Pension contributions

Russyarnold

Hi,
If I am earning 65K salary, if I put in £15k into my pension, it brings my net pay to 50k therefore I can access full child benefit without having to pay it back?

Pat38493

Russyarnold said:

Hi,
If I am earning 65K salary, if I put in £15k into my pension, it brings my net pay to 50k therefore I can access full child benefit without having to pay it back?

Pretty much yes, but I think that you might also need to take into account taxable benefits and make sure your taxable earnings including benefits like car allowance, medical or whatever are below that threshold.  Someone will correct me if I'm wrong there.

Russyarnold

Thanks for your response. Yes I'm going to take into account all other incomes as well.
I have one more question on claiming tax relief for pension contributions.
Long story short, I don't want to put 15k into my current company provided pension but want to put into a Nest pension pot from my previous employer. Nest says that any amount I'll deposit will come with 20% top-up and remaining 20% tax relief (as a higher rate payer) must be claimed from HMRC.
If I pay into Nest £100
1. How much will that be once after 20% top-up is included?
2. As I understand, ear 20% should be claimed as cash deposit from HMRC? How much that is going to be?

I'm not that bad with maths, but wanted to know how much I need to put into pension pot to make it £15K.

Thanks.

Dazed_and_C0nfused

Russyarnold said:

Hi,
If I am earning 65K salary, if I put in £15k into my pension, it brings my net pay to 50k therefore I can access full child benefit without having to pay it back?

You have to include all taxable income.

So say your only taxable income was taxable pay of £65,000 and interest of £500 (not from an ISA) and you contributed £15k gross to the pension then your adjusted net income would be £50,500 and the HICBC would be 5% of the Child Benefit even though the interest would all be taxed at 0%.

justwhat

Does you company do salary sacrifice ? That may be you best option. 

Russyarnold

justwhat said:

Does you company do salary sacrifice ? That may be you best option. 

They do. But it's pain the back to amend contributions as they allow a change only once a year.
Are there any drawbacks by not going through salary sacrifice? Thanks

QrizB

Russyarnold said:

justwhat said:

Does you company do salary sacrifice ? That may be you best option. 

They do. But it's pain the back to amend contributions as they allow a change only once a year.
Are there any drawbacks by not going through salary sacrifice?

With salsac you also save on NI, as well as income tax, and you get the full tax saving credited to your pension rather than getting part of it back through your tax code / Self Assessment.

(Do you file a Self Assessment tax return already? You haven't explicitly stated.)

Dazed_and_C0nfused

If I pay into Nest £100
1. How much will that be once after 20% top-up is included?
2. As I understand, ear 20% should be claimed as cash deposit from HMRC? How much that is going to be?

I'm not that bad with maths, but wanted to know how much I need to put into pension pot to make it £15K.

It's a 25% "top up".

1.  £125 (of which £25 is the basic rate tax relief (20% of the gross contribution).

2.  You cannot claim 20% extra from HMRC.  The gross contribution increases your basic rate band meaning more tax can be paid at basic rate and less at 40%.  The exact benefit will depend on how much 40% tax you would otherwise be liable to.  And If you would be liable to HICBC it could quite a bit more than 20% extra saving.

If you contribute £12k that will become £15k in your pension fund with the basic rate tax relief added.  That will not reduce your taxable income but it does reduce your adjusted net income by £15k.  And adjusted net income is used to calculate the HICBC.

Have you checked out any initial fee charged by Nest?

Russyarnold

Dazed_and_C0nfused said:

If I pay into Nest £100
1. How much will that be once after 20% top-up is included?
2. As I understand, ear 20% should be claimed as cash deposit from HMRC? How much that is going to be?

I'm not that bad with maths, but wanted to know how much I need to put into pension pot to make it £15K.

It's a 25% "top up".

1.  £125 (of which £25 is the basic rate tax relief (20% of the gross contribution).

2.  You cannot claim 20% extra from HMRC.  The gross contribution increases your basic rate band meaning more tax can be paid at basic rate and less at 40%.  The exact benefit will depend on how much 40% tax you would otherwise be liable to.  And If you would be liable to HICBC it could quite a bit more than 20% extra saving.

If you contribute £12k that will become £15k in your pension fund with the basic rate tax relief added.  That will not reduce your taxable income but it does reduce your adjusted net income by £15k.  And adjusted net income is used to calculate the HICBC.

Have you checked out any initial fee charged by Nest?

While I am not sure on Nest charges, I found the below on their website on single additional contributions and tax relief. Not sure how to claim. Have anyone done this before? No I don't file self assessment as I have no additional income sources.

Single additional contributions

You can make an additional contribution at any time.

Our pension calculator helps you work out how much an additional contribution now could increase your pot’s total at retirement.

