Best place to put extra savings after maxing out workplace pension contributions and ISA allowance

happinessstan

Hi. Having received a (very minor) payrise, I would now like to save an additional £500 p/m. However, having alreay maxed out my workplace pension contribution and annual ISA allowance, I am unsure as to the best/most tax efficient way to save. Any advice gratefully received (I am also a higher tax rate/complete an annual self-assessment if that helps steer recommendations. Thanks!

grumbler

MSE:

• Best regular savings accounts

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Dazed_and_C0nfused

happinessstan said:

Hi. Having received a (very minor) payrise, I would now like to save an additional £500 p/m. However, having alreay maxed out my workplace pension contribution and annual ISA allowance, I am unsure as to the best/most tax efficient way to save. Any advice gratefully received (I am also a higher tax rate/complete an annual self-assessment if that helps steer recommendations. Thanks!

 Do you mean you are contributing the most your employer will match or you are contributing the maximum possible i.e. earn £55k and contribute £55k (gross).

xylophone

However, having alreay maxed out my workplace pension contribution 

Do you mean that you have contributed the whole of your net relevant earnings to your workplace pension?

ColdIron

happinessstan said:

However, having alreay maxed out my workplace pension contribution

When most people say this they mean they are paying 5% or the minimum required for employer matching

You can make pension contributions up to your relevant income (gross)

I am unsure as to the best/most tax efficient way to save
I am also a higher tax rate/complete an annual self-assessment if that helps steer recommendations.

As a higher rate tax payer a pension contribution is by far the most tax efficient thing you could do. A no-brainer for most

happinessstan

Definitely the amount the employer will match and the max I can also contribute (based on my understanding). This all feeds into my overall Aviva pension though so I can always top that up independently but not sure that is the best way to maximise the output?

Dazed_and_C0nfused

happinessstan said:

Definitely the amount the employer will match and the max I can also contribute (based on my understanding). This all feeds into my overall Aviva pension though so I can always top that up independently but not sure that is the best way to maximise the output?

How can you top it up independently if you are already contributing the maximum possible 🤔.

I suspect you've misunderstood what your maximum is or are using terminology out of context.

ColdIron

happinessstan said:

Definitely the amount the employer will match and the max I can also contribute (based on my understanding). This all feeds into my overall Aviva pension though so I can always top that up independently but not sure that is the best way to maximise the output?

Your annual allowance is £60,000 or your relevant earnings whichever is the lower

So if you earn £50,000 you can contribute £40,000 and receive £10,000 tax relief

It sounds like you are nowhere near this

happinessstan

OK, so I can bascially contribute up to £60k to the workplace pension per year. Is it more beneficial to do this (for tax reasons) than to say save in an alternative like a SIPP?

r6mile

No difference, tax-wise, unless your work pension is via salary sacrifice in which case it’s marginally better (as a higher rate taxpayer). If your work pension offers a decent range of investments then I would stick with that if I were you.

ColdIron

happinessstan said:

OK, so I can bascially contribute up to £60k to the workplace pension per year. Is it more beneficial to do this (for tax reasons) than to say save in an alternative like a SIPP?

Workplace pensions and SIPPs are both pensions so no income tax advantage. How you pay it can make a difference, if your employer offers Salary Sacrifice you pay less NI (and so do they)