help with pension contributions - be gentle

Grumpy_chap

QrizB said:

It's a bigger problem if the spouse is unwaged, 

Thanks - this was the situation I was considering.
Useful comments from all who responded.

jimboger1

Dazed_and_C0nfused said:

jimboger1 said:

Marcon said:

jimboger1 said:

Marcon said:

jimboger1 said:

only looking for some help - please be gentle as I am pretty clueless about these things

I having been piling money into my pension for the last few years including big bonuses and I THINK I'm still within my allowance but not sure  - see below - this includes employer contributions and tax relief

• 2024 - 2025 - £74,280
• 2023 - 2024 - £95,073
• 2022 - 2023 - £8,753
• 2021 - 2022 - £74,045
• 2020 - 2021 - £7,589
• 2019 - 2020 - £9,406
• 2018 - 2019 - £6,963
• 2017 - 2018 - £6,679
• 2016 - 2017 - £5,829
• 2015 - 2016 - £3,400

according to an online calculator, I have £17,200 allowance that I can still use for 24/24
so I have a couple of questions - 

1. is this figure correct
2.  I intend to retire in December 2025, and for 2025/2026, I intend to put in £4k per month from April '25 to December '25 (£36K), then around £55k bonus also in December '25 - CAN I DO THIS? 
   
3. I know the above will be over the limit, but can I use the 26/27 allowance when I'm not working ?
4. if I can't do (2) / (3) above, what would be the best approach

many thanks

Jim

To use 'carry forward', you need to be earning enough in the tax year you make the contributions to cover ALL the contributions you make that year. What were you earning in (say) 23/24 - hopefully at least £95,073? 

1. Need to know your salary for the current tax year
2. Not unless you have both the taxable earnings and the 'carry forward' to do so - and it seems unlikely from the very little info you've given
3. You can pay in £2,880 and it will be topped up to £3,600 - otherwise no tax relief available if you have no earnings in 26/27
4. Contribute as much as you can while you're earning

1. current salary is £80k with a 60k bonus at December '24
2. what other info do you need?
3. where do you get these numbers?
4 I intend to but worried what happens if I go over the allowance?

Jim

1. So absolute max of £140K contribution  in 24/25 including tax relief on personal contributions/any employer contributions
2. Salary history for the previous 3 tax years
3. That's the legislative position
4. You pay tax on the amount by which you exceed the allowance.

1. I thought max was £60k per year

I thought you knew some people can make use of unused annual allowance carried forward from a previous year(s)?

yes, I do know, but the way I read your comment was that you were adding my 80k salary to the 60k allowance?

jimboger1

zagfles said:

Sarahspangles said:

jimboger1 said:

hi Sarah, I can post links as I'm new to the forum - I just googled pension carry forward calculator, and used the first couple I found and they all gave me the same figure 

I put it into the spreadsheet I used for my own checks. I get the remaining AA available to carry forward from 2022/23, which you could still use this year, to a further £14,305. It’s not far out but maybe someone else will check. You need to take full advantage of whatever it is, as you’ve used up all the Annual Allowance for the three years prior to 2025/26 so will be restricted to £60k.

You definitely can’t use carry back from 2026/27 to cover a breach in 2025/26.

That agrees with the HL calculator

My manual calc also agrees:

2021/22 is the first year that required carry forwards, and the figures show there's easily enough c/f available from 18/19 and 19/20, so 20/21 is not needed and therefore still available for future years. 

2023/24 is next year that requires c/f and needs 35073 of which 32411 can come form 20/21, and 2662 from 22/23. 

This leaves 28585 from 22/23 still available for 24/25 and/or 25/26. 14280 already used this tax year, so 14305 still available either for further conts this tax year or could be used next tax year. 

excellent, thank you, I can now see where you got this figure - the mistake I made was only using 3 years previous to this year, rather than your explanation above - got it now

jimboger1

Sarahspangles said:

zagfles said:

Sarahspangles said:

jimboger1 said:

hi Sarah, I can post links as I'm new to the forum - I just googled pension carry forward calculator, and used the first couple I found and they all gave me the same figure 

I put it into the spreadsheet I used for my own checks. I get the remaining AA available to carry forward from 2022/23, which you could still use this year, to a further £14,305. It’s not far out but maybe someone else will check. You need to take full advantage of whatever it is, as you’ve used up all the Annual Allowance for the three years prior to 2025/26 so will be restricted to £60k.

