Private Pension Contributions

JamesPL

Hello, firstly hope you're all well & apologies in advance if this question has already been asked. I have around £36k in savings from when my mum passed away a few years ago, I always told her my dream was to give up work as soon as I can, so I'm retiring early at the age of 61 in late September. I've got a Santander Edge Up account which pays interest on up to £25k, I currently have £20k in a fixed rate 1 year ISA which matures early June paying 4.15%, it will resort to being a standard ISA. I've decided to start paying £2000 a month into my private pension which is approaching £90k, after a year of living on my savings, I'll take the 25% tax free (after paying the 3% charge) and take around £850 a month so that I'm below the tax threshold, my question is, can I continue to pay £2k a month into my account when I'm no longer earning a wage before I start drawing on my private pension? 
If anyone else has any ideas how I should invest my savings, please feel free to express an opinion, I know pensions aren't doing great at the moment but I thought the 20% the government add make it worth while, hopefully they will rally once Trump has been sorted out. 

Dazed_and_C0nfused

JamesPL said:

Hello, firstly hope you're all well & apologies in advance if this question has already been asked. I have around £36k in savings from when my mum passed away a few years ago, I always told her my dream was to give up work as soon as I can, so I'm retiring early at the age of 61 in late September. I've got a Santander Edge Up account which pays interest on up to £25k, I currently have £20k in a fixed rate 1 year ISA which matures early June paying 4.15%, it will resort to being a standard ISA. I've decided to start paying £2000 a month into my private pension which is approaching £90k, after a year of living on my savings, I'll take the 25% tax free (after paying the 3% charge) and take around £850 a month so that I'm below the tax threshold, my question is, can I continue to pay £2k a month into my account when I'm no longer earning a wage before I start drawing on my private pension? 
If anyone else has any ideas how I should invest my savings, please feel free to express an opinion, I know pensions aren't doing great at the moment but I thought the 20% the government add make it worth while, hopefully they will rally once Trump has been sorted out. 

You need to consider a few things,

1.  It is normally the whole tax year that is important, stopping earning in September doesn't prevent you from contributing after that.  But in the current year you are probably going to be limited by what you earn (to September).

2.  Once you take taxable income from a DC pension you trigger the Money Purchase Annual Allowance (MPAA) which immediately limits your future contributions to £10k per tax year (including the basic rate relief the pension company adds).

3.  Unless you start work again* you will be limited to £3,600/year (gross from 6 April 2026
*and earn more than £3,600

Possibly more importantly than all that though is why are you paying 3% to access your own money 😳

El_Torro

If you take the 25% tax free and nothing taxable then yes, you can continue to pay into your pension, subject to the normal limits. If you took any taxable money then you could still pay in to the pension, though the limits would be stricter. Look up the rules on MPAA. 

Remember that regardless you can't pay more into a pension than your earnings for that tax year. Pension income doesn't count as eligible earnings. If you have no earnings you can still pay in £2,880 a year (which with tax relief is topped up to £3,600). 

One option would be to transfer your Cash ISA to a Stocks & Shares ISA. You will have the same options in what to invest in as a pension, though of course the rules about tax are different. 

JamesPL

Just to clarify, I was wondering whether I can still pay £2k a month in between when I stop working in late September 2025 and when I take the 25% draw down in early October 2026. I've spoke to Santander about transferring the £20k from my ISA to another Santander ISA but they didn't seem to have much to offer anywhere near as good as the Governments 20% increment.

dunstonh

Just to clarify, I was wondering whether I can still pay £2k a month in between when I stop working in late September 2025 and when I take the 25% draw down in early October 2026.

Contributions are measured by tax year. Not the dates within the tax year.   So, when you get your P45 in September, the gross salary, minus any contributions made to date in this tax year is what you can pay to the pension.  It doesnt matter if you do it monthly or a one off.  As long as you don't exceed your gross salary.

What you can contribute in the 26/27 tax year will be limited to £3600 over the whole tax year.

 I've spoke to Santander about transferring the £20k from my ISA to another Santander ISA but they didn't seem to have much to offer anywhere near as good as the Governments 20% increment.

Pensions get 20% tax relief.  its not an increment.   If you want to equate the relief to an increment, then its 25%.

QrizB

JamesPL said:

..., I'll take the 25% tax free (after paying the 3% charge) ...

Who is charging you 3%, and what exactly do you get for it?

JamesPL

QrizB said:

JamesPL said:

..., I'll take the 25% tax free (after paying the 3% charge) ...

Who is charging you 3%, and what exactly do you get for it?

my pension is with Weslyan, they charge 3% to change it to a 'flexible' pension

Dazed_and_C0nfused

JamesPL said:

QrizB said:

JamesPL said:

..., I'll take the 25% tax free (after paying the 3% charge) ...

Who is charging you 3%, and what exactly do you get for it?

my pension is with Weslyan, they charge 3% to change it to a 'flexible' pension

How much is it to transfer it to a different provider?

JamesPL

Dazed_and_C0nfused said:

JamesPL said:

QrizB said:

JamesPL said:

..., I'll take the 25% tax free (after paying the 3% charge) ...

Who is charging you 3%, and what exactly do you get for it?

my pension is with Weslyan, they charge 3% to change it to a 'flexible' pension

How much is it to transfer it to a different provider?

I don't know, I've just messaged them

Albermarle

JamesPL said:

Dazed_and_C0nfused said:

JamesPL said:

QrizB said:

JamesPL said:

..., I'll take the 25% tax free (after paying the 3% charge) ...

Who is charging you 3%, and what exactly do you get for it?

my pension is with Weslyan, they charge 3% to change it to a 'flexible' pension

How much is it to transfer it to a different provider?

I don't know, I've just messaged them

Just for info. It is normally very easy nowadays to open a new pension online and transfer another pension into it for zero cost. 
However I think Wesleyan are one of the more old style providers ( as can be seen by them charging 3% for you to access your pension)  so maybe there will be a charge.
At least one of the pension providers often mentioned on this forum ( Fidelity) will refund any exit charges if you transfer to them, although others may also do the same ( I don't know ) . 

JamesPL

Dazed_and_C0nfused said:

JamesPL said:

QrizB said:

JamesPL said:

..., I'll take the 25% tax free (after paying the 3% charge) ...

Who is charging you 3%, and what exactly do you get for it?

my pension is with Weslyan, they charge 3% to change it to a 'flexible' pension

How much is it to transfer it to a different provider?

Hello, looks like theres no charge, here's my answer

Good morning, There are no penalties or fees for transferring your pension to another provider. If you wish to do so, please contact the other provider and instruct that they send us Pension transfer request via Origo.