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Can I pay more into my workplace pension?

gelato_cat
Posts: 2,970 Ambassador


I got made redundant in January. At that job, I had a workplace pension per UK law and was paying the minimum into it from my gross salary.
I have recently started reading about pensions and realised that I made a huge mistake and should have been paying more from my gross, because I wouldn't have missed the money, it would have been very tax-efficient and I have never paid much into any pension that I have. Definitely kicking myself.
My question is, how can I remedy this without dumping a load of savings from my net earnings into my pension? Is all the tax and NI I paid in that job this tax year lost forever or can I somehow make a retrospective decision to pay some more into that pension from my gross earnings, bearing in mind I left that job two months ago?
I have recently started reading about pensions and realised that I made a huge mistake and should have been paying more from my gross, because I wouldn't have missed the money, it would have been very tax-efficient and I have never paid much into any pension that I have. Definitely kicking myself.
My question is, how can I remedy this without dumping a load of savings from my net earnings into my pension? Is all the tax and NI I paid in that job this tax year lost forever or can I somehow make a retrospective decision to pay some more into that pension from my gross earnings, bearing in mind I left that job two months ago?
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You cannot alter the pay you have already received.
Most personal pension contributions don't have any impact on your own personal income tax liability so may well not have change the amount of tax you are due to pay (or be refunded) for the current tax year.
And they don't make any difference to your NI.
But they do get basic rate tax relief added by the pension company so if you paid say £2,000 then they pension company would add £500 in basic rate tax relief giving you a fund of £2,500.
Roughly how much have you earned in taxable income in 2022:23?1 -
Dazed_and_C0nfused said:
Roughly how much have you earned in taxable income in 2022:23?
I'm kind of scared to say. A lot. I was well into higher rate tax and nearly into top rate.
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Suzey said:Dazed_and_C0nfused said:
Roughly how much have you earned in taxable income in 2022:23?
I'm kind of scared to say. A lot. I was well into higher rate tax and nearly into top rate.
They have two main benefits in your situation (on top of the basic rate tax relief).
1. They reduce your adjusted net income. This can help you keep your Personal Allowance which would otherwise be lost (ANI above £100k means you gradually lose your Personal Allowance).
2. The gross contribution increases your basic rate tax band, meaning more income is taxed at 20% and less at 40%.
In short they are incredibly tax efficient.
But you only have a few days to make a contribution for the current tax year. You do not have to choose how to invest the money now, making the contributions is key.
And you cannot carry back pension contributions from one tax year to another so if you don't contribute in the current tax year there is no way of rectifying that.1 -
Thanks for the info - that's good to know. As I'm not currently working, I have some time to allocate to this.
Where do I start, though? I am not sure what I need to be Googling here.
When you say personal contributions would save me some tax, do you mean personal contributions from my net salary (ie my savings) which I put into my pension as a lump sum contribution?
I’m a Forum Ambassador and I support the Forum Team on the Savings & Investments, Small Biz MoneySaving and House Buying, Renting & Selling boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the Report button, or by e-mailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.0 -
Suzey said:Dazed_and_C0nfused said:
Roughly how much have you earned in taxable income in 2022:23?
I'm kind of scared to say. A lot. I was well into higher rate tax and nearly into top rate.
Maximum gross contribution for 2022/23 is £40,000 (that includes basic rate relief). You may be able to use carry forward depending on your earnings: https://www.hl.co.uk/pensions/contributions/carry-forward-rule/annual-allowance-calculator
Googling on your question might have been both quicker and easier, if you're only after simple facts rather than opinions!1 -
Suzey said:Thanks for the info - that's good to know. As I'm not currently working, I have some time to allocate to this.
Where do I start, though? I am not sure what I need to be Googling here.
When you say personal contributions would save me some tax, do you mean personal contributions from my net salary (ie my savings) which I put into my pension as a lump sum contribution?
Yes, a lump sum payment will need to come from your savings given you aren't currently earning.Googling on your question might have been both quicker and easier, if you're only after simple facts rather than opinions!2 -
Do you currently complete Self Assessment returns?1
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Dazed_and_C0nfused said:Do you currently complete Self Assessment returns?I’m a Forum Ambassador and I support the Forum Team on the Savings & Investments, Small Biz MoneySaving and House Buying, Renting & Selling boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the Report button, or by e-mailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.0
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Dazed_and_C0nfused said:Suzey said:Dazed_and_C0nfused said:
Roughly how much have you earned in taxable income in 2022:23?
I'm kind of scared to say. A lot. I was well into higher rate tax and nearly into top rate.
They have two main benefits in your situation (on top of the basic rate tax relief).
1. They reduce your adjusted net income. This can help you keep your Personal Allowance which would otherwise be lost (ANI above £100k means you gradually lose your Personal Allowance).
2. The gross contribution increases your basic rate tax band, meaning more income is taxed at 20% and less at 40%.
In short they are incredibly tax efficient.
But you only have a few days to make a contribution for the current tax year. You do not have to choose how to invest the money now, making the contributions is key.
And you cannot carry back pension contributions from one tax year to another so if you don't contribute in the current tax year there is no way of rectifying that.
Thanks for this!
Bear with me here... I know I've messed up by not paying out of my gross, and now I need to pay out of my net.
The part I am trying to get my head around is: in the two points you mentioned above, how does that benefit me in a practical way? Do you mean that HMRC will look at my taxes for this year and possibly adjust how much I should have paid?
I’m a Forum Ambassador and I support the Forum Team on the Savings & Investments, Small Biz MoneySaving and House Buying, Renting & Selling boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the Report button, or by e-mailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.0 -
Marcon said:Suzey said:Thanks for the info - that's good to know. As I'm not currently working, I have some time to allocate to this.
Where do I start, though? I am not sure what I need to be Googling here.
When you say personal contributions would save me some tax, do you mean personal contributions from my net salary (ie my savings) which I put into my pension as a lump sum contribution?
Yes, a lump sum payment will need to come from your savings given you aren't currently earning.
Thank you!
I have a plain old Nest pension with my last employer and it looks like I can make a contribution into it. There's a button I can press which gives me this page:
I’m a Forum Ambassador and I support the Forum Team on the Savings & Investments, Small Biz MoneySaving and House Buying, Renting & Selling boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the Report button, or by e-mailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.1
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