You definitely can’t use carry back from 2026/27 to cover a breach in 2025/26.

That agrees with the HL calculato
My manual calc also agrees:

2021/22 is the first year that required carry forwards, and the figures show there's easily enough c/f available from 18/19 and 19/20, so 20/21 is not needed and therefore still available for future years. 

2023/24 is next year that requires c/f and needs 35073 of which 32411 can come form 20/21, and 2662 from 22/23. 

This leaves 28585 from 22/23 still available for 24/25 and/or 25/26. 14280 already used this tax year, so 14305 still available either for further conts this tax year or could be used next tax year. 

Thanks! I am genuinely chuffed my maths was right.

@jimboger1 Maxing out your pension contributions for tax relief is fine but you also need a plan to get the money out again, ideally without unnecessarily paying higher rate tax. From our experience, as a couple receiving pension lump sums and inheritance, you then need a plan so you don’t unnecessarily pay tax on savings interest/dividends etc. Your ISA allowance it’s valuable here, that’s another one where you use it or lose it each year.

The other rookie mistake I spot some high earners make is not considering their partner’s position if they are in a couple. It’s too late when someone is paying higher rate tax to realise their wife has several years of £12,570 personal allowance going to waste.

thank you Sarah, and thanks for the advice - the plan to get the money to is my next task tbh - my wife currently works at around £12k per year, but we also share rental properties with a £37k income so it's taking a bit of juggling - problem I have is due to past experience I am very wary of IFA's   - although I understand they are not all bad - lol

jimboger1

DRS1 said:

Marcon said:

jimboger1 said:

Marcon said:

jimboger1 said:

Marcon said:

jimboger1 said:

only looking for some help - please be gentle as I am pretty clueless about these things

I having been piling money into my pension for the last few years including big bonuses and I THINK I'm still within my allowance but not sure  - see below - this includes employer contributions and tax relief

• 2024 - 2025 - £74,280
• 2023 - 2024 - £95,073
• 2022 - 2023 - £8,753
• 2021 - 2022 - £74,045
• 2020 - 2021 - £7,589
• 2019 - 2020 - £9,406
• 2018 - 2019 - £6,963
• 2017 - 2018 - £6,679
• 2016 - 2017 - £5,829
• 2015 - 2016 - £3,400

according to an online calculator, I have £17,200 allowance that I can still use for 24/24
so I have a couple of questions - 

1. is this figure correct
2.  I intend to retire in December 2025, and for 2025/2026, I intend to put in £4k per month from April '25 to December '25 (£36K), then around £55k bonus also in December '25 - CAN I DO THIS? 
   
3. I know the above will be over the limit, but can I use the 26/27 allowance when I'm not working ?
4. if I can't do (2) / (3) above, what would be the best approach

many thanks

Jim

To use 'carry forward', you need to be earning enough in the tax year you make the contributions to cover ALL the contributions you make that year. What were you earning in (say) 23/24 - hopefully at least £95,073? 

1. Need to know your salary for the current tax year
2. Not unless you have both the taxable earnings and the 'carry forward' to do so - and it seems unlikely from the very little info you've given
3. You can pay in £2,880 and it will be topped up to £3,600 - otherwise no tax relief available if you have no earnings in 26/27
4. Contribute as much as you can while you're earning

1. current salary is £80k with a 60k bonus at December '24
2. what other info do you need?
3. where do you get these numbers?
4 I intend to but worried what happens if I go over the allowance?

Jim

1. So absolute max of £140K contribution  in 24/25 including tax relief on personal contributions/any employer contributions
2. Salary history for the previous 3 tax years
3. That's the legislative position
4. You pay tax on the amount by which you exceed the allowance.

1. I thought max was £60k per year

You've been happily paying in more than that, presumably using carry forward (hopefully with the earnings in the tax year of contribution to support what you've done).

