Topping up pension a couple of years before 55

Bogstomper

Hi, can I pay a lump sum into my pension at the age of 53 & 54, get the tax relief off it, and then withdraw the original capital at age 55?
Assuming I’m still within my contribution allowance for those two years and the capital to be withdrawn is < 25% of the pot.

NoMore

As long as you have enough relevant earnings to cover the tax relief.

If no relevant earnings then you could still put £2880 p.a. (Grossed up to £3600)

Albermarle

Bogstomper said:

Hi, can I pay a lump sum into my pension at the age of 53 & 54, get the tax relief off it, and then withdraw the original capital at age 55?
Assuming I’m still within my contribution allowance for those two years and the capital to be withdrawn is < 25% of the pot.

You need to have enough earnings to gain the tax relief.
For example you could not just add £40K if you only earn £30K.
Also nothing to stop you adding to a pension after 55 ( until 75) 

Apart from that at age 55, you could withdraw the whole lot if you want, although not normally advisable.
Otherwise you can withdraw 25% tax free ( all at once or in stages) and 75% is taxable. Whether you actually pay any tax will depend on how much you withdraw and your other income.
Or you can just leave it alone and withdraw it later when you retire, which is what pensions are for of course.

A free chat with Pensionwise and a good read of this website may be useful.

Taking your pension | Help with taking your pension | MoneyHelper

artyboy

Mrs Arty is 54 and has been stuffing her pension to the max for the past couple of years, using prior year carryovers, plus this year there's the higher £60k limit. Much of the extra is sitting in short term money market funds, just to provide some capital security.

It may be that she doesn't immediately take any tax free cash out at 55, but at this age, psychologically it feels like you're paying into a fixed term savings account giving an immediate 100% return.

Sea_Shell

"It may be that she doesn't immediately take any tax free cash out at 55, but at this age, psychologically it feels like you're paying into a fixed term savings account giving an immediate 100% return"

Definitely.   It feels less like a putting money in a "pension" for some dim and distant time in the future, and more like general savings, albeit locked away still for a couple of years.

Bogstomper

Great! Thanks all! I’ll be adding to my pension.
it did sound like a very high ‘interest rate’ for a very short time.

Jonboy1889

Albermarle said:

Bogstomper said:

Hi, can I pay a lump sum into my pension at the age of 53 & 54, get the tax relief off it, and then withdraw the original capital at age 55?
Assuming I’m still within my contribution allowance for those two years and the capital to be withdrawn is < 25% of the pot.

You need to have enough earnings to gain the tax relief.
For example you could not just add £40K if you only earn £30K.
Also nothing to stop you adding to a pension after 55 ( until 75) 

Apart from that at age 55, you could withdraw the whole lot if you want, although not normally advisable.
Otherwise you can withdraw 25% tax free ( all at once or in stages) and 75% is taxable. Whether you actually pay any tax will depend on how much you withdraw and your other income.
Or you can just leave it alone and withdraw it later when you retire, which is what pensions are for of course.

A free chat with Pensionwise and a good read of this website may be useful.

Taking your pension | Help with taking your pension | MoneyHelper

I assume after taking the 25% as a lump sum you can’t take any more tax free if you put money into another pension? Or are the pots treated separately?

Albermarle

Jonboy1889 said:

Albermarle said:

Bogstomper said:

Hi, can I pay a lump sum into my pension at the age of 53 & 54, get the tax relief off it, and then withdraw the original capital at age 55?
Assuming I’m still within my contribution allowance for those two years and the capital to be withdrawn is < 25% of the pot.

You need to have enough earnings to gain the tax relief.
For example you could not just add £40K if you only earn £30K.
Also nothing to stop you adding to a pension after 55 ( until 75) 

Apart from that at age 55, you could withdraw the whole lot if you want, although not normally advisable.
Otherwise you can withdraw 25% tax free ( all at once or in stages) and 75% is taxable. Whether you actually pay any tax will depend on how much you withdraw and your other income.
Or you can just leave it alone and withdraw it later when you retire, which is what pensions are for of course.

A free chat with Pensionwise and a good read of this website may be useful.

Taking your pension | Help with taking your pension | MoneyHelper

I assume after taking the 25% as a lump sum you can’t take any more tax free if you put money into another pension? Or are the pots treated separately?

You assume wrong !

When you add to a pension, these are known as uncrystallised funds. To take the tax free cash you have to crystallise part or all of the funds, as when you do this 25% is tax free and 75% is left crystallised and potentially taxable when withdrawn.
If you then add more uncrystallised funds with new contributions, then when this is crystallised you will get 25% tax free again.
It is not always necessary to open a new pension for the new contributions. It depends on the provider.