Returning to teaching after taking pension

Redwing500

I retired at 60yrs old, thereby taking my pension and paying off our mortgage (with use of maximum lump sum, via TPS). I have returned to full time work and intend working for a few more years. As a result,(my combined earnings and pension, gross salary, is comparatively large) I am paying a large amount of income tax. 

How best can I reduce my tax exposure? I have looked at an additional pension with The Wesleyan. Annually, there must be hundreds of teachers retiring and then returning to work, with some of them returning to FT positions. I would be grateful of any advice. 

jimjames

Paying in to pension to get your income back in to basic rate? If it's a FS/DB scheme you're getting pension from then you aren't limited to the £10k allowance that applies to DC schemes.

eskbanker

Redwing500 said:

As a result,(my combined earnings and pension, gross salary, is comparatively large) I am paying a large amount of income tax.

Perhaps worth sharing more detail about earnings and tax, i.e. quantifying what you mean by 'large', such as whether you're in the higher rate band?

Redwing500

Thank you for taking the time to consider my circs.

I was a higher rate payer before I took my pension. My mortgage has gone and I have surplus circa £1500 per month, at least, to play with. I'm rich until I retire - but I have nothing after that and, as an older parent, I have uni fees etc, to pay. I expect to work FT for at least two more yrs and then it's a question of how long I can hack it and whether I can work in parts of my senior position on a PT basis. If I could lose £1500, a months into a pension of some description, that would obviously reduce my tax exposure. What I really wonder is whether there is someone here, in the forums, that has experience of this scenario as a retiree OR a pensions advisor with specific understanding of TPS.

Dazed_and_C0nfused

You have two basic choices.  Increase your contributions within TPS, typically by buying added pension although other options are available.  Doing this is likely to mean you have a reduced taxable income and pay less tax on your earnings.

https://www.teacherspensions.co.uk/members/working-life/paying-in/increasing-your-pension.aspx

Or open a separate personal pension/SIPP and make some RAS (relief at source) contributions.  They will have basic rate tax added by the pension company so £1,000 added by you becomes £1,250 in your pension fund.

The gross contribution will also increase your basic rate tax band meaning you will pay less tax overall, more income is taxed at 20% and less at 40%.  You need to sort that aspect out with HMRC but it's not complicated.

A personal pension/SIPP is potentially more flexible but the outcome is largely dependent on your investment choices. 

MSE_ForumTeam5

We've moved this thread to the Cutting Tax board