Help with Pension Tax

Rodert

Hello,

I'm trying to help my mum with her money but I'm a bit lost.

My mum gets her pension and has been left money by my dad after he died. She manages fine on her pension and wants to invest the money left to her. She's used her ISA allowance already and will do the same next year.

Can she invest money in a pension tax free and what's the best way to do this? What are the amounts she can invest and what tax would she pay if she takes it out of the pension?

Her income is about £25,000.

Thanks

zagfles

How old is she? Does she have earned income or just pension income? What is her earned income if any?

Dazed_and_C0nfused

If she doesn't have any earnings for pension purposes (wages, self employment) then she is limited to contributing £3,600 each tax year.

This would be £2,880 she pays to the pension company and £720 tax relief that automatically gets added.

If she then took that out of the pension she would be left with £3,060 after tax, so an easy 6.25% return.
£900 would be the TFLS

£2,700 would be taxed at basic rate leaving £2,160 after tax

£900 + £2,160 = £3,060

She can do that until she is 75.  And she could leave the money in the pension, she doesn't need to take it out.

Rodert

Hi, thanks very much for clearing that up. Very helpful answers.

Rodert

She's 67 and doesn't have any earned income, only pension.