New pension and not working

DRS1

Marcon said:

DRS1 said:

RaiRai25 said:

Hello Everyone

I was wondering if you can help with the following.

 

I am 50 and not currently employed. What are my options if I wish to pay into a pension. A job would help.

1.      I believe you are entitled to pay £2880 in a pension and the government will top up 25%. Yes If so do I pay the full amount No and have to apply for a refund No or does the pension company just add it on immediately Not immediately They get it from HMRC before it can be invested and buy 25% more and then claim the money from the government?

2.      I believe you can pay in unused contributions for the previous 3 years. Only if you have a well paid job Does this mean that I can pay in 2880 x 4? No I do not currently have a private pension, just the state pension and an NHS pension from a number of years ago that will pay 4k a year and I have been told to leave as it is index linked

3.      What type of pensions can I open? SIPP or another? Yes

4.      If I got a partime job paying say 8k pa could I put the full amount into a private pension? Yes.  In theory but if your contributions are by salary sacrifice you can only sacrifice down to the national minimum wage

5.      If you paid all your wage into a pension how does this work regarding NI contributions. If you salary sacrifice it saves on NICs but other methods of contributing don't.  Are they taken out first or do you get credits?

Many thanks in advance

You should have a read of this forum.  It will give you most of the answers to your questions.

Not everybody wants (or needs) to plough through the many thousands of threads on this forum, especially those with little knowledge of pensions. Sometimes even spotting that someone else has actually asked the same question is less than straightforward, so it's not unreasonable for newcomers to ask rather than research.

That said, I agree with your comment!

and, to be fair, I had given answers to the questions but you need some text under the quoted section.

DRS1

QrizB said:

You seem to be keen to make this complicated, considering your current situation!

RaiRai25 said:

I am 50 and not currently employed. What are my options if I wish to pay into a pension.

If you've had no earned income all tax year (since 6th April 2024) you are limited to contributing £2880 to a relief-at-source (RAS) pension. You will receive 25% tax relief, £720, making your gross pension contribution £3600.

If I got a partime job paying say 8k pa could I put the full amount into a private pension?

If your earnings this tax year are £8k gross, and you have no other income, you'll pay no tax. (Whether you pay NI or not will depend on how many weeks the £8k is spread over.) You'll be able to pay £6400 into a RAS pension and receive £1600 tax relief, total gross contribution £8000.

Salary sacrifice on an £8k pa job is likely to leave you in a worse position than RAS contributions would.

I [get a job paying] 40k pa.

If you were to get a job paying £40k pa, and your employer offers salary sacrifice, then you would be able to sacrifice down to minimum wage. Let's say NMW for your working pattern works out as £20k pa. You could salsac £20k into your pension. The remaining £20k would be paid to you net of tax an NI.

You could then pay £16k into a RAS pension and receive £4k tax relief, taking your RAS contribution up to £20k.

and if you salary sacrifice the £20k as suggested that means your wage becomes £20k and the total income is £40k and so you don't pay any higher rate tax.  So nothing to reclaim.

RaiRai25

Thanks everyone for the replies it is very helpful

I did look through the threads but couldn't see anything asking me exactly what I wanted to know. Maybe I missed certain posts. 

One quesrion I asked above which relates to my circumstances... 

If I earn 40k and get 20k passive income how does it work. 
Could I take my wage 40k minus tax and then pay it into my own Sipp?  Would I pay in 32k and get a refund of 8k
My total income would be 60k I would be classed as higher rate, would I have to claim the higher rate tax back through SA

Once again many thanks

DRS1

The 8K would not be a refund - it would go into the SIPP from HMRC.

The amount you contribute (plus the tax relief) ie £40k would be added to your threshold for Higher Rate Tax so instead of being £50270 it would be £90270 so you would not pay any Higher Rate Tax.

I assume you pay tax on the passive income via self assessment

RaiRai25

DRS1 said:

The 8K would not be a refund - it would go into the SIPP from HMRC.

The amount you contribute (plus the tax relief) ie £40k would be added to your threshold for Higher Rate Tax so instead of being £50270 it would be £90270 so you would not pay any Higher Rate Tax.

I assume you pay tax on the passive income via self assessment

Yes to the last question

Many thanks