How To Put More Than £3600 Stakeholder Maximum Year Into My Pension?

Strike_Team

I've put £3600 (£2800 + tax relief) into my stakeholder for the last financial year. I will shortly do the same for the current tax year. As I don't have a lot of pension provision other than this, I'm wondering if there's any way I can put more money into a pension for the current year? £2808/3600 is the maximum I can pay into the stakeholder due to my income.

All thoughts and ideas appreciated.

dunstonh

You are allowed to put in a percentage of you earnings each tax year. The £3600 is the lower limit for those with insufficient (or no) earnings.

What is you income? If over 30k, are you in an occupational pension scheme and if yes, is it money purchase/defined contribution or final salary/defined benefit? And last question, what is your age?

From that, we can tell you what your percentage is and how much you can pay in.

Strike_Team

I've looked into putting more in already. Due to my age (33), income over the past 5 years, etc. I can only put in £3600/year. I do still want to put more into a pension if possible, as the only other provision I've got is a couple of years contributions to an employers scheme, the rest of the time I've been ill or a student.

telly-addict

Personally I would set aside the excess cash that you want to contribute but can't, in a high interest savings account, even an ISA. Once you have some years with higher 'net relevant earnings' (usually employment income plus benefits in kind, certain income also qualifies) than £3600, you can establish a 'basis year' which you can use to base higher payments on for the subsequent 5 years.

For example, if you had a year when you received £15,000 and the following 4 years only £10,000, you could base your personal pension payments on the £15,000 for the following 4 years also.

So I would save the cash for the years when you will be able to make higher pension contributions.

This basis year treatment applies for the 5 years after the earnings have ceased.

Ref s 646B and 646C ICTA 1988.

sneekymum

WoW - that's really useful information!

isasmurf

Not all that useful as this is the last year you can nominate a 'basis year'.

However, I would agree with him and stick it in a high interest savings account until next year when you will able to put in 100% of your earnings.

sneekymum

No - useful information to those of us about to make a maximum contribution now based on the best year in the last five....

But yes - this 100% of earnings idea - sounds good but I think there will be some restrictions - otherwise people like me will use savings to reduce earnings to almost nothing and then claim 37% back in tax credits...

telly-addict

isasmurf wrote:

Not all that useful as this is the last year you can nominate a 'basis year'.

However, I would agree with him and stick it in a high interest savings account until next year when you will able to put in 100% of your earnings.

And who said that telly addict was a he?

EdInvestor

Strike_Team wrote:

... the rest of the time I've been ill or a student.

How's your state pension record? May be worth making up any missing years -you can do this for a max of 6 years in arrears. The index-linked state pension may look very low, but when you check how much it would cost you to buy that guaranteed income in real money ( 93,000 for a woman, 82,000 for a man retiring at 65 - and that's just the basic state pension, excluding the second pension also included in NI contributions) you can see it is well worth keeping your contribution record up to date.

Milarky

As mentioned in message #6 above, the forthcoming changes will make it possible to contribute as much to a pension as you want in practice in any given year. I'm not sure why anyone would want to go and pay more than 100% of salary [or £3,600 with fewer earnings] but can I ask if the 'carry BACK' provisions are ending at the same time?

[With 'carry BACK' you can basis [i]this[/i] year's contributions on last year's earnings, as long as the 'election' to base the contributions on a non-current year is made before 31st January 2006. Thus you can squeeze two years allowances into one if you want. I assume this will go when you can put 100% of earnings in, but would be grateful if someone could clarify that?]

Thanks

[Opps!! - see next message]

DavidLaGuardia

Milarky wrote:

As mentioned in message #6 above, the forthcoming changes will make it possible to contribute as much to a pension as you want in practice in any given year. I'm not sure why anyone would want to go and pay more than 100% of salary [or £3,600 with fewer earnings] but can I ask if the 'carry forward' provisions are ending at the same time?

[With 'carry forward' you can basis [i]this[/i] year's contributions on last year's earnings, as long as the 'election' to base the contributions on a non-current year is made before 31st January 2006. Thus you can squeeze two years allowances into one if you want. I assume this will go when you can put 100% of earnings in, but would be grateful if some could clarify that?]

Thanks

THAT IS NOT CARRY FORWARD!

"CARRY BACK" is where a contribution is treated as if it was made in the previous tax year year. Where this is used, the rules of the previous year apply, so therefore someone making an election to "carry back" next tax year would have the current contributions limit insofar as the "carry back" is concerned
"CARRY FORWARD" is no longer allowed. This is where, after the allowances of any one year had been used, the allowances of up to to 6 previous years could be used, starting with the earliest. This was very useful and by conducting CARRY BACK at the same time then the total number of years contribution made at once could be 8 (including the current year).
Alledgedly the Inland Revenue 's officers hated the amount of work each case could generate. Whatever the reson behind it, the facility was removed in April 2001 (from memory I think it was 2001, but might be corrected here. If so, by using carry back, Jan 2002 was when it last could be used used)