Additional private pension

MouldyOldDough

I am 61 - drawing ill health retirement pensions from 2 different government employers

My State Pension is on track for full payout in 5 years time - my SP contributions are being made up by DWP.

Is it worth (or even possible) for me to invest additional funds now - in an additional private pension - in order to gain from tax ??

I do (just) pay income tax on my present income.

molerat

You can pay £2880 into a SIPP and receive a £720 tax top up.  When withdrawing 25% of the £3600 is tax free and £2700 taxable.  So at basic rate you would pay £540 tax on that £2700.  £3600 - £540 = £3060 - £2880 = £180 up.  You could open one now for 24-25 and pay another £2880 in after 6 April for 25-26.  Many of us of a certain age do the £2880 in £3600 out every year, an easy £180, better than bank interest as that 6.25% uplift is something like a 25% AER as it is in the SIPP for a relatively short time.

Albermarle

Income from pensions does not count when calculating how much you can add to a new pension and get tax relief. The fact you are actually paying some income tax is not relevant.
As detailed in the previous post you are limited to adding £2880 when you have no 'relevant income' 

MouldyOldDough

So I can invest £2880 pa until 2030 ?

Which I could then withdraw (tax free) in 2030 - and gain 5 * £720 tax ?

so that's a gain of £3600 tax free ?

Am I correct in this ?

Sam_666

MouldyOldDough said:

So I can invest £2880 pa until 2030 ?
> Until you are pension age.

Which I could then withdraw (tax free) in 2030 - and gain 5 * £720 tax ?
>No, you can withdraw it anytime, 75% subject to tax.

so that's a gain of £3600 tax free ?
>That depends on total income and allowance that year, which can change.

Am I correct in this ?

See above.

molerat

Which I could then withdraw (tax free) in 2030 - and gain 5 * £720 tax ?

Where did you get that ideas from ?  

As with all DC pensions, on withdrawal 25% is tax free and 75% is taxable.  The gain for a basic rate tax payer would be 5 x £180.  Taking it all in one go though could push you in to a different tax band, that 75% taxable is added to your other income.

Dazed_and_C0nfused

MouldyOldDough said:

So I can invest £2880 pa until 2030 ?

Which I could then withdraw (tax free) in 2030 - and gain 5 * £720 tax ?

so that's a gain of £3600 tax free ?

Am I correct in this ?

No idea where you got that idea from.

25% will be "tax free".  The remaining 75% is taxable income. 

The amount of tax payable on the taxable income will depend what other taxable income you have in the tax year you take the money out of the pension.

Marcon

Sam_666 said:

MouldyOldDough said:

So I can invest £2880 pa until 2030 ?
> Until you are pension age.

See above.

Not sure what you mean by 'pension age' but OP can continue to pay in £2,880 pa and get basic rate tax relief added to the 'pot' until they are 75 - so for 14 years, given they are 61 now.

DRS1

So I can invest £2880 pa until 2030 ?

I think you can do it until age 75.

QrizB

DRS1 said:
I think you can do it until age 75.

Off-topic, but has there been any suggestion that Gov't might increase this to 77, in conjunction with increasing minimum pension age to 57?

Sarahspangles

QrizB said:

DRS1 said:
I think you can do it until age 75.

Off-topic, but has there been any suggestion that Gov't might increase this to 77, in conjunction with increasing minimum pension age to 57?

Not that I’ve seen, and there appears to be no intention for the Minimum Pension Age (55 rising to 57) to be linked dynamically to the State Pension Age (65 rising to 68) either.