We'd like to remind Forumites to please avoid political debate on the Forum. This is to keep it a safe and useful space for MoneySaving discussions. Threads that are - or become - political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
We're aware that dates on the Forum are not currently showing correctly. Please bear with us while we get this fixed, and see Site feedback for updates.

Final pension push - is this possible

I’m 59 and in a reasonable position re retirement but I have a chance to boost it, and I’d like some insights and views. 

Briefly: I have around £720k in retirement savings - about 400k is in pension funds and the rest in ISAs. I own my property worth £440k and a couple of properties overseas. No debts or mortgage. And I qualify for a maximum state pension in 8 years. 

I guess I could be called semi retired. I currently work three days a week.  I get a good salary which takes me way over the 40 percent tax rate.  But because of my overall situation I only put 5 percent plus employer 5 percent into the pension scheme - around £750 a month. 

Now here’s the rub.  Another company has asked if I would work for them for the remaining 2 days a week. Remuneration would be proportionate to what I currently earn and the combined salary would take me into the 45 per cent bracket. 

Candidly I don’t really need the money but I’m a bit bored and thinking of doing this for a couple of years.  

I’m thinking of putting this  entire salary into their pension scheme - they pay an attractive 8 percent also so in effect it would be 108% of my gross extra salary invested in a pension fund. 

Putting aside the £60k per annum max contribution (this move would push me  pretty near it but not over) are there any tax or NI issues I’ve not thought of?

My main employer knows. They have no  problem.  I’m assuming that as my taxable income isn’t changing (because all the extra income is going into my pension) my tax and NI liability won’t change also. 

What am I missing?
«1

Comments

  • Dazed_and_C0nfused
    Dazed_and_C0nfused Posts: 16,276 Forumite
    10,000 Posts Fifth Anniversary Name Dropper
    edited 14 October 2023 am31 8:59AM
    I’m thinking of putting this entire salary into their pension scheme - they pay an attractive 8 percent also so in effect it would be 108% of my gross extra salary invested in a pension fund. 

    My main employer knows. They have no problem. I’m assuming that as my taxable income isn’t changing (because all the extra income is going into my pension) my tax and NI liability won’t change also. 

    What am I missing?
    Will your new employer actually allow that?  Or do you mean you will be paid most of the money and separately put it into your own personal pension or SIPP?

    If so it won't reduce your taxable income at all as RAS contributions don't have that effect.

    You would declare the contributions on your tax return and your basic rate band would be increased meaning more income is taxed at 20% and less at 40% (and potentially less at 45%).

    As a result the tax impact may well be slightly different to not having the income me to be taxed in the first place.  It depends on whether you plan on adding your take home pay to your own pension (grossed up by the basic rate relief the provider adds) or if you will pay in 80% of the gross earnings from your new employment.
  • wjr4
    wjr4 Posts: 1,276 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    How much income do you actually need in retirement? 
    I am an Independent Financial Adviser (IFA). Any posts on here are for information and discussion purposes only and should not be seen as financial advice.
  • Albermarle
    Albermarle Posts: 25,993 Forumite
    10,000 Posts Sixth Anniversary Name Dropper
    In tax terms both salaries are just added together, so you would get a similar effect by just increasing your current employer contributions, or adding more to both.
    As long as you get the max employer contributions possible in both cases.
    One difference though is how your contributions are made for either employment.

     I get a good salary which takes me way over the 40 percent tax rate.  But because of my overall situation I only put 5 percent plus employer 5 percent into the pension scheme - around £750 a month. 

    A relatively wealthy 40% taxpayer paying only 5% into a pension is somewhat anathema to a MSE pensions forum ! Are you sure they will not pay more if you pay more ( up to a point)?
  • DavidT67
    DavidT67 Posts: 483 Forumite
    Part of the Furniture 100 Posts Name Dropper
    edited 14 October 2023 am31 9:36AM
    scobie said:
    I’m 59 and in a reasonable position re retirement but I have a chance to boost it, and I’d like some insights and views. ...

    Putting aside the £60k per annum max contribution (this move would push me  pretty near it but not over) are there any tax or NI issues I’ve not thought of?

    ...

    What am I missing?
    For each role you can salary sacrifice into the workplace pension scheme down to national minimum wage and not below, assuming employer's payroll system doesn't have other restrictions.
    If you want to go beyond that then make personal contributions to a personal pension and claim the tax relief. 
    With two employments ensure you correctly indicate one is a second job, so you don't get the personal income tax allowance twice and end up with a large tax bill after year end.
    Also you might want to contact HMRC regarding National Insurance deferment to prevent overpaying NI.

  • wolvoman
    wolvoman Posts: 1,178 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    OP, why do you want so much money in your 70s when you're less able to enjoy it, than in your 50s when you can do so much more with it?

