Pension Contribution at 74

Silversurfer60

I am 75 in December . It would seem fiscal drag is likely to have just put me into the 40% tax bracket for 23/4 ( by a small amount but enough to lose £500 of interest relief and pay the higher rate on part of my dividend payment ). I do not have a private pension my income is from a final salary pension, state pension and dividends . Am I too late to make any private pension contributions for last year and would it be possible to make a payment  this year? I am aware I can’t make any further payments after 75 

dunstonh

Am I too late to make any private pension contributions for last year and would it be possible to make a payment  this year?

its too late for last tax year as that ended 5th April.  Still time for 24/25 but it wont help your 23/24 position.

Marcon

Silversurfer60 said:

I am 75 in December . It would seem fiscal drag is likely to have just put me into the 40% tax bracket for 23/4 ( by a small amount but enough to lose £500 of interest relief and pay the higher rate on part of my dividend payment ). I do not have a private pension my income is from a final salary pension, state pension and dividends . Am I too late to make any private pension contributions for last year and would it be possible to make a payment  this year? I am aware I can’t make any further payments after 75 

You have no earned income, but can still contribute £2,880 and the pension provider will claim basic rate tax on your behalf to top that up to £3,600.

You can reclaim higher rate tax relief to the extent you paid higher rate tax on your contribution.

xylophone

Relative is  fully retired 40%  tax payer  - his 75th fell on 11th April 2023 - he made his final £2880 contribution to his Hargreaves  Sipp on 6 April 2023.

Marcon

xylophone said:

Relative is  fully retired 40%  tax payer  - his 75th fell on 11th April 2023 - he made his final £2880 contribution to his Hargreaves  Sipp on 6 April 2023.

You've got him well trained!

Albermarle

If when you withdraw from this new pension, you will be paying 40% tax on 75% of it, then the benefit from setting it up just for one year is going to be very limited,

skycatcher

Albermarle said:

If when you withdraw from this new pension, you will be paying 40% tax on 75% of it, then the benefit from setting it up just for one year is going to be very limited,

What would the maths be then if you get the extra tax relief going in... How much after tax do you get on withdrawal?

Dazed_and_C0nfused

skycatcher said:

Albermarle said:

If when you withdraw from this new pension, you will be paying 40% tax on 75% of it, then the benefit from setting it up just for one year is going to be very limited,

What would the maths be then if you get the extra tax relief going in... How much after tax do you get on withdrawal?

If it is as simple as 40% relief in and 40% tax on way out it would be £2,520 in total.  Although I suspect your situation is a little more complex than that if it impacts your savings nil rate band (aka PSA) in the tax year you contribute.

You pay £2,880.  £720 is added in basic rate relief making a pension fund of £3,600.  You avoid paying 40% tax on an extra £3,600 saving you £720.  Net cost of the £3,600 in your pension is £2,160.

You take the whole £3,600 out.  £900 is a TFLS and £2,700 is taxable.  40% tax on the £2,700 is £1,080 so you get £1,620 after tax.  Plus the TFLS.  Total return £2,520.

skycatcher

Dazed_and_C0nfused said:

skycatcher said:

Albermarle said:

If when you withdraw from this new pension, you will be paying 40% tax on 75% of it, then the benefit from setting it up just for one year is going to be very limited,

What would the maths be then if you get the extra tax relief going in... How much after tax do you get on withdrawal?

If it is as simple as 40% relief in and 40% tax on way out it would be £2,520 in total.  Although I suspect your situation is a little more complex than that if it impacts your savings nil rate band (aka PSA) in the tax year you contribute.

You pay £2,880.  £720 is added in basic rate relief making a pension fund of £3,600.  You avoid paying 40% tax on an extra £3,600 saving you £720.  Net cost of the £3,600 in your pension is £2,160.

You take the whole £3,600 out.  £900 is a TFLS and £2,700 is taxable.  40% tax on the £2,700 is £1,080 so you get £1,620 after tax.  Plus the TFLS.  Total return £2,520.

So a £360 gain?

Silversurfer60

dunstonh said:

Am I too late to make any private pension contributions for last year and would it be possible to make a payment  this year?

its too late for last tax year as that ended 5th April.  Still time for 24/25 but it wont help your 23/24 position.

• Thank you for your reply. Apologies for the late response but I had a problem replying which now seems fixed !
  
  I was afraid that might be the case. i have a small untouched ex SERPs pot of about £20k that’s now with Aviva. I’ve basically just ignored this over the years and it’s only because they’ve written to me telling me I will lose certain rights at 75 if I don’t make some choices that I’ve looked at this now. I apparently don’t have the option of adding anything to this pot now . It is not my intention to withdraw from this pot at any time. I would look at this contribution as inheritance planning and am kicking myself for wasting the opportunity for the past 15 years. 
  

Silversurfer60

skycatcher said:

Dazed_and_C0nfused said:

skycatcher said:

Albermarle said:

If when you withdraw from this new pension, you will be paying 40% tax on 75% of it, then the benefit from setting it up just for one year is going to be very limited,

What would the maths be then if you get the extra tax relief going in... How much after tax do you get on withdrawal?

If it is as simple as 40% relief in and 40% tax on way out it would be £2,520 in total.  Although I suspect your situation is a little more complex than that if it impacts your savings nil rate band (aka PSA) in the tax year you contribute.

You pay £2,880.  £720 is added in basic rate relief making a pension fund of £3,600.  You avoid paying 40% tax on an extra £3,600 saving you £720.  Net cost of the £3,600 in your pension is £2,160.

You take the whole £3,600 out.  £900 is a TFLS and £2,700 is taxable.  40% tax on the £2,700 is £1,080 so you get £1,620 after tax.  Plus the TFLS.  Total return £2,520.

So a £360 gain?

I am not planning on withdrawing this it will be part of my estate. I  have a small untouched ex SERPs pot (£21k) with Aviva. They are chasing me to do something with it before my 75th birthday. Apparently I can’t add to this. I don’t know if I can move it to a platform like H &L and add something to it this year. I could put in more cash if allowed . My income includes a 15k dividend from an (investment) company of which I am a Director I’m not sure if that makes any difference to how much I can put in to pension