather better than 1.4% interest.

What about your State Pension - have you got a State Pension Forecast? If you do not have a full State Pension, paying voluntary contributions is a much better way of using your spare money.

xylophone

I'm 60.

State Pension forecast  - you expect to draw it at age 66?

https://www.gov.uk/check-state-pension

What exactly does it say?

If your only  income is your salary of £5000 a year, you can pay up to  a total of £4000 (net) into your personal pension and receive tax relief of up to £1000, even though you have paid no tax in the first place.

At the moment, you are contributing £600 a year?

jamesd

Why not take a "small pot rule" payment of all £9,000 from your pension now and pay gross your whole income into the pension each year? After two years do small pot rule again and in two more years the final small pot rule one.

Small pot rule is because your contributions are capped to £4,000 gross a year if you take out taxable money in other ways and you're earning more than that.

This makes you much more free money from the tax relief than what you're considering. If your gross was £5,000 the tax gain would be £1,000 a year. Pay in £4,000 net and have £5,000 to take out free of tax as long as you stay within your £12,500 income tax personal allowance.