advise re higher rate tax payer and NHS pension

MKUX3

i am a hgher rate rate payer and work with the NHS.

i today received a letter rfom my accountant saying

"If you think you will be a 40% taxpayer in 07/08, you can reduce your liabiulity by MAKING A ONE OFF LUMP SUM PAYMENT TO A PENSION IN THE 07/08 YEAR BUT YOU NEED TO MAKE IT BY 5 APRIL

sHOULD I TRY AND PUT SOME MONEY INTO A NHS WORK PENSION

WILL THIS THEN REDUCE MY TAX POSITION

THANKS FOR HELP

jem16

MKUX3 wrote: »

i am a hgher rate rate payer and work with the NHS.

i today received a letter rfom my accountant saying

"If you think you will be a 40% taxpayer in 07/08, you can reduce your liabiulity by MAKING A ONE OFF LUMP SUM PAYMENT TO A PENSION IN THE 07/08 YEAR BUT YOU NEED TO MAKE IT BY 5 APRIL

sHOULD I TRY AND PUT SOME MONEY INTO A NHS WORK PENSION

Yes if you can. Do you already pay into the pension?

WILL THIS THEN REDUCE MY TAX POSITION

Yes it will.

MKUX3

no i dont pay into any sort of pension

thanks for advice

EdInvestor

The NHS pension is an excellent one and you should join it anyway.

DavidLaGuardia

As ED says you should be a member of the NHS scheme (if you are not already)

As for a lump sum you can make
i) additional voluntary contributions,
ii) buy addtional pension or
iii) put it into a separate personal/stakeholder pension.

Buying an addtional pension can be seen as expensive (i.e. depending on age it can have an equivalent low rate of return compared to invested options) but its advantage is a a guaranteed pension amount at retirement.

A separate personal pension has the advantage of benefits that can be taken at a different time earlier or later top the main scheme, but you make your choice and take the risk of investment.

AVCs are also investment linked but linked to the scheme so many now view either of the others as taking priority in planning.

All of these effectively cost you 60p in the pound up to the amount you pay higher rate tax and 78p (80p from 6th April 08) for anything in excess of that.

EdInvestor

In this case "catchup" via buying additional years in the NHS pension might be the best, depends on how old the OP is really and how long he has not been paying in..

justme111

EdInvestor wrote: »

In this case "catchup" via buying additional years in the NHS pension might be the best, depends on how old the OP is really and how long he has not been paying in..

hi.
you seem to know about the subject, hope you will not mind me asking.
i have paid nhs scheme for 2 years, I'm 34, selfemployed. would it be worthwhile buying additional years? I have received a letter stating i can buy 13 years ( or so, don't remember exactly). I have seen an IFA who told me the benefit will be small and calculated that with my declared pentionable pay ( £30000) I would have to pay about £100 additional per month and it would give me about £140 additional per month when receiving a pension, does it seem to be the case? I'd happily check it again with him as our meeting was short and not very well coordinated due to unexpected changes in my timetable for that day but he does not reply his phone and a deadline for purchasing additional years is 31/03/08. What would happen if I cease to pay nhs contributions in let's say 6 years, what I would get in that case once retired?