    Don't get me wrong, having a secure retirement is great - but just feels like you've swung the pendulum too far.
    And what's your 'death before retirement' plan?
  • Marcon
    Marcon Posts: 12,992 Forumite
    Eighth Anniversary 10,000 Posts Name Dropper Combo Breaker
    scobie said:
    I get a good salary which takes me way over the 40 percent tax rate.  But because of my overall situation I only put 5 percent plus employer 5 percent into the pension scheme - around £750 a month. 


    What am I missing?
    A whole load of tax relief.

    Without knowing what your 'overall situation' is, it's hard to understand why a higher rate taxpayer wouldn't have been contributing more to their pension for some time - but clearly you had your reasons, which you don't need to explain to anyone here.

    If you want - or indeed need - to boost your pension provision, it sounds as if you have scope to use carry forward, meaning you could pay in more than £60K if you wished.

    Googling on your question might have been both quicker and easier, if you're only after simple facts rather than opinions!  
  • scobie
    scobie Posts: 137 Forumite
    Sixth Anniversary 100 Posts Combo Breaker
    My strategy has always been to have a retirement income based not exclusively on pension. So I’m quite comfortable with my balance. When I retire overseas my U.K. property and one of my overseas properties will generate £2,500 a month, and if I need to supplement that I can draw on the rest of the savings. I’ll sell the U.K. property in 5-6 years or so. 

    That’s why I’ve not been interested in boosting pension savings in the last 2-3 years. I’ve been using excess funds to acquire the properties. 


  • scobie
    scobie Posts: 137 Forumite
    Sixth Anniversary 100 Posts Combo Breaker
    wolvoman said:
    OP, why do you want so much money in your 70s when you're less able to enjoy it, than in your 50s when you can do so much more with it?

    Don't get me wrong, having a secure retirement is great - but just feels like you've swung the pendulum too far.
    And what's your 'death before retirement' plan?
    Not sure what my 70s have to do with it. I’ll retire when I’m 62. 

    I’ve had a very good lifestyle in my 50s. The bulk of my retirement savings was accumulated in my 40s. My fifties have been devoted to travel and accumulating a couple of properties.  

    60s will be about enjoying life.  

    70s - who knows. 

    As for death plan, as I said I’ll retire at 62. I enjoy working now and was thinking why not find a way to boost my savings by another £80-£100k if I can. I’m fit and healthy and walk 12-15k steps a day.  If I die unexpectedly, then my wife can decide what she wants to do with it herself. 
  • scobie
    scobie Posts: 137 Forumite
    Sixth Anniversary 100 Posts Combo Breaker
    In tax terms both salaries are just added together, so you would get a similar effect by just increasing your current employer contributions, or adding more to both.j
    As long as you get the max employer contributions possible in both cases.
    One difference though is how your contributions are made for either employment.

     I get a good salary which takes me way over the 40 percent tax rate.  But because of my overall situation I only put 5 percent plus employer 5 percent into the pension scheme - around £750 a month. 

    A relatively wealthy 40% taxpayer paying only 5% into a pension is somewhat anathema to a MSE pensions forum ! Are you sure they will not pay more if you pay more ( up to a point)?
    My main employer pays a max of 5 percent. So I pay the same.  Could I pay more - yes but as I’ve outlined I have had a different strategy and wanted to retain some flexibility. During my 40s I was paying in around 35% of my salary. Plus 100% of any bonus. 

    But this new job opportunity has made me think. I don’t need extra income now so why not just Chuck pretty much all of it into a pension and avoid the tax liability. 
  • scobie
    scobie Posts: 137 Forumite
    Sixth Anniversary 100 Posts Combo Breaker
    I’m thinking of putting this entire salary into their pension scheme - they pay an attractive 8 percent also so in effect it would be 108% of my gross extra salary invested in a pension fund. 

    My main employer knows. They have no problem. I’m assuming that as my taxable income isn’t changing (because all the extra income is going into my pension) my tax and NI liability won’t change also. 

    What am I missing?
    Will your new employer actually allow that?  Or do you mean you will be paid most of the money and separately put it into your own personal pension or SIPP?



    Just curious - why wouldn’t they allow that. If they allow me to put in 8% to match their 8% and allow me to put in more, why wouldn’t they allow me to put in as much as my income as I want, up to whatever legal maximum applies? 
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 348.4K Banking & Borrowing
  • 252.1K Reduce Debt & Boost Income
  • 452.4K Spending & Discounts
  • 241K Work, Benefits & Business
  • 617.3K Mortgages, Homes & Bills
  • 175.7K Life & Family
  • 254.1K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16K Discuss & Feedback
  • 15.1K Coronavirus Support Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.