Tax questions on making contributions to pensions

tuppleextra

I'm currently looking at making contributions to a pension as I've maxed out my ISA allowance and have some questions around what's the best route to do so.

My company has a workplace pension that I contribute by salary sacrifice. I'm in the 40% tax bracket and I'm 38yo.

Can I make contributions to my workplace pension and still get the tax rebate/contributions from the government, or do I need to open a SIPP and contribute there?

Thanks in advance!

Dazed_and_C0nfused

Really a question for your employer or their pension provider to start with.

Salary sacrifice is generally seen as the most tax efficient method as although it is actually an employer pension contribution and therefore there is no pension tax relief due.

You save tax and NIC from not having the salary to pay tax/NIC on in the first place.

If you contribute to a SIPP there is a 25% uplift i.e. you contribute £1,000 and the pension company adds £250 giving a gross contribution of £1,250 and if any higher rate tax relief is due you sort that with HMRC.  Any personal income tax saving comes back to you, it doesn't go in the SIPP.

Brynsam

Why would you make personal contributions to your workplace scheme - can you not simply increase your level of salary sacrifice? That way you get the full 40% tax relief immediately (by virtue of your salary being lower) and also see a 2% NI saving.

If your employer won't let you increase the amount you sacrifice, then yes, you can pay personal contributions and you'd get basic rate added to your workplace pension (assuming it is a defined contribution scheme and your contributions would come out of your post-tax salary) and you could claim higher rate relief via your tax return/direct from HMRC. 

Albermarle

Just increase your salary sacrifice contributions if possible.
Also make sure you are up to speed as to how your money is invested within the pension .

dunstonh

Can I make contributions to my workplace pension and still get the tax rebate/contributions from the government, or do I need to open a SIPP and contribute there?

Most employers allow additional contributions to be made via the payslip.  Although there may be limits depending on the amounts.  If not, then you just open an individual stakeholder personal pension, master trust scheme or SIPP instead.

tuppleextra

Thanks everyone! To reply back to Brynsam:

Brynsam said:

Why would you make personal contributions to your workplace scheme - can you not simply increase your level of salary sacrifice? That way you get the full 40% tax relief immediately (by virtue of your salary being lower) and also see a 2% NI saving.

I currently have a lump sum in my account now and also get RSUs as part of my compensation and therefore looking for how I could invest it. Pensions seemed to be the best place long term.

I didn't think about increasing my pension sacrifice, that makes a lot of sense and will adjust it.

btcp

I add lump sum to my workplace pension time to time, when I have a bigger bonus or RSU. The pension provider automatically adds basic tax relief but I have to claim higher tax relief through self assessment. I increased my salary sacrifice contribution but sometimes there are instances when I just ended up with extra cash, for example no holiday abroad this year. 

You may want to check with your pension provider if they allow personal contribution. Mine allows it, but I know not all of them do. 

Albermarle

btcp said:

I add lump sum to my workplace pension time to time, when I have a bigger bonus or RSU. The pension provider automatically adds basic tax relief but I have to claim higher tax relief through self assessment. I increased my salary sacrifice contribution but sometimes there are instances when I just ended up with extra cash, for example no holiday abroad this year. 

You may want to check with your pension provider if they allow personal contribution. Mine allows it, but I know not all of them do. 

Also it is possible ( I think ) that if your regular contributions are via salary sacrifice , then a personal one off lump sum may also be treated as a salsac payment and no tax relief added, I guess it depends on the provider admin/IT and probably worth a check with them first, just in case. 

btcp

Albermarle said:

btcp said:

I add lump sum to my workplace pension time to time, when I have a bigger bonus or RSU. The pension provider automatically adds basic tax relief but I have to claim higher tax relief through self assessment. I increased my salary sacrifice contribution but sometimes there are instances when I just ended up with extra cash, for example no holiday abroad this year. 

You may want to check with your pension provider if they allow personal contribution. Mine allows it, but I know not all of them do. 

Also it is possible ( I think ) that if your regular contributions are via salary sacrifice , then a personal one off lump sum may also be treated as a salsac payment and no tax relief added, I guess it depends on the provider admin/IT and probably worth a check with them first, just in case. 

Could be with other providers, mine is Scottish Widows and they add basic tax relief. My friend has Aegon and not salary sacrifice, there is no option for additional personal contribution there.