Financial position retirement advice request

DjangoUnchained

Thank you for all your helpful comments, i do find it all complicated but i will slowly get my head round it.

Marcon

https://forums.moneysavingexpert.com/discussion/comment/82178191#Comment_82178191

EVERYONE (including those of us who've been working in pensions for decades!) finds it complicated, for the simple reason it IS complicated. Do please post again here whenever you have questions - there's likely to be someone who can help, and it could save you wading through a whole load of stuff which may or may not give you the answer you need…

Triumph13

Probably the first thing to do is to start putting 100% of your earnings for this tax year into your pension and live off savings instead, eg if you earn £30k you'd make total net contributions of £24k and HMRC would add the other £6k.

I would then suggest you seriously consider an annuity to get your guaranteed income a bit closer to your £20k number. If you got your pension up to say £150k then you could do something like take 25% tax free, leave enough behind to draw the difference between the personal allowance and annuity income for the years until the SP starts and buy an annuity with the rest.

MarlowMallard

https://forums.moneysavingexpert.com/discussion/comment/82178453#Comment_82178453

Probably not sensible to put 100% of earnings… you should take at least £12,570 from salary at 0% tax, and pay the remainder into pension. If you put 100% into pension you're not saving any tax on the £12,570, you can't get it back out until 57, and you'll probably end up paying income tax on it if you take out after state pension age.

kempiejon

https://forums.moneysavingexpert.com/discussion/comment/82178516#Comment_82178516

Is that right ? 100% of salary was my plan as I think I get the tax I didn't pay on £12570 added automatically too.

MallyGirl

https://forums.moneysavingexpert.com/discussion/comment/82178524#Comment_82178524

it isn't right. You get 20% tax relief even if you didn't pay tax on that £12570

NoMore

https://forums.moneysavingexpert.com/discussion/comment/82178516#Comment_82178516

Despite not paying tax on your 12570 allowance putting it in a pension is very advanatageous because you still get tax relief within the pension on it. You seem to think you don't. The amount of tax relief you get is based on your relevant earnings not the amount of tax you pay.

QrizB

If you put 100% into pension you're not saving any tax on the £12,570

As others have said, that's not true; you'll still get tax relief on it if you pay it into a RAS pension scheme.

kermchem

I will help with some real but slightly rounded numbers that I have posted before:

Take a salary of about £30K, this person pays about £1500 into employer pension (not sal sac), leaving taxable pay of £28.5K. Tax is £3K, NI is £1300, so take home about £23.2K. If the person then feeds 80% of £28.5K taxable pay to SIPP, so £22.8K, then tax relief adds £5.7K. Hence pension fund gets back all the tax paid, all the NI paid and a bit more. Yes, you can get tax relief on the personal allowance!
Only works if there is another household income to live on, and the other income is not able to be contributed to pension (i.e., it is savings or a pension).

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82178516#Comment_82178516

It is always worth noting that the amount of tax you actually pay, and the amount of tax relief you can get on pension contributions are two unrelated items.