Should I put an inhertiance into pension pot?

LongoBongo

After a bit of inheritance/pension advice if I may:

I’m in my mid 40s and just inherited about £100K that I don’t particularly “need.” I don’t have any debts, cars or mortgage to pay, kids too young to need significant lump sums at this stage in life., maybe in 10 years.

I’ve been self-employed for a while and don’t have a great pension for someone who wants to retire by 60 (15 years), it's less than £200K. My company pays into it monthly with the odd extra bonus payment when possible, all in all about £10,000 a year. I don’t put any personal amounts into the pension. I earn £12,500 PAYE.

My question is – should/could I put some of that inheritance into the pension and would it be subject to any government “top-up” and is there a maximum amount I can transfer into it? Or should I just leave my pension to build as it currently does and put the inheritance elsewhere?

Figures are approximations and fully appreciate how fortunate I am relative to many others. I will seek advice from a financial advisor rather than “random person on internet” but just wanted to be a bit more informed before I went into such a meeting.

Many thanks

Marcon

LongoBongo said:

After a bit of inheritance/pension advice if I may:

I’m in my mid 40s and just inherited about £100K that I don’t particularly “need.” I don’t have any debts, cars or mortgage to pay, kids too young to need significant lump sums at this stage in life., maybe in 10 years.

I’ve been self-employed for a while and don’t have a great pension for someone who wants to retire by 60 (15 years), it's less than £200K. My company pays into it monthly with the odd extra bonus payment when possible, all in all about £10,000 a year. I don’t put any personal amounts into the pension. I earn £12,500 PAYE.

My question is – should/could I put some of that inheritance into the pension and would it be subject to any government “top-up” and is there a maximum amount I can transfer into it? Or should I just leave my pension to build as it currently does and put the inheritance elsewhere?

Figures are approximations and fully appreciate how fortunate I am relative to many others. I will seek advice from a financial advisor rather than “random person on internet” but just wanted to be a bit more informed before I went into such a meeting.

Many thanks

Are you self employed, or employed by your company? I suspect the latter, if the company is making contributions to your pension scheme.

You can make personal contributions of up to the amount you earn. Your company can contribute up to £60K per annum to your pension (minus any personal contributions), assuming it has the profits to do so. There may also be scope for 'carry forward' if your company does that, meaning it (not you) could pay more than £60K in the tax year.

There's nothing in your question which would help with the 'should' aspect of your question. Back to the old chestnut of 'it depends...'.

Linton

LongoBongo said:

After a bit of inheritance/pension advice if I may:

I’m in my mid 40s and just inherited about £100K that I don’t particularly “need.” I don’t have any debts, cars or mortgage to pay, kids too young to need significant lump sums at this stage in life., maybe in 10 years.

I’ve been self-employed for a while and don’t have a great pension for someone who wants to retire by 60 (15 years), it's less than £200K. My company pays into it monthly with the odd extra bonus payment when possible, all in all about £10,000 a year. I don’t put any personal amounts into the pension. I earn £12,500 PAYE.

My question is – should/could I put some of that inheritance into the pension and would it be subject to any government “top-up” and is there a maximum amount I can transfer into it? Or should I just leave my pension to build as it currently does and put the inheritance elsewhere?

Figures are approximations and fully appreciate how fortunate I am relative to many others. I will seek advice from a financial advisor rather than “random person on internet” but just wanted to be a bit more informed before I went into such a meeting.

Many thanks

If you total earnings are £12500/year the maximum you can put into your pension is £10K/year which will be topped up to create a £12500 gross contribution.  So useful but not a major immediate deduction from the inheritance.  You could also make a contribution to your spouse's (if any) pension. 

A pension contribution is the most tax advantageous action you can take since you get the tax rebate even though you paid no tax.

dunstonh

I’ve been self-employed for a while and don’t have a great pension for someone who wants to retire by 60 (15 years), it's less than £200K. My company pays into it monthly with the odd extra bonus payment when possible, all in all about £10,000 a year. I don’t put any personal amounts into the pension. I earn £12,500 PAYE.

If I read that correctly, you are not self employed.   You may be a shareholding director of "own" company but you are not self employed.

What dividend level do you take?  This is key question 

My question is – should/could I put some of that inheritance into the pension and would it be subject to any government “top-up” and is there a maximum amount I can transfer into it? Or should I just leave my pension to build as it currently does and put the inheritance elsewhere?

Potentially £220,000  but whether you should or its sensible to do so is a different matter.

Plus, my answer comes with qualifiers, as you are looking at employee contribution levels, and the answer above is based on that.  However, a shareholder director wouldn't use employee contributions in most cases.  They would use employer contributions.   And for money outside of the company, they would typically adjust their dividend take accordingly

Mark_d

LongoBongo said:

After a bit of inheritance/pension advice if I may:

I’m in my mid 40s and just inherited about £100K that I don’t particularly “need.” I don’t have any debts, cars or mortgage to pay, kids too young to need significant lump sums at this stage in life., maybe in 10 years.

I’ve been self-employed for a while and don’t have a great pension for someone who wants to retire by 60 (15 years), it's less than £200K. My company pays into it monthly with the odd extra bonus payment when possible, all in all about £10,000 a year. I don’t put any personal amounts into the pension. I earn £12,500 PAYE.

My question is – should/could I put some of that inheritance into the pension and would it be subject to any government “top-up” and is there a maximum amount I can transfer into it? Or should I just leave my pension to build as it currently does and put the inheritance elsewhere?

Figures are approximations and fully appreciate how fortunate I am relative to many others. I will seek advice from a financial advisor rather than “random person on internet” but just wanted to be a bit more informed before I went into such a meeting.

Many thanks

Pension is certainly a good place to put the money if you're sure you won't need it until retirement.  But the total gross amount you can pay in each year is limited by your taxable earnings.

So I'd pay in the max pension contributions this year, then max the S&S ISA.  The rest could sit in easy access savings to let the interest supplement your regular income.

dunstonh

So I'd pay in the max pension contributions this year, then max the S&S ISA.  The rest could sit in easy access savings to let the interest supplement your regular income.

Seeing as the maximum potential contribution is £220,000 (subject to caveats once more detail is known), there won't be anything left for the ISA.

This scenario is a bit more complicated as details such as profit and dividends need to be known as it will likely require an adjustment and redirect for a period that goes beyond the question actually asked.

LongoBongo

Thanks for the comments. Yeah, Director of Ltd company, just pay the minimum monthly then about 20K in dividends each year depending how things are going.