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What is the penalty for putting too much in a pension?
Jaguar_Skills
Posts: 557 Forumite
Hi all,
My salary has recently just increased to £150k and I also obtain income from a rental property.
I always try to maximise the pension contributions I make, i.e. get it to as near as £40k per annum as possible.
Given the above, I don't really understand the tapered annual allowance I must admit but can anyone confirm the penalty if I continue to deposit £40k per annum as my pay increases?
I am reluctant to work it all out completely as it is very complex and I don't really understand it, but I do want to try and get the maximum relief possible - which I obviously won't do if I just deposit say £20-£30k per annum?
Can anyone assist? I do appreciate the position I am in and I am not trying to be arrogant, I would just like some help.
If people think an IFA is needed I would be happy to go down that route if it is going to be beneficial?
My salary has recently just increased to £150k and I also obtain income from a rental property.
I always try to maximise the pension contributions I make, i.e. get it to as near as £40k per annum as possible.
Given the above, I don't really understand the tapered annual allowance I must admit but can anyone confirm the penalty if I continue to deposit £40k per annum as my pay increases?
I am reluctant to work it all out completely as it is very complex and I don't really understand it, but I do want to try and get the maximum relief possible - which I obviously won't do if I just deposit say £20-£30k per annum?
Can anyone assist? I do appreciate the position I am in and I am not trying to be arrogant, I would just like some help.
If people think an IFA is needed I would be happy to go down that route if it is going to be beneficial?
0
Comments
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You just need to do a small calculation, to work out the maximum you can put in.
Have a look at example C here: https://www.oldmutualwealth.co.uk/Adviser/literature-and-support/knowledge-direct/hot-topics/tapered-annual-allowance---examples/
If you contribute too much, then you will need to pay tax on the excess contributions via your tax return. As you also pay tax when you withdraw funds from the pension, then those excess funds will, in effect, be taxed twice. Not an attractive proposition.I am an Independent Financial Adviser. Any comments I make here are intended for information / discussion only. Nothing I post here should be construed as advice. If you are looking for individual financial advice, please contact a local Independent Financial Adviser.0
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