Avoid Paying Tax On Income By Using Pension?

Joey122

I m trying to avoid paying too much tax so I ve decided that anything over 40K is going straight into my pension.

Has anyone else been thinking of this?

What concerns me is two things

1) In the next twenty years the goverment changes the rules and gets their grubby paws on the pension

2) If i build up a big pension pot then I will need to pay a lot of tax when I am 55.

Are these valid concerns?

Whilst the age for state pension has increased , is 55 still the age you can claim 25% of your personal pension pot?

Can anyone comment of whether if I did not have a private pension what I would be entitled to which I wont be entitled to if i have a pension. State pension is paid out regardless but pension credits? Anything else?

Thanks all

jem16

Joey122 wrote: »

I m trying to avoid paying too much tax so I ve decided that anything over 40K is going straight into my pension.

Has anyone else been thinking of this?

Yes currently doing exactly that.

What concerns me is two things

1) In the next twenty years the goverment changes the rules and gets their grubby paws on the pension

They may change the tax-free cash that you can take but I don't see how they can get their hands on it totally.

2) If i build up a big pension pot then I will need to pay a lot of tax when I am 55.

That could happen. However if you know you will get higher rate tax relief on the pension going in and will be a basic rate taxpayer in retirement then it does benefit you.

Whilst the age for state pension has increased , is 55 still the age you can claim 25% of your personal pension pot?

At the moment it's age 50 but from 2010 it's 55.

Joey122

Thanks very much.

What about this question

Can anyone comment of whether if I did not have a private pension what I would be entitled to which I wont be entitled to if i have a pension. State pension is paid out regardless but pension credits? Anything else?

Joey122

jem16

You could move to a different country at 55 and enjoy your hard earned pension?

Have you considered this?

jem16

Joey122 wrote: »

Thanks very much.

What about this question

Can anyone comment of whether if I did not have a private pension what I would be entitled to which I wont be entitled to if i have a pension. State pension is paid out regardless but pension credits? Anything else?

Pension credits would be unlikely if you had a private pension. Help with care costs I would imagine would also be unlikely.

jem16

You could move to a different country at 55 and enjoy your hard earned pension?

Have you considered this?

No desire to do this. I'm happy at home and would miss my family.

I'd love to retire at 55 - could in fact retire now age wise. However it's unlikely to happen unless I get some sort of package as I have a final salary pension which would be reduced by around 25% if I were to take it early. It's also government backed so would be taxed here anyway.