Annual Allowance £40,000

georgehere

ratechaser:

work out how much NI you have contributed and consider the picture as a whole before you start feeling too guilty

JoeCrystal

Mick70 said:

Thrugelmir said:

£40k pa limit is sufficient to provide people with an adequate pension provision. 

if they were paying that in from an early age i would agree , but realistically the vast majority are only ever in the position to do this in the later stages of their careers .  I agree about possibly putting an end to the extra tax relief higher earners can claim through their annual tax returns , but not to reduce the annual amount you can pay in (including the govt top up), should be encouraging pensions not discouraging them

The vast majority of the people will never be in a position to contribute £40k per year into the pension scheme and besides, considering this. The median pension wealth for the adult population with pension provision in 2018 is £60,700 with the DC pension fund much lower than that. Even a few years of £40k contribution pa is more than sufficient to give people with reasonable pension provision.

Albermarle

The vast majority of the people will never be in a position to contribute £40k per year into the pension scheme

I think something like 30% have no pension provision at all , although this is an older figure and it will have come down with the roll out of auto enrolment . Although most auto enrollers are not high earners and probably typically less than £2K a year going in.

So worrying about the £40K pa limit is strictly a luxury problem for the Top ten per cent  and even than only usually in their later years.

Thrugelmir

Mick70 said:

Thrugelmir said:

£40k pa limit is sufficient to provide people with an adequate pension provision. 

if they were paying that in from an early age i would agree , but realistically the vast majority are only ever in the position to do this in the later stages of their careers .  I agree about possibly putting an end to the extra tax relief higher earners can claim through their annual tax returns , but not to reduce the annual amount you can pay in (including the govt top up), should be encouraging pensions not discouraging them

Given the amount the Government is borrowing to prop up the economy at the current time. £45 billion in April alone. The matter will be off the political agenda for a very long time. One consequence of this crisis hopefully will be a return to a more equitable and fair society. Rather than factions arguing for the benefit of a few on a specific issue. We are all going to pay the cost. 

ratechaser

georgehere said:

ratechaser:

work out how much NI you have contributed and consider the picture as a whole before you start feeling too guilty

Oh certainly, and I vaguely recall the howls of rage when the uncapped 1% (and subsequently 2%) NI charge first came in - because we all know it's just income tax by another name. 

But there's 2 sides to this... 

Firstly in relative terms, I have paid a pretty hefty chunk compared to others that will end up getting the same pension and NHS provision - and as I also have private healthcare (the cost of which is paid for by my employer but which I am taxed on as a benefit in kind), I'm actually  using the NHS less than many others. So I could feel aggrieved for paying more than my 'fair' share.

However, secondly... in absolute terms, if my 30 years of NI cons, which started off sub-£100 a year, and only got really big about 10 years ago, were used to fund a D.C. pension, I doubt they would get me an annuity nearly as big as what my state pension will ultimately provide for. And yes I know I will keep on paying NI, although hopefully for not many more years! 

So I can't grumble all that much...

bargainhunter888

Hi All
Can I just clarify the £40k allowance, as it covers both mine & employers contributions, which is 10% of my salary a year, am i right in thinking i'd have have to earn £400k P/A to worry about this allowance?
reading a lot of posts worrying about this limit, are people on this forum seriously high earners or that they & their employers are very generous with their contributions? even if it was 25% total contribution, someone would have to earn £160k a year!
also where does the £3,600 limit come from? confused by this

Thanks 

LobsterMemory

You can make extra contributions to a pension, you're not restricted to what's taken out of your pay packet though can usually pay in up to your salary (simplifying here). Also the £40k includes the tax relief (max £8k).

 £3600 is the amount you can pay into a pension if you earn £3600 a year or less (doesn't include tax relief) or have taken money out of the pension (excluding the tax free lump sum)

bargainhunter888

LobsterMemory said:

You can make extra contributions to a pension, you're not restricted to what's taken out of your pay packet though can usually pay in up to your salary (simplifying here). Also the £40k includes the tax relief (max £8k).

 £3600 is the amount you can pay into a pension if you earn £3600 a year or less (doesn't include tax relief) or have taken money out of the pension (excluding the tax free lump sum)

wouldnt £40k be £10k Tax relief? so £50k actually put into the pension?ends up in your pension? either way, its only going to be high salary earners that can put in £40k in a year!

LobsterMemory

No, it's £32k + £8I

Yes, it's mainly going to be for high earners but could also be transfer from other savings or windfalls like sale of a house, inheritance or lottery win etc

Albermarle

I think quite a lot of people making this level of pension contribution are typically in their 50's and higher rate taxpayers . They can see retirement in the distance and probably start thinking/learning more about financial issues in more detail. Also by this age many expenses have passed for the lucky ones ( no mortgage, kids grown up etc ) So they increase monthly contributions and use savings for lump sum top ups , to maximise the higher rate tax relief in their final years of working. That is roughly what I have done anyway . It does not quite come to £40K though and was a lot less when I was younger.