47 yrs =?

pinnks

Of course it is still worthwhile.  Payback will be a little longer as you need to use the post-tax pension amount compared to the cost of a year but that's it.

molerat

GibbsRule_No3. said:

If people are still paying Tax, after receiving State and Personal Pensions is it ever actually worth paying the extra amount to make the State Pension up?  It wasn't something I had to worry about but the Tax I pay on my Pensions made me wonder.

Yes it is.  Paying £900 gets you £6.32 pw / £328 pa.  £900 /£328 = 2.75 years to get the capital back gross.  Paying 20% tax on that will take 3.5 years to get it back.  Now, have you ever considered if it is worth buying an annuity with your pension fund - millions of people do ? To buy that £328 with an annuity would likely cost you £6.5K and will take around 20 years to get the capital amount back gross, 25 years after 20% tax !   Both calculations are ignoring annual inflationary increases and the state pension is often increased at a better rate than annuities.

Dazed_and_C0nfused

GibbsRule_No3. said:

If people are still paying Tax, after receiving State and Personal Pensions is it ever actually worth paying the extra amount to make the State Pension up?  It wasn't something I had to worry about but the Tax I pay on my Pensions made me wonder.

Some people are able to add £6.32/week £328/year) to their State Pension for less than £200.  

Even if you are an advanced rate payer in Scotland that is £180/year extra post tax income.  So live for 30 years after SPA and you are onto a winner.

Get run over by a bus before SPA and it's money down the drain though.

Silvertabby

GibbsRule_No3. said:

If people are still paying Tax, after receiving State and Personal Pensions is it ever actually worth paying the extra amount to make the State Pension up?  It wasn't something I had to worry about but the Tax I pay on my Pensions made me wonder.

Absolutely.  Even after 20% tax, my original break even point was less than 4 years, after which it is all profit.  

GibbsRule_No3.

molerat said:

 Now, have you ever considered if it is worth buying an annuity with your pension fund - millions of people do ? To buy that £328 with an annuity would likely cost you £6.5K and will take around 20 years to get the capital amount back gross, 25 years after 20% tax !   Both calculations are ignoring annual inflationary increases and the state pension is often increased at a better rate than annuities.

My current work Pensions that are in payment are Final Salary, so assume no Annuity option. The one I am paying into now, while still doing two days a week, I probably could but by the time I need that I might take it due to my age.

Gambo47

GibbsRule_No3. said:

If people are still paying Tax, after receiving State and Personal Pensions is it ever actually worth paying the extra amount to make the State Pension up?  It wasn't something I had to worry about but the Tax I pay on my Pensions made me wonder.

As the tax allowance is currently frozen, the basic state pension plus any other income soon exceeds that and yes I will be losing a chunk of money in tax...

Silvertabby

Gambo47 said:

GibbsRule_No3. said:

If people are still paying Tax, after receiving State and Personal Pensions is it ever actually worth paying the extra amount to make the State Pension up?  It wasn't something I had to worry about but the Tax I pay on my Pensions made me wonder.

As the tax allowance is currently frozen, the basic state pension plus any other income soon exceeds that and yes I will be losing a chunk of money in tax...

But ..... 80% of something is way better than 100% of nothing.

Aretnap

Indeed. The key question is not "will I have to pay more tax if I do this?" - by that logic there would have been no point going to work for the last 47 years, or buying anything other than food, or doing pretty much anything really. 

It's "if I do this I will have an extra £X per year after tax; is it worth paying £Y to get that?" The amount of tax you will pay is relevant only so far as you need it to calculate X.

GunJack

Silvertabby said:

Gambo47 said:

GibbsRule_No3. said:

If people are still paying Tax, after receiving State and Personal Pensions is it ever actually worth paying the extra amount to make the State Pension up?  It wasn't something I had to worry about but the Tax I pay on my Pensions made me wonder.

As the tax allowance is currently frozen, the basic state pension plus any other income soon exceeds that and yes I will be losing a chunk of money in tax...

But ..... 80% of something is way better than 100% of nothing.

It never ceases to amaze me that people are so hung up on paying a bit of tax, seemingly ignoring the fact that it really means they've got four times the tax extra in their pocket!!!!

Sarahspangles

If retirement is a release from responsibility to contribute, you’re ’paid up’, then it does jar a bit that taxes still have to be paid. It’s similar to the frustration people feel when they have qualified for the full pension but someone who hasn’t worked as hard qualifies for pension credit and may actually be better off.

I know that tax on personal pensions is effectively deferred income tax and that the majority of people on benefits certainly aren’t on easy street - but that’s being objective.