paying extra in to maximise tax free cash and tax relief

Josh1309Rugby

I have a private pension which I have paid in from been 18, I turn 55 in September, It is with Scot Widows in 2 parts £105k and £65k. total £170k value I
think mostly linked to the ftse 100, I do not recall choosing a fund ?, I am somewhat unhappy about the values as some of my mates have much better values for less monthly contributions, £250 pcm plus the tax relief.  I have money earning nothing in savings and wondered what is the best thing to do
ahead of my birthday and before this tax year ends. How far can I go back to pay in a lump sum, Will I be able to may my max in for tax year 21/22 in anticipation of my earnings,   How much can I pay in now do I just pay it in, where will my tax relief come from and will I be able to take my max 25% tax free out and pay back in ? 

Marcon

Josh1309Rugby said:

I have a private pension which I have paid in from been 18, I turn 55 in September, It is with Scot Widows in 2 parts £105k and £65k. total £170k value I
think mostly linked to the ftse 100, I do not recall choosing a fund ?, I am somewhat unhappy about the values as some of my mates have much better values for less monthly contributions, £250 pcm plus the tax relief.  

Have you looked at the funds your mates are in and checked which one(s) you are in? Quite possible that you didn't choose a fund, and were put into a default option which, as you've now found, doesn't necessarily give the best outcome. Never too late...

Reading your pension provider's literature might be a good start. That will explain about how much you can pay in, how tax relief is given, and why 'recycling' (taking tax free cash out and then paying it straight back in) may not work.

xylophone

What are your gross earnings for the year 20-21?

Is the £250 (net) a month the only pension contribution you are making?

Re recycling a Pension Commencement Lump Sum......
https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/pensions-and-tax/pension-lump-sum-recycling

Albermarle

think mostly linked to the ftse 100,

Unfortunately the FTSE 100 has underperformed most other global stock markets for many years now, and was hit by the Covid downturn more than most . At the same time the US market in particular has powered ahead. 

Normally it is better to have more globally diversified investments , with only a certain % in UK . This % is a matter of opinion but usually somewhere between 5% and 35% maximum .

dunstonh

think mostly linked to the ftse 100, I do not recall choosing a fund ?

That would not be a good choice and it is something you should find out.  The FTSE100 has been a dire performer for a long time.  The default fund for SW isn't linked to the FTSE100.

I am somewhat unhappy about the values as some of my mates have much better values for less monthly contributions, £250 pcm plus the tax relief.

Time and how you invest are the other variables.  Starting with a higher figure and paying less can give a higher value than starting with a lower value and paying more.    

Josh1309Rugby

yes £250 pcm is the only contributions I am making. My earnings are circa £40 k gross for 20/21.

xylophone

yes £250 pcm is the only contributions I am making. My earnings are circa £40 k gross for 20/21.

https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief

If your relevant earnings  will be £40,000 for 2020-21 then you may make a net contribution of up to £32,000 to your pension and the provider will add tax relief of up to £8000.

It would seem that so far this year you have  already made a net contribution of £2,500?

Josh1309Rugby

can I go back any years ? and pay in after April to my expected 40k salary.

Albermarle

Josh1309Rugby said:

can I go back any years ? and pay in after April to my expected 40k salary.

No, but you still have time to add more this tax year .