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Having to take early retirement.
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Xenon123 said:Albermarle said:
OP - If you do switch savings into a pension , then you need to do it before this tax year ends , so you can get the maximum tax relief whilst you are still working . You can not claim the relief retrospectively. It is very easy to open a new pension online.
Any contributions you add to your pension will get 25% added to them . ( assuming you do not add more than you get paid but it seems that is not the case)
When you take the pension - 25% is tax free and the rest is taxable ( but whether you actually pay tax depends on your other income /if it is over the personal allowance)
Probably it would be better to wait to take income from the pension from 23/24 so you can fully use your personal tax allowance , but nothing to actually stop you taking it straight after you retire .0 -
Xenon123 said:itsmeagain said:Xenon123. There's a point that has been made by others that I'm not sure has got through with respect to your proud paying off of mortgage & rate you are putting away savings.
(1) It's too late for you, but for anyone else reading this, paying off your mortgage was a financial mistake. To save say 1.5% mortgage interest, you have paid it off using taxed & NI'd income that could have gone into pension and made 10%. This pension pot could have been used later to pay off your mortgage and still have money left over.
To be honest, I didn't use a pension to fund mine, and if I had, I'd have been well over the LTA (including my DB). After reading 'motley fool', I actually used FTSE share ISA's that gave circa 12.5% year on year. I have always made money out of mortgages and have even re-mortgaged to fund ISA's.0 -
Xenon123 said:itsmeagain said:Albermarle said:For Point 1 ) It may have been a mistake in pure rational financial terms , but many people just like to get the mortgage paid off for 'peace of mind' especially if their job security or health is not great .
For Point 2 ) - I agree . Even if the employer is not operating a salary sacrifice scheme , then pension contributions are still probably the best way forward. Especially if when taking the pension, you can utilise the personal tax allowance
OP - If you do switch savings into a pension , then you need to do it before this tax year ends , so you can get the maximum tax relief whilst you are still working . You can not claim the relief retrospectively. It is very easy to open a new pension online.
So, OP... Lets say that you earn £40kPA and you manage to squeeze £10 into your work pension. Deplete your savings by putting the other 30K (or what you can afford) into your DC (if they accept external payment) or open something like a Vanguard LS60 SIPP (in the next 2 months)!
You can then start taking it back out next year under the 25% tax free & £12.7k PA with no NI to pay either.
You won't get it all out tax free before age 67, but you can 'top up' your State pension by circa 4kPA from your SIPP without tax, and if you don't reach an age to spend it all, then it will go to family tax free.
No one here knows who you are, so why not share your period 10 payslip data here and we'll be more precise on the figures/opportunity.
I grasp exactly what you are saying and can see the sense in it. The problem is, topping up my state pension at 67 is not my priority. Nice as it is, I think we will be comfortable enough on the approx £37k a year we will have guaranteed at that age. Before considering diverting savings to my pension, I would already have breached the tax free monthly allowance before accounting for the increased contributions, so I would only benefit from the full tax free amount if I left it to after 67. Of course, my wife would benefit from it then and that would be great, but we are looking to enjoy our retirement as much as possible over the next 10 years if I am about that long.
I suppose though that even if I did want to access the extra amount over the next 10 years I could still take it and pay the tax and be no worse off given it wasn't taxed in the first place, and possibly have enjoyed some growth as well.
I don't know why I am even debating this, it makes perfect sense to add to my pension rather than save it.
I suppose I just wanted to have unfettered access to it if it was ever needed quickly..
You are correct that even if you exceed the 12.7kPA drawdown, you effectively only pay 15% tax on the additional you take out, having saved 32% when you paid it in (or take the 25% tax free).
You need to ask your pension dept about the max you can put in for the next 2 months & the following year. Whether its a lump sum or you change to paying a high percentage doesn't really matter. You will be limited to a net income of circa £1k month (there's some sort of min wage rule). There is also a £40kPA + carry forward limit that you are unlikely to exceed.
Whilst you may still be able to add to your DC (or new SIPP) in this tax year (up to 80% of your taxable income externally) to make up for missed opportunity for last 10 months, you will not receive salary sacrifice. This means that you will have lost the Ni benefit but still get the tax benefit (still worth doing).
Next year, you just need to pay the max that they will permit into your DC using salary sacrifice (instead of saving).0 -
Albermarle said:Xenon123 said:Albermarle said:
OP - If you do switch savings into a pension , then you need to do it before this tax year ends , so you can get the maximum tax relief whilst you are still working . You can not claim the relief retrospectively. It is very easy to open a new pension online.
Any contributions you add to your pension will get 25% added to them . ( assuming you do not add more than you get paid but it seems that is not the case)
When you take the pension - 25% is tax free and the rest is taxable ( but whether you actually pay tax depends on your other income /if it is over the personal allowance)
Probably it would be better to wait to take income from the pension from 23/24 so you can fully use your personal tax allowance , but nothing to actually stop you taking it straight after you retire .0
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