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

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  • Thirty9
    Thirty9 Posts: 41 Forumite
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    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).
    As I understand it, you cannot contribute all of your gross salary: you need to take home at least the minimum wage.
  • ColdIron
    ColdIron Posts: 9,033 Forumite
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    edited 16 October 2023 at 9:39PM
    Thirty9 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).
    As I understand it, you cannot contribute all of your gross salary: you need to take home at least the minimum wage.
    That is a restriction on salary sacrifice, not pension contributions. You cannot reduce your salary below the NMW using SS. It's an employer obligation
  • george4064
    george4064 Posts: 2,811 Forumite
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    edited 17 October 2023 at 11:15AM
    ColdIron said:
    Thirty9 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).
    As I understand it, you cannot contribute all of your gross salary: you need to take home at least the minimum wage.
    That is a restriction on salary sacrifice, not pension contributions. You cannot reduce your salary below the NMW using SS. It's an employer obligation
    Also worth noting that you can use up precious unused allowances going back 3 years.
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  • MeteredOut
    MeteredOut Posts: 1,310 Forumite
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    ColdIron said:
    Thirty9 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).
    As I understand it, you cannot contribute all of your gross salary: you need to take home at least the minimum wage.
    That is a restriction on salary sacrifice, not pension contributions. You cannot reduce your salary below the NMW using SS. It's an employer obligation
    Low worth noting that you can use up precious unused allowances going back 3 years.
    ...so long as you have an active pension in those years (which it looks like the OP has).
  • artyboy
    artyboy Posts: 883 Forumite
    First Anniversary First Post Name Dropper
    ColdIron said:
    Thirty9 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).
    As I understand it, you cannot contribute all of your gross salary: you need to take home at least the minimum wage.
    That is a restriction on salary sacrifice, not pension contributions. You cannot reduce your salary below the NMW using SS. It's an employer obligation
    Low worth noting that you can use up precious unused allowances going back 3 years.
    But not if you don't have sufficient relevant earnings in the CURRENT tax year to be able to add more than £60k in contributions. 
  • Albermarle
    Albermarle Posts: 22,097 Forumite
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    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?
    The £60K includes employer contributions and tax relief. If less than £40K ( which is what the limit used to be ) has been added to the pension in the last 3 years you can bring unused allowance forward so more than £60 K can be added.
    However you personally can not add more than your gross salary.

    Your workplace pension and a SIPP are both Defined Contribution ( DC) pensions so in respect of tax, legal status etc they are exactly the same . One may have different charges to the other, and the SIPP will have a much larger range of investments to choose from, although this can be a good or bad thing.
  • OK thanks. So just spoken to payroll and they have informed me that the max % I can sacrifice is 10% (which is what I am currently doing). So in terms of next best (i.e. tax beneficial) way, I presume this would be to independently top up the same pension fund via Aviva?
  • Andreg
    Andreg Posts: 187 Forumite
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    edited 17 October 2023 at 12:28PM
    If  you work for a small company I suggest you ask them to change their policy and allow you to contribute more than 10%.    Particularly if the contributions are taken via salary sacrifice as that will save you national insurance.  It's to the company's benefit as the employers' NI saving is 13.8%.

    Alternatively you could look at paying off part of your mortgage  (if you have one).  If you can get the loan-to-value ratio below 60% that will enable you to get a much better interest rate when you next renew the fixed rate.
  • Albermarle
    Albermarle Posts: 22,097 Forumite
    First Anniversary First Post Name Dropper
    OK thanks. So just spoken to payroll and they have informed me that the max % I can sacrifice is 10% (which is what I am currently doing). So in terms of next best (i.e. tax beneficial) way, I presume this would be to independently top up the same pension fund via Aviva?
    Having a max % you can sacrifice is pretty unusual as far as I know ( except for the rule where you can not sacrifice below the National Minimum Wage) .
    If you add a lump sum to the Aviva pension or to a new pension, the tax relief benefit will be the same.
    So three points to consider.
    1) Will the Aviva workplace pension accept lump sums added by you personally? ( you will need to check with them)
    2) Comparative charges of Aviva pension vs a new one
    3) Choice of investments ( not important to most as they are pretty clueless about investing)


  • penners324
    penners324 Posts: 2,724 Forumite
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    If payroll are unwilling to budge on 10% max (which would be odd) then set up a standing order into the pension account on the same day as your salary goes into your account 
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