When you make an additional contribution, we claim the 20% basic rate of tax relief from HMRC and add it to your pot. Higher rate taxpayers can claim any additional tax relief from HMRC. If you’re not eligible for tax relief, please update your details before proceeding.

Albermarle

Russyarnold said:

Dazed_and_C0nfused said:

If I pay into Nest £100
1. How much will that be once after 20% top-up is included?
2. As I understand, ear 20% should be claimed as cash deposit from HMRC? How much that is going to be?

I'm not that bad with maths, but wanted to know how much I need to put into pension pot to make it £15K.

It's a 25% "top up".

1.  £125 (of which £25 is the basic rate tax relief (20% of the gross contribution).

2.  You cannot claim 20% extra from HMRC.  The gross contribution increases your basic rate band meaning more tax can be paid at basic rate and less at 40%.  The exact benefit will depend on how much 40% tax you would otherwise be liable to.  And If you would be liable to HICBC it could quite a bit more than 20% extra saving.

If you contribute £12k that will become £15k in your pension fund with the basic rate tax relief added.  That will not reduce your taxable income but it does reduce your adjusted net income by £15k.  And adjusted net income is used to calculate the HICBC.

Have you checked out any initial fee charged by Nest?

While I am not sure on Nest charges, I found the below on their website on single additional contributions and tax relief. Not sure how to claim. Have anyone done this before? No I don't file self assessment as I have no additional income sources.

Single additional contributions

You can make an additional contribution at any time.

Our pension calculator helps you work out how much an additional contribution now could increase your pot’s total at retirement.

When you make an additional contribution, we claim the 20% basic rate of tax relief from HMRC and add it to your pot. Higher rate taxpayers can claim any additional tax relief from HMRC. If you’re not eligible for tax relief, please update your details before proceeding.

NEST charging structure is on their website.
It is rather unusual as it charges a hefty 1.8% on all new contributions, although its ongoing charge of 0.3% is rather low. Normally there is no initial charge for new contributions with other pension providers.

Even if you do not want to salary sacrifice more into your workplace pension ( which would be the best route), you can probably separately add a lump sum to it. You would need to check with them if that was OK and check what their charges are.

You do not need to file a tax return, you just need to inform HMRC of your pension contribution in the tax year  including the added tax relief ( your gross contribution in the jargon). This should only be for your personal contributions. The salary sacrifice means you automatically get all the relevant tax releif 

Russyarnold

Albermarle said:

Russyarnold said:

Dazed_and_C0nfused said:

If I pay into Nest £100
1. How much will that be once after 20% top-up is included?
2. As I understand, ear 20% should be claimed as cash deposit from HMRC? How much that is going to be?

I'm not that bad with maths, but wanted to know how much I need to put into pension pot to make it £15K.

It's a 25% "top up".

1.  £125 (of which £25 is the basic rate tax relief (20% of the gross contribution).

2.  You cannot claim 20% extra from HMRC.  The gross contribution increases your basic rate band meaning more tax can be paid at basic rate and less at 40%.  The exact benefit will depend on how much 40% tax you would otherwise be liable to.  And If you would be liable to HICBC it could quite a bit more than 20% extra saving.

If you contribute £12k that will become £15k in your pension fund with the basic rate tax relief added.  That will not reduce your taxable income but it does reduce your adjusted net income by £15k.  And adjusted net income is used to calculate the HICBC.

Have you checked out any initial fee charged by Nest?

While I am not sure on Nest charges, I found the below on their website on single additional contributions and tax relief. Not sure how to claim. Have anyone done this before? No I don't file self assessment as I have no additional income sources.

Single additional contributions

You can make an additional contribution at any time.

Our pension calculator helps you work out how much an additional contribution now could increase your pot’s total at retirement.

When you make an additional contribution, we claim the 20% basic rate of tax relief from HMRC and add it to your pot. Higher rate taxpayers can claim any additional tax relief from HMRC. If you’re not eligible for tax relief, please update your details before proceeding.

NEST charging structure is on their website.
It is rather unusual as it charges a hefty 1.8% on all new contributions, although its ongoing charge of 0.3% is rather low. Normally there is no initial charge for new contributions with other pension providers.

Even if you do not want to salary sacrifice more into your workplace pension ( which would be the best route), you can probably separately add a lump sum to it. You would need to check with them if that was OK and check what their charges are.

You do not need to file a tax return, you just need to inform HMRC of your pension contribution in the tax year  including the added tax relief ( your gross contribution in the jargon). This should only be for your personal contributions. The salary sacrifice means you automatically get all the relevant tax releif 

Thanks a bunch.
Will get in touch with retiready on Monday when they're next open.