Non-earner able to add more than £2880 into a pension?

ddi

I’m trying to understand how I can put more than £2880 into a pension per year as a non earner. According to gov website people can add more than their allowances but then need to pay back the tax relief (as a ‘charge’). I’d like to put more in & pay the charge but both Vanguard and AJBell say I can’t. The max I’m allowed is the £2880. Any ideas please?

Dazed_and_C0nfused

Is there any reason you don't just use a general investment account or S&S ISA?

https://www.pruadviser.co.uk/knowledge-literature/oracle-plus/annual-allowance/

dunstonh

I’m trying to understand how I can put more than £2880 into a pension per year as a non earner.

You are limited to £3600 to get tax relief.

According to gov website people can add more than their allowances but then need to pay back the tax relief (as a ‘charge’). I’d like to put more in & pay the charge but both Vanguard and AJBell say I can’t. The max I’m allowed is the £2880. Any ideas please?

There is no logical reason you would want to suffer the tax charge (ie.. wipe out the relief.     
Why not use ISA and then unwrapped or an investment bond as alternative wrappers?

ddi

Dazed_and_C0nfused said:

Is there any reason you don't just use a general investment account or S&S ISA?

I already use the full ISA allowance 

There is no logical reason you would want to suffer the tax charge (ie.. wipe out the relief.     
Why not use ISA and then unwrapped or an investment bond as alternative wrappers?

Because there’s a pension wrapper that allows me 25% tax free when I start drawing it. Whereas a general investment would not have 25% tax free and would be subject to capital gains. It seems a pension is a better tax efficient way to save for a pension than a general investment. Albeit I’m not understanding the differences in the tax obligations. So could be very wrong. 

Dazed_and_C0nfused

But income tax would be due on the 75% that is pension income.

If you invest in a general investment account and withdraw funds there is no income tax to pay, though you obviously don't get any income tax relief added to your fund either.

Income tax would possibly be due on any income earned within the fund i.e. interest or dividend payments.

There is an annual Capital Gains exempt amount, do you think you will be making gains in excess of this?  

Albermarle

You would only pay tax on a general investment account if you became liable for CGT or dividend tax . Which means exceeding the annual allowances .

With a pension you pay minimum 15% tax on any money withdrawn .

Seems unlikely that pension would be better .

dunstonh

Because there’s a pension wrapper that allows me 25% tax free when I start drawing it. Whereas a general investment would not have 25% tax free and would be subject to capital gains. It seems a pension is a better tax efficient way to save for a pension than a general investment. Albeit I’m not understanding the differences in the tax obligations. So could be very wrong. 

a general investment account can be controlled and free of taxes up to around £150k.   on the income generated,  Dividend tax is 7.5% after £2000 tax free.
Yes, the gains are subject to capital gains tax but above your annual CGT allowance.  Through annual bed & ISA and rebalancing, you can use up the CGT allowance and avoid any taxes.     Even if you have to pay some CGT, it will be less than what you pay in income tax via the pension.  I have clients with half a million in GIAs and have not paid CGT

Alternatively, there is the investment bond tax wrapper which is not quite as good as a GIA but next in the pecking order and better than using pensions with no tax relief.  But its unlikely you need to go there.

If you have a  spouse, then you have double the allowances.

ddi

Can you please explain - ‘Through annual bed & ISA and rebalancing, you can use up the CGT allowance and avoid any taxes.’ 

I’d never heard of Bed & ISA so have just googled. I now put the max in an ISA each year. If I had a GIA should I use funds from that to go into the ISA and then cash I’d usually put into the ISA put into the GIA instead. So, 20k cash into GIA then following year that 20k from GIA into ISA and new cash into GIA. Is that correct? 

This is extremely helpful everyone! I obviously need to investigate GIAs in more detail including Bed & ISA. It’s quite complicated to a layperson, so huge thanks!