Over annual allowance

NoMore

I'm sorry but unless they get that £2k out tax free from the pension, they are in a worse position than if they had avoided AA just took it as salary and stick it in an ISA.

£2000 in Pension, AA charge of 40% means it becomes £1200, on withdrawal at 25% tax free and rest taxed at 20 % you get £1020, at 40% £840.

If they take the £2000 as pay now they get £1160.

Your correct it's not much difference at 20% tax withdrawal but it is a worse place that avoiding the AA charge.

Problem is once you have gone over your available AA, its too late to do anything about it.

Bemr

Problem is once you have gone over your available AA, its too late to do anything about it.

Well I’ve technically not gone over yet (next pay date is 2 weeks off) which was the reason for me starting this thread ;)

Aylesbury_Duck

https://forums.moneysavingexpert.com/discussion/comment/81926915#Comment_81926915

Is that right? The £2000 doesn't "become" £1200, it's still £2000 (I accept that it's cost a £800 tax charge but that hasn't changed the pension value). And when 25% of that £2000 is taken tax free and the rest taxed at 20% it's worth £1200, not £1020. Taxed at 40% it's worth £900, not £840.

Or am I tying myself in mental math knots here?!

Aylesbury_Duck

https://forums.moneysavingexpert.com/discussion/comment/81926931#Comment_81926931

Will your employer allow an extraordinary late change?

Bemr

https://forums.moneysavingexpert.com/discussion/comment/81926913#Comment_81926913

I don’t think I’m missing it, I accounted for the £100 in the pension in my last post. Can you provide a calculation to demonstrate where I’ve gone wrong?

Bemr

https://forums.moneysavingexpert.com/discussion/comment/81926947#Comment_81926947

No, I already asked them if they could amend it manually and they said no

DRS1

I know you have asked "your employer" but have you asked the right person at your employer - that is why I suggested payroll (ie the people who actually process the payments). Obviously I don't know how your place works and you may not be able to speak to them at all and even if you could there may be nothing they could do. So it may be grasping at straws but sometimes there is something to be said for going to the people who actually DO things instead of the High Panjandrums.

Bemr

https://forums.moneysavingexpert.com/discussion/comment/81926955#Comment_81926955

I work for a large company so trying to find the right person for specific tasks is difficult at the best of times. I’ve done what I can and HR told me they escalated so I’m out of options there.

I assumed my pension provider can’t do anything (like refuse the contribution or hold the payment over to next year) so haven’t bothered talking to them.

NoMore

https://forums.moneysavingexpert.com/discussion/comment/81926941#Comment_81926941

So you start with minus 800 compared to +1200 if you avoid the AA or you can start with 2000 in the ISA. So ISA still wins. Doesn't really matter if scheme pays or you, you still pay it.

Just because its in a pension doesn't automatically make it better, that's only if you get the tax advantage which the AA negates.

In your case with DB PIA, I sympathise that it can be hard not to break the AA due to PIA issues but just be aware that you do not end up in a neutral position when you do.

Aylesbury_Duck

Yes, the DB revaluation is a bit of a guessing game….thankfully it's usually a matter of a couple of hundred quid. One year it was £2k.