Please me fix my terrible pension…Do I get pension tax relief based on English or Scottish rates?!

abgrad

Hello, I’m almost 40 and well, I feel like saying I don’t have much of a pension as I don’t really. I’ve done 2 degrees at uni so not had many years contributing to a work pension. State pension years are probably on track i would say. I can probably only count an NHS pension that will pay £4K a year I think. The rest is not much for a job I did for 2 years and my current job (just 1 year so far).

I need to start trying much harder with my pension! I used to be good with finances but let it slip. 

The thing is I live in Scotland but work in England at the moment. For this financial year I’m on course to be in the higher rate tax bracket for Scotland but may miss the higher rate one for England by a couple of grand. 

Is it the Scottish or English bandings that count towards pension tax relief? For interest for savings I believe it’s English but not sure about pension. This may be the only year I will be counted as a higher rate tax payer as may reduce my hours next financial year. So I’m thinking I should put a lump sum in workplace pension (“nest”) and then can I claim tax relief using a self assessment?! I do have quite a bit of savings but am hoping to sell current small flat and get bigger property. However I feel I should take advantage of the opportunity for good tax relief.

Sorry this is long winded. Oh, currently I contribute 5% from salary and employer 3 or 4% (the minimum I think). I’ve also been putting money in lifetime isa (about 8k in there) but I realise I should be putting it in my pension if I am getting good tax relief. 

Thanks for any advice.

molerat

If your main home address is Scotland then your earned income comes under the Scottish tax system. 

Your pension relief comes under the Scottish bands but savings allowances and rates are under the UK bands and rates.

https://www.litrg.org.uk/tax-guides/tax-basics/what-scottish-income-tax/how-does-scottish-income-tax-work#toc-how-does-scottish-income-tax-interact-with-uk-income-tax-

Marcon

abgrad said:

Hello, I’m almost 40 and well, I feel like saying I don’t have much of a pension as I don’t really. I’ve done 2 degrees at uni so not had many years contributing to a work pension. State pension years are probably on track i would say. I can probably only count an NHS pension that will pay £4K a year I think. The rest is not much for a job I did for 2 years and my current job (just 1 year so far).

I need to start trying much harder with my pension! I used to be good with finances but let it slip. 

The thing is I live in Scotland but work in England at the moment. For this financial year I’m on course to be in the higher rate tax bracket for Scotland but may miss the higher rate one for England by a couple of grand. 

Is it the Scottish or English bandings that count towards pension tax relief? For interest for savings I believe it’s English but not sure about pension. This may be the only year I will be counted as a higher rate tax payer as may reduce my hours next financial year. So I’m thinking I should put a lump sum in workplace pension (“nest”) and then can I claim tax relief using a self assessment?! I do have quite a bit of savings but am hoping to sell current small flat and get bigger property. However I feel I should take advantage of the opportunity for good tax relief.

Sorry this is long winded. Oh, currently I contribute 5% from salary and employer 3 or 4% (the minimum I think). I’ve also been putting money in lifetime isa (about 8k in there) but I realise I should be putting it in my pension if I am getting good tax relief. 

Thanks for any advice.

The words 'I think....' crop up more than once in your post. Why not find out for certain? There are far too many posters on here who reach the point of retirement and 'always thought/assumed...' only to find that what they fondly believed wasn't actually what was happening.

At 40 you have a good quarter of a century to ensure you have a decent retirement income, so don't despair just yet - but do think about saving a bit more than 5% of your salary into a pension if you can afford to do so.

xylophone

State pension years are probably on track i would say. 

State Pension forecast here

https://www.gov.uk/check-state-pension

I can probably only count an NHS pension that will pay £4K a year I think. 

You have a deferred NHS pension?

https://www.nhsbsa.nhs.uk/member-hub/getting-estimate-your-pension

The rest is not much for a job I did for 2 years 

Defined Benefit or Defined Contribution?

Re NEST

https://www.nestpensions.org.uk/schemeweb/memberhelpcentre/contributions/make-additional-contributions.html

https://www.nestpensions.org.uk/schemeweb/nest/about-pensions/tax-relief-benefits.html

All eligible taxpayers get 20% tax relief on their contributions. If you're a higher rate taxpayer, you can get additional tax relief - but you must apply for it through HMRC. This additional tax relief goes straight to you rather than being paid into your pot.

Dazed_and_C0nfused

The thing is I live in Scotland but work in England at the moment. For this financial year I’m on course to be in the higher rate tax bracket for Scotland but may miss the higher rate one for England by a couple of grand. 

In which case additional pension contributions will be very tax efficient as you can avoid paying 42% tax on the top slice of your income.

If you don't need to file a tax return for any other reason then pension contributions won't mean you need to file one, you just have to advise HMRC of the gross amount paid into a RAS (relief at source) scheme each tax year and they will ensure you receive any additional relief due.  Either by a (provisional) tax code increase or refund after the tax year has finished.

You will also benefit from having a larger basic rate band, avoiding some Scottish intermediate rate tax

Qyburn

abgrad said:

Is it the Scottish or English bandings that count towards pension tax relief? For interest for savings I believe it’s English but not sure about pension. This may be the only year I will be counted as a higher rate tax payer as may reduce my hours next financial year. So I’m thinking I should put a lump sum in workplace pension (“nest”) and then can I claim tax relief using a self assessment?! 

Your pension contributions will receive 20% tax relief even though some was taxed at the 19% Starter Rate. Regarding higher rates, the contributions increase your "Scottish basic rate limit", which means less 21% or 42% tax is due, although that will need to be claimed back. I did exactly as you say last few years, paid a lump sum sufficient to keep me out of higher rate. 

abgrad

Thanks everyone. This has been very helpful! 

abgrad

Marcon said

The words 'I think....' crop up more than once in your post. Why not find out for certain? There are far too many posters on here who reach the point of retirement and 'always thought/assumed...' only to find that what they fondly believed wasn't actually what was happening.

At 40 you have a good quarter of a century to ensure you have a decent retirement income, so don't despair just yet - but do think about saving a bit more than 5% of your salary into a pension if you can afford to do so.

Thanks for your reply Marcon. I was aware I was putting think and thought someone would pick up on it! I used to be quite good at keeping track of things but I’ve started to find more times when I don’t know what to do so I’ve done nothing. It was quite hard to find out about my NHS pension, I wanted to know how much what I had put in would give me and I was told £4000 a year but this seems a lot given I only worked a few years but it was a high paid job. However I was just told this in an email so it’s not that official. 

After I left the NHS job I was working in quite a low paid job so I probably stuck my head in the sand a bit regarding finances as less spare cash. Unfortunately I was daft and I also tried to do investing with some savings and lost quite a bit of money so it was sort of hard to face that for a good while but now I know I need to sort things out. I wish my employers would up their contribution a few percentage points if I did but they don’t offer matching  

Now I know that I will be classed as higher rate pay for this financial year I will contribute a lump sum to my pension.

Dazed_and_C0nfused

It was quite hard to find out about my NHS pension, I wanted to know how much what I had put in would give me and I was told £4000 a year but this seems a lot given I only worked a few years but it was a high paid job. 

What you contributed isn't really relevant.  The different NHS schemes are defined benefit pensions so you get a pension based on the scheme rules.

And whatever you accrued by the time you left will be revalued each April by the preceding September's CPI inflation rate.

So in April 2023 it would have had a 10.1% increase just for that year alone.

Think gold standard pension 😃