Top up pension with earned income

On_Edge_1964

Hello, in brief:
I stopped working middle of 2024 having taken my DB pension
I have a DC still running (approx value £60K)
I earned approx £8k in tax year 24/25. This is after payments via salary sacrifice were made into DC pension
Questions:
Can I pay the £8K earned into the pension before end of 24/25 tax year?
I am assuming yes but only the amount earned in any given tax year. i.e. I couldn't pay in more that £8K?
Having paid tax on this £8K - would I get tax back?
I plan to cash this pension in in next 18 to 24 months and it is currently invested in a low risk plan so is there any real advantage in topping up vs keeping it in a fixed rate bond, for example
Any thoughts greatly received.

molerat

Having paid tax on this £8K - would I get tax back?

That would likely be an uphill struggle if the pension is not set up to receive RAS contributions, HMRC often find this one hard to understand.  You would likely be better starting a SIPP where the relief would be added paying in £6400 and the provider grossing it up to £8K.

Linton

On_Edge_1964 said:

Hello, in brief:
I stopped working middle of 2024 having taken my DB pension
I have a DC still running (approx value £60K)
I earned approx £8k in tax year 24/25. This is after payments via salary sacrifice were made into DC pension
Questions:
Can I pay the £8K earned into the pension before end of 24/25 tax year?
I am assuming yes but only the amount earned in any given tax year. i.e. I couldn't pay in more that £8K?
Having paid tax on this £8K - would I get tax back?
I plan to cash this pension in in next 18 to 24 months and it is currently invested in a low risk plan so is there any real advantage in topping up vs keeping it in a fixed rate bond, for example
Any thoughts greatly received.

Yes, you can make a direct personal pension contribution in the 24/25 tax year provided your total gross contributions in that year do not exceed your £8k gross earnings.  To contribute £8K you actually pay in £8K X 0.8.  The missing £1.6K is paid in by HMRC via the pension company and at least makes up for any basic rate tax you paid.

The financial advantage depends on your overall tax position when you make the contribution and when you withdraw.   Generally it comes from non-taxing of the 25% tax free, so relatively small.