Redundancy payment into pension

dharm999

NoMore said:

dharm999 said:

To work out how much is available to put into a pension

His redundancy pay will be £102k of relevant taxable income, so he could put 102k (Gross) of his redundancy pay into Pension as long as he has enough AA. His previous earnings to date don't change this.

Of course, getting mixed up between earnings and annual allowance

dharm999

Quorden said:

dharm999 said:

What will your taxable pay ytd be when you leave?  Have you paid any of the £70k in to a pension already, if so, that will reduce how much of the redundancy you can put in to your pension.

in theory, of the £132k, £30k will be tax free, and then of the £102k remaining, you can ask that an amount equal to your taxable pay at leaving less pension contributions at point of leaving be paid in to your pension.  I’m making assumptions about whether any contributions were made by a salary sacrifice arrangement, but you get the general gist of how to work out how much of£70k102k to pay in to your pension.

The £70k is my estimate of what my taxable pay will be end of September which will be my leaving date, nothing can do change that date. I will only have paid in £20k into my pension through salary sacrifice by that point as well.  So that will leave me about £40k to pay into the pension to take me up to my annual allowance.

How much was paid in to your pension, in the previous two tax years, as that determine how much of your annual allowance you have left to use in this tax year

Quorden

dharm999 said:

Quorden said:

dharm999 said:

What will your taxable pay ytd be when you leave?  Have you paid any of the £70k in to a pension already, if so, that will reduce how much of the redundancy you can put in to your pension.

in theory, of the £132k, £30k will be tax free, and then of the £102k remaining, you can ask that an amount equal to your taxable pay at leaving less pension contributions at point of leaving be paid in to your pension.  I’m making assumptions about whether any contributions were made by a salary sacrifice arrangement, but you get the general gist of how to work out how much of£70k102k to pay in to your pension.

The £70k is my estimate of what my taxable pay will be end of September which will be my leaving date, nothing can do change that date. I will only have paid in £20k into my pension through salary sacrifice by that point as well.  So that will leave me about £40k to pay into the pension to take me up to my annual allowance.

How much was paid in to your pension, in the previous two tax years, as that determine how much of your annual allowance you have left to use in this tax year

for 2024 - 25, it was £30k and for 2023 - 2024 it was £45k.  Think this means I can put another £45k on top of this years remaining allowance if my math, and understanding, are correct?

MallyGirl

Sounds right. I Sal sac'ed everything from my settlement (after deducting the £30k) I could while still meeting the NLW requirement. I didn't get enough to need carry forward but I don't see why you couldn't use it. I just made my intentions very clear to the payroll/pension people. Refunded holiday didn't count towards NLW so I ended up pay £100 tax and no NI so I was happy with that

kimwp

Quorden said:

dharm999 said:

Quorden said:

dharm999 said:

What will your taxable pay ytd be when you leave?  Have you paid any of the £70k in to a pension already, if so, that will reduce how much of the redundancy you can put in to your pension.

in theory, of the £132k, £30k will be tax free, and then of the £102k remaining, you can ask that an amount equal to your taxable pay at leaving less pension contributions at point of leaving be paid in to your pension.  I’m making assumptions about whether any contributions were made by a salary sacrifice arrangement, but you get the general gist of how to work out how much of£70k102k to pay in to your pension.

The £70k is my estimate of what my taxable pay will be end of September which will be my leaving date, nothing can do change that date. I will only have paid in £20k into my pension through salary sacrifice by that point as well.  So that will leave me about £40k to pay into the pension to take me up to my annual allowance.

How much was paid in to your pension, in the previous two tax years, as that determine how much of your annual allowance you have left to use in this tax year

for 2024 - 25, it was £30k and for 2023 - 2024 it was £45k.  Think this means I can put another £45k on top of this years remaining allowance if my math, and understanding, are correct?

Think so, although I think it's the last three tax years that you can carry over unused allowance, then it's limited by your pay this year - you can only salary sacrifice down to min wage - but you could put anything you receive into a sipp and get the tax back, bearing in mind the upper limits. I'm not sure how redundancy counts towards the upper limit (normally your gross salary limits the max that can go into a pension without tax being applied, including any tax relief, employer contributions). But it sounds like others know.

70k for six months, nice!! (Boo for redundancy, though fab pay off- Mine would be about 10% of a year's salary, based on the last round of redundancies)