Should I top up?

HIA

I have retired early and am in receipt of pensions from NHS  and USS. I took advice from a financial advisor last year when I took my pensions and wanted to know what to do with the lump sums. At his suggestion I opened a Scottish widows private pension. Should I add to that again this financial year in order to get the govt top up and when/how should I look at taking the money out of this pension? I have no experience of private pensions from my working life. State pension is still 6 years away.

Dazed_and_C0nfused

HIA said:

I have retired early and am in receipt of pensions from NHS  and USS. I took advice from a financial advisor last year when I took my pensions and wanted to know what to do with the lump sums. At his suggestion I opened a Scottish widows private pension. Should I add to that again this financial year in order to get the govt top up and when/how should I look at taking the money out of this pension? I have no experience of private pensions from my working life. State pension is still 6 years away.

If you are a basic rate payer now and will be in all future years there is a benefit but it's relatively small in the overall scheme of things.

You can add £2,880 and that has £720 tax relief added.

When you come to take the money out 25% will be tax free (assuming the upper limit of £260k+ for tax free cash isn't relevant) and the rest taxed at 20%.

End result is you started with £2,880 and can end up with £3,060.  A 6.25% return.

The above assumes you find a provider where this can be done without any fees.

Marcon

HIA said:

I have retired early and am in receipt of pensions from NHS  and USS. I took advice from a financial advisor last year when I took my pensions and wanted to know what to do with the lump sums. At his suggestion I opened a Scottish widows private pension. Should I add to that again this financial year in order to get the govt top up and when/how should I look at taking the money out of this pension? I have no experience of private pensions from my working life. State pension is still 6 years away.

There's no 'magic' answer to this any more than there is to any other savings product, so 'when you need it' and 'look at the provider's website' for information on how.

MallyGirl

Note that you cannot contribute more gross (your contribution plus the tax relief) than you earn and pension income doesn't count. If you don't earn anything and just receive pension income then £3600 gross is the max allowed (as per the calculation above)

xylophone

Have you obtained a state pension forecast?

https://www.gov.uk/check-state-pension

HIA

Yes thanks, topped up a year by claiming for childcare I provide so I can't top up anymore.