Still working and receiving gov pension advice

eric4395

I am 66 and still working and  I maybe will continue for another 12/18 months. I have started to receive my gov pension of approx £800   a month.  I am in the 40% tax bracket  so this is going to be taxed accordingly as well. Is there a way I can get some of this tax back by  paying into a  personel/private pension scheme ( ie pay say £800  a month into it until i retire) and how would I go about doing this. Also if I could, would I personally have to inform HMRC that I am paying additional contributions into a pension scheme. I am still in my works pension scheme but not even sure if I could put additional contributions into that. Appreciate any advice as I am definitely not clued up as to the best approach.

p00hsticks

Is there any reason why you chose to take your state Pension as soon as you could rather than defer it ?

Dazed_and_C0nfused

eric4395 said:

I am 66 and still working and  I maybe will continue for another 12/18 months. I have started to receive my gov pension of approx £800   a month.  I am in the 40% tax bracket  so this is going to be taxed accordingly as well. Is there a way I can get some of this tax back by  paying into a  personel/private pension scheme ( ie pay say £800  a month into it until i retire) and how would I go about doing this. Also if I could, would I personally have to inform HMRC that I am paying additional contributions into a pension scheme. I am still in my works pension scheme but not even sure if I could put additional contributions into that. Appreciate any advice as I am definitely not clued up as to the best approach.

You can effectively get some of the tax back but not all of it.

If you have £800 State Pension a month and tax at 40% is due you are left with £480 after tax.

If you pay that £480 into a SIPP the pension company will add £120 tax relief giving you a pension fund of £600.

Advise HMRC of your SIPP contributions and they will increase your basic rate band by £600.  Potentially saving you £120 in your personal income tax liability (£600 x 20% instead of £600 x 40%).

So you started with £800 and now have £720 (£600 in the SIPP and £120 less tax to pay).

All of the above assumes you are still eligibe to contribute that much into a SIPP and will pay sufficient higher rate tax overall to benefit fully from the increased basic rate band.

Marcon

Even though you've started to draw your state pension, you could temporarily cease receiving state pension payments (known as 'deferring it'). Info here about whether that might be worth considering: https://www.which.co.uk/money/pensions-and-retirement/state-pension/deferring-your-state-pension-ahr9w8p0f87w

eric4395

Looking at the figures regarding defering my gov pension, i am under the impression it takes over 15  years before you would actually make up what you lost in that first year. However i admit i am not taking into account what i am currently losing in tax ie £800 is actually only £480. So bearing in mind if i did actually work on for another 12 months i am paying £320 in tax a month x12. As you say above i can get some of it back paying into a sipp but is it actually worth defering my pension for what i would save at the end of the day?

NottinghamKnight

eric4395 said:

Looking at the figures regarding defering my gov pension, i am under the impression it takes over 15  years before you would actually make up what you lost in that first year. However i admit i am not taking into account what i am currently losing in tax ie £800 is actually only £480. So bearing in mind if i did actually work on for another 12 months i am paying £320 in tax a month x12. As you say above i can get some of it back paying into a sipp but is it actually worth defering my pension for what i would save at the end of the day?

Only you can decide. One viewpoint is that deferring offers you around double the return of buying an annuity in the open market so would appear favourable but if you have a need for the money now then it's not so good.