Can I pay into pension after retirement

Malchester

Hi. This may be a simple question but I am not sure of the answer. I have retired early and for the gap between now and state pension age I have a local authority DB pension paying full benefits as well as a small DC pension from another employer which I intend to run down towards state pension age. I top this DC pension up each year with the allowed £2880 which is added to by HMRC to take the total to £3600. I do not pay tax at the moment.

When I reach state pension age I have another DB pension which kicks in alongside the existing one along with a full state pension. My question is, when I reach state pension age I will start paying basic rate tax again, will have no 'earned' income, so could I still contribute £2880 to a pension and have the tax claimed back from HMRC (or would it be another figure or none).

I am NOT asking whether this is a good or bad; right or wrong thing to do, just whether it is possible and once I know that I will consider the sense or otherwise of doing it.

Many thanks in anticipation for any comments or thoughts

AlanP_2

Yes, a non-earner can contribute £2880 gross / £3600 net until Age 75.

jamesd

Pension income including the state pension is taxable income so it's likely that your taxable income will go over your personal allowance and some basic rate tax will be due. HMRC will normally use a tax code sent to one of the work pensions to collect this.

You can pay in 2880 net, 3600 gross now and if you withdraw it within your personal allowance no income tax is due. That requires 2700 (3/4 of 3600) to be fully tax free and get you the maximum £720 gain. If the taxable part was all taxed at basic rate the gain would be £180. Else, somewhere between those two numbers. A newborn baby to a person just before their 75th birthday can do the paying in part of this.

xylophone

A newborn baby to a person just before their 75th birthday can do the paying in part of this.

That's one advanced baby.....

jamesd

Premature babies allowed too. But adults will probably have to help in some ways.

Babies can also draw money from pensions, notably beneficiary or successor types, also with adult trustee help. No age 55 restriction with those.

Malchester

jamesd said:

Pension income including the state pension is taxable income so it's likely that your taxable income will go over your personal allowance and some basic rate tax will be due. HMRC will normally use a tax code sent to one of the work pensions to collect this.

You can pay in 2880 net, 3600 gross now and if you withdraw it within your personal allowance no income tax is due. That requires 2700 (3/4 of 3600) to be fully tax free and get you the maximum £720 gain. If the taxable part was all taxed at basic rate the gain would be £180. Else, somewhere between those two numbers. A newborn baby to a person just before their 75th birthday can do the paying in part of this.

Thanks for this but if you had read my initial post correctly you would see that i know this and made that clear. I asked one simple question as am aware of what you said in your answer

xylophone

Thanks for this but if you had read my initial post correctly you would see that i know this and made that clear. I asked one simple question as am aware of what you said in your answer

James did answer your question (if what you actually meant was as below).


Your question:-

 My question is, when I reach state pension age I will start paying basic rate tax again, will have no 'earned' income, so could I still contribute £2880 to a pension and have the tax claimed back from HMRC (or would it be another figure or none).

I assume that what you meant was

When I reach SPA  and draw my state pension and another DB pension (and start paying basic rate tax again), if I continue to contribute  the non earner's maximum permitted £2880 (net) to my DC pension, will there be any tax that I can reclaim from HMRC?

Now re- read James's answer.

You can pay in 2880 net, 3600 gross now and if you withdraw it within your personal allowance no income tax is due. That requires 2700 (3/4 of 3600) to be fully tax free and get you the maximum £720 gain. If the taxable part was all taxed at basic rate the gain would be £180. Else, somewhere between those two numbers. 

MoneyGeoff

As above, if you have to pay tax on the withdrawal the the gain is only £180 plus you have to pay annual fees for the sipp, fund fees and then more fees when you come to drawdown. If it was with HL I think the fees would outweigh the gain, not certain about that though.

If you aren’t using your ISA allowance then it might be simpler, cheaper and more flexible to pay into your ISA instead. If you can pay into an existing pension such that fees don’t increase or are low then that might make the pension option better.

Albermarle

If it was with HL I think the fees would outweigh the gain, not certain about that though.

It would depend on the fund you invested in . Lets say it was a relatively expensive on at 1 % and then plus HL fee of 0.45% .

Over 12 months it would cost approx £50 pa or maybe £50 over two years if you invested in a cheaper fund..

So there would still be financial gain to be had .

However although this is tantamount to heresy on the MSE forums , you could also think would it really be worth it , for say £150 pa maximum .

You would have to contact HL every time you wanted to withdraw, presumably have to go through all the warnings as well.

Then a good chance the tax would be wrong and you would have to contact HRMC and claim it back .

JGB1955

I just left my money in HL as cash, and then took it out again with the tax uplift but no charges.  £2880 in (x 3), £10,800 out. £2160 in my pocket... thanks!  

MoneyGeoff

Yes, if the OP is over 55 then definitely seems worth it.