Pension Question

eric4395

Audaxer said:

eric4395 said:

The discussion on this topic has concentrated on whether to defer my state pension which I haven't done since i started receiving it 18 months ago and won't be now.  As said I looked at the figures at the time and didn't fancy waiting approx 17 years for a return. So regarding the original point I was trying to say  was should I or  "WOULD YOU" add  £12,000 =(£15000   tax relief)into my  6 figure pension pot ( drawdown). Despite clawing back £3000  in tax relief I feel that my £15,000  would be lucky to even show in my next statement at the end of the year and the total sum of my pension will be less than it is now even adding this sum?. So am I as well not adding any money at the moment and just pay the 40% on what I've earned in my state pension (prob about £5000)  as it may be less than my losses  in my pension. So what would you do at the present time. Just pay my tax bill or add the £12000  into my pension? 

Apologies for going off topic.  To your original question as to whether we would add the £12,000 to a pension at this time to get the £3,000 tax relief. I think in that position I would because you wouldn't actually need to invest any of the £15,000 if you didn't want to as you could leave it all as cash until you were ready to either draw it out, or invest it later maybe when markets had fallen a bit more. However markets may start to rise and you could miss out by not investing now at the current low prices, but that is up to you.  As I say you could just leave it in there as cash meantime.

By saying you should put the £12,000 into your pension, I'm assuming you can and are not already subject to the MPAA £4,000 contribution limit, which would apply if you have already drawn any taxable income from your pension? 

I dont think the MPAA effects me As an example and these are not exact figures but if  I had £211,000 invested in my drawdown pension in jan it has now dropped to £200,000 in March. So I add this £12,000 back into it giving me £215,000  with my tax relief. Then let's say the markets continue to drop this year (( I know none of us can tell but it's extremely likely?) and my next statement later in the year is way less than £200,000 then I obviously think that  it was a waste of time adding that £12,000 to it as it has disappeared?  I am obviously doing this to try and recuperate some of  the £5000 tax bill that I am about to pay to HMRC, but just unsure if it's in my interest to do it or not and would just like to know what other posters would do. Thanks for your view on it 

Audaxer

eric4395 said:

Audaxer said:

eric4395 said:

The discussion on this topic has concentrated on whether to defer my state pension which I haven't done since i started receiving it 18 months ago and won't be now.  As said I looked at the figures at the time and didn't fancy waiting approx 17 years for a return. So regarding the original point I was trying to say  was should I or  "WOULD YOU" add  £12,000 =(£15000   tax relief)into my  6 figure pension pot ( drawdown). Despite clawing back £3000  in tax relief I feel that my £15,000  would be lucky to even show in my next statement at the end of the year and the total sum of my pension will be less than it is now even adding this sum?. So am I as well not adding any money at the moment and just pay the 40% on what I've earned in my state pension (prob about £5000)  as it may be less than my losses  in my pension. So what would you do at the present time. Just pay my tax bill or add the £12000  into my pension? 

Apologies for going off topic.  To your original question as to whether we would add the £12,000 to a pension at this time to get the £3,000 tax relief. I think in that position I would because you wouldn't actually need to invest any of the £15,000 if you didn't want to as you could leave it all as cash until you were ready to either draw it out, or invest it later maybe when markets had fallen a bit more. However markets may start to rise and you could miss out by not investing now at the current low prices, but that is up to you.  As I say you could just leave it in there as cash meantime.

By saying you should put the £12,000 into your pension, I'm assuming you can and are not already subject to the MPAA £4,000 contribution limit, which would apply if you have already drawn any taxable income from your pension? 

I dont think the MPAA effects me As an example and these are not exact figures but if  I had £211,000 invested in my drawdown pension in jan it has now dropped to £200,000 in March. So I add this £12,000 back into it giving me £215,000  with my tax relief. Then let's say the markets continue to drop this year (( I know none of us can tell but it's extremely likely?) and my next statement later in the year is way less than £200,000 then I obviously think that  it was a waste of time adding that £12,000 to it as it has disappeared?  I am obviously doing this to try and recuperate some of  the £5000 tax bill that I am about to pay to HMRC, but just unsure if it's in my interest to do it or not and would just like to know what other posters would do. Thanks for your view on it 

The MPAA will only affect you if you have already taken taxable income out of your pension. If you have done that you can only contribute a maximum of £4,000 per tax year. If it does not affect you and you are able to contribute £12,000 and get the £3,000 tax relief, it does seem a good idea to me to do it, as you can just leave it in your pension as cash until you think it's the right time to invest it, but the point is you don't need to invest it.

Even if you do invest it and markets continue to fall further, I wouldn't consider that investment has disappeared. As an example, I am retired and invested some additional funds in my S&S ISA last month when markets had dropped a bit. They have now dropped further, and will probably drop further still in the next few weeks. Although my pot is lower than it was a few months ago, even with the additional investment, I don't think that investment has disappeared, as I am confident the funds will recover in time. 

Albermarle

Then let's say the markets continue to drop this year (( I know none of us can tell but it's extremely likely?)

If you think it is extremely likely, than as said before you should not invest, and you should liquidate all your investments to cash to protect them from falling further .

However you should take into account that if the market players thought it extremely likely to drop , then it would already have dropped.

sevenhills

eric4395 said:

I dont think the MPAA effects me

If you look on the pensions forum, where this should have been posted, there are lots of issues being discussed to educate yourself.

Dazed_and_C0nfused

Don't forget that if MPAA doesn't apply (don't think you have actually answered this) and you contribute £15,000 gross and are liable to higher rate tax not only will get the £3,000 in basic rate tax relief in your pension fund but you will make a personal tax saving.

The exact amount of tax saving will depend on your overall tax position for the tax year the contribution is made in but based on what you've posted it could be as much as another £3,000.  Or as little as 20p.