Adding to pension after retirement

Kelvin_Hall

Hi, I've had some great advice here in the past and hoping for some now as I can't seem to get much by googling.

I retired early 3 months ago. I have only taken the 25% lump sum from one of my DC pensions and am planning on living on that till my two DB pesions kick in (in about 4 months).  I have another DC pension which I have not touched.

I have just had some sad news about a relative, which means I am likely going to inherit north of £50,000.

My question is, can I put that money (which I don't need at the moment) or some of it into one of my DC pensions.  And if so, is it a sensible thing to do ?

Thanks in advance,

Kelvin

Pat38493

If you have stopped working 3 months ago and will not earn anything in future, I suspect the answer will be that it depends whether you get the money before the end of this tax year.

You can only contribute to a pension up to the amount of qualifying earned income that you have in that tax year.  If you don’t have any earned income, you can only put up to £3600 gross (£2880 net) into the pension.

If you get the money before 6th April, potentially you could put some in the SIPP if you have remaining earned income to match it with in the 23/24 tax year.

You also have to stay within the annual allowance which is a separatel limit of £60K per year total pension contributions including any employer contributions (you can carry over any unused part of the allowance from prior years but before April 2023 it was £40K per year).

Marcon

Kelvin_Hall said:

Hi, I've had some great advice here in the past and hoping for some now as I can't seem to get much by googling.

I retired early 3 months ago. I have only taken the 25% lump sum from one of my DC pensions and am planning on living on that till my two DB pesions kick in (in about 4 months).  I have another DC pension which I have not touched.

I have just had some sad news about a relative, which means I am likely going to inherit north of £50,000.

My question is, can I put that money (which I don't need at the moment) or some of it into one of my DC pensions.  And if so, is it a sensible thing to do ?

Thanks in advance,

Kelvin

Depends what your objectives are - and as mentioned in the post above, you are limited in the amount you can contribute by your 'relevant earnings' in the tax year in which the contribution is made.

Pat38493 said:

You also have to stay within the annual allowance which is a separatel limit of £60K per year total pension contributions including any employer contributions (you can carry over any unused part of the allowance from prior years but before April 2023 it was £40K per year).

You can only use carry forward if your earned income in the tax year in which you make the pension contribution is at least equal to the (gross) amount being contributed - a point which is often overlooked and causes endless confusion! You can only go back three years, so any under-used annual allowance from earlier tax years is 'lost'.

jamesd

Yes, up to the earnings limit and maybe annual allowance plus carry-forward this year. From next year just the £3,600 gross.

Almost certainly a good idea to do it since it's tax relief that you don't get otherwise.

You can use savings, the DC lump sum taken already or tax free from the untouched pot to fund the contributions if necessary, no need to wait for the inheritance.

You could also use the small pot rule to take £10k chunks from the other pension, transferring 10k somewhere else to meet the £10k maximum if they won't do it in the background. 25% tax free, 75% taxable.

LHW99

If the inheritance doesn't arrive this tax year, then you could add £2880 each year to a pension until you are 75, and get each payment made up to £3600 by the Government.

Then you can also get £20k into an ISA, after April 5th and could perhaps look at some fixed rate accounts for the rest - if some is in a one-year fix, say £22,880, you would be set up to get £20k into an ISA and £2880 into a pension in the 25/26 tax year.