I think maybe he is thinking the Annual Allowance has always been £60k.  OP it was  £40k for tax years 2016/7 to 2022/3.  It only went up to £60k for 2023/4 and later

yes, got it now 

jimboger1

Sarahspangles said:

Grumpy_chap said:

Sarahspangles said:

The other rookie mistake I spot some high earners make is not considering their partner’s position if they are in a couple. It’s too late when someone is paying higher rate tax to realise their wife has several years of £12,570 personal allowance going to waste.

Except it is difficult to get pension contributions in for the lower earning spouse to ensure they have sufficient funds to draw down and use up that personal allowance in full.

Unless you know a way?

Hope this is not drawing the thread too far off topic.

It just needs to be more of a consideration in decisions. I can see why people don’t consider pension contributions a high priority when women (usually) take a career break for child rearing, as it’s a point when finances are squeezed. But I know women who have gone part time in their later years on the basis that’s now affordable if they stop contributing. So they miss out on employer contributions and don’t accrue enough pension to use their own allowance, and meanwhile their other half is paying more into their pension and may even pay higher rate tax on that in retirement.

Women also leave the workplace to provide elderly care, at which point they get NI credits. But if they are then bereaved, those end. Families rarely seem to see that as a shared issue, it’s not necessarily possible to take off (say) the years in which you’re 55 to 59 to provide care for an 85 to 89 year old, and after they pass away ro walk back into a job at 60. So there are potentially several years missing NI contributions.

so, if I use up my allowance, I can contribute part of my 60k xmas bonus to my wife's pension?

QrizB

jimboger1 said:

so, if I use up my allowance, I can contribute part of my 60k xmas bonus to my wife's pension?

Sort of.

Once you've paid tax and NI and have your bonus on your bank account, you can gift as much of it as you want to your wife.

Your wife can pay into her own pension with the same limits as you have for yours; tax relief limited to her relevant earnings, and annual contributions limited to the Annual Allowance.

jimboger1

QrizB said:

jimboger1 said:

so, if I use up my allowance, I can contribute part of my 60k xmas bonus to my wife's pension?

Sort of.

Once you've paid tax and NI and have your bonus on your bank account, you can gift as much of it as you want to your wife.

Your wife can pay into her own pension with the same limits as you have for yours; tax relief limited to her relevant earnings, and annual contributions limited to the Annual Allowance.

well that's the issue though, I dont want the bonus in my bank due to tax purposes, hence piling it into my pension

Grumpy_chap

jimboger1 said:

QrizB said:

jimboger1 said:

so, if I use up my allowance, I can contribute part of my 60k xmas bonus to my wife's pension?

Sort of.

Once you've paid tax and NI and have your bonus on your bank account, you can gift as much of it as you want to your wife.

Your wife can pay into her own pension with the same limits as you have for yours; tax relief limited to her relevant earnings, and annual contributions limited to the Annual Allowance.

well that's the issue though, I dont want the bonus in my bank due to tax purposes, hence piling it into my pension

Yes, but you cannot gift the money to your wife until you have received the money from your employer.  Your employer will not be able to pay part of your remuneration directly to your wife or your wife's pension.

Once you have received the money and gifted it to your wife, she can choose (subject to relevant limits) to pay that into her pension, or go on holiday or buy a handbag or shoes or car.

jimboger1

Grumpy_chap said:

jimboger1 said:

QrizB said:

jimboger1 said:

so, if I use up my allowance, I can contribute part of my 60k xmas bonus to my wife's pension?

Sort of.

Once you've paid tax and NI and have your bonus on your bank account, you can gift as much of it as you want to your wife.

Your wife can pay into her own pension with the same limits as you have for yours; tax relief limited to her relevant earnings, and annual contributions limited to the Annual Allowance.

well that's the issue though, I dont want the bonus in my bank due to tax purposes, hence piling it into my pension

Yes, but you cannot gift the money to your wife until you have received the money from your employer.  Your employer will not be able to pay part of your remuneration directly to your wife or your wife's pension.

Once you have received the money and gifted it to your wife, she can choose (subject to relevant limits) to pay that into her pension, or go on holiday or buy a handbag or shoes or car.

thanks for the help again