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  • FIRST POST
    • stationairy
    • By stationairy 25th May 19, 2:26 PM
    • 212Posts
    • 9Thanks
    stationairy
    New job huge raise
    • #1
    • 25th May 19, 2:26 PM
    New job huge raise 25th May 19 at 2:26 PM
    Just gained a big promotion which has taken my salary from 30k to 57.5k and after reading on line it appears I will move up tax amounts and I wondered if it would be worth putting more in to my pension or something else because if I did the money I would be putting in would be tax I'm saving ?

    I currently put 13 % into my pension which my employer matches up to 10% but I was a late starter to my pension not joining till I was 30 and am now 40
Page 1
    • Dazed and confused
    • By Dazed and confused 25th May 19, 3:00 PM
    • 4,897 Posts
    • 2,548 Thanks
    Dazed and confused
    • #2
    • 25th May 19, 3:00 PM
    • #2
    • 25th May 19, 3:00 PM
    Salary is often irrelevant for tax purposes. It is taxable pay/salary/wage which counts.

    So if your salary is 57.5k and you are contributing 13% to a net pay pension scheme your taxable salary would be 50,025. This is the figure which would appear on your P60 (and payslips).

    The amount of higher rate tax paid would depend on where you are resident for tax purposes and what other taxable income you have.

    But contributing extra into a pension may well reduce your tax liability. Or at the very least benefit from the 25% top up in a "relief at source" scheme.
    • xylophone
    • By xylophone 25th May 19, 3:12 PM
    • 29,808 Posts
    • 18,240 Thanks
    xylophone
    • #3
    • 25th May 19, 3:12 PM
    • #3
    • 25th May 19, 3:12 PM
    Does your pension scheme use "relief at source" or "net pay"?
    • Socajam
    • By Socajam 25th May 19, 3:33 PM
    • 348 Posts
    • 449 Thanks
    Socajam
    • #4
    • 25th May 19, 3:33 PM
    • #4
    • 25th May 19, 3:33 PM
    I would put aside:
    one year's emergency fund;
    one year's life happens fund;
    clear any debts that you may have; and
    then concentrate on the pension.
    Last edited by Socajam; 25-05-2019 at 3:38 PM.
    • cloud_dog
    • By cloud_dog 26th May 19, 7:28 AM
    • 4,267 Posts
    • 2,625 Thanks
    cloud_dog
    • #5
    • 26th May 19, 7:28 AM
    • #5
    • 26th May 19, 7:28 AM
    Just gained a big promotion which has taken my salary from 30k to 57.5k and after reading on line it appears I will move up tax amounts and I wondered if it would be worth putting more in to my pension or something else because if I did the money I would be putting in would be tax I'm saving ?

    I currently put 13 % into my pension which my employer matches up to 10% but I was a late starter to my pension not joining till I was 30 and am now 40
    Originally posted by stationairy
    As D and C points out, you are only 25 in to the 40% tax bracket (assuming no additional BIK aspects to consider)

    My question to you would be... What is your financial situation, do you feel/want to be doing more toward retirement (as opposed to longer term/accessible savings/investments)?

    Whilst still young do you feel you would like to retire earlier than SP age?

    Have you an idea what your pot might be worth when you want to use it?

    Have you an idea of how much you might want to be having in retirement, i.e. per month?

    Does your company pay you within a salary sacrifice scheme?
    Personal Responsibility - Sad but True

    Sometimes.... I am like a dog with a bone
    • stationairy
    • By stationairy 26th May 19, 12:15 PM
    • 212 Posts
    • 9 Thanks
    stationairy
    • #6
    • 26th May 19, 12:15 PM
    • #6
    • 26th May 19, 12:15 PM
    Cheers all pensions comes out before tax is taken

    Currently my employer matches my contribution upto 10%,so at present I put int 13 and they 10

    On top of my salary too I get a 15% bonus but this vary depending on company performance and this has only ever paid between 60-80 %, of the 15%

    As I started late and as I was on a reduced amount my pension pot is only about 30K

    Have no real debt apart from mortgage (can over pay by 17k a year if this is a better option) and our family car

    I was just thinking if I increased pension contributions and it meant say I paid a extra 5% but as its before tax it's only like paying 2.5% extra because of tax saving it may be worth it

    But if I have read it wrong and it's not like that and I would be better paying tax and banking money for rainy day I will do that
    • Dazed and confused
    • By Dazed and confused 26th May 19, 12:30 PM
    • 4,897 Posts
    • 2,548 Thanks
    Dazed and confused
    • #7
    • 26th May 19, 12:30 PM
    • #7
    • 26th May 19, 12:30 PM
    A lot was dependent on where you are resident for tax purposes but now you have mentioned the bonus then even if you live outside Scotland you look as though you are still going to be well into the higher rate tax bracket so an extra 5%, say 3,000 in cash terms, will save you paying 1,200 in 40% tax. So quite tax efficient.

    If you post on the pensions board then pension contributions generally are seen as ahead of extra mortgage payments in the lost of priorities as your pension needs time to grow (assuming it's defined contribution) and mortgage interest rates are currently very low.

    But a lot of people would go for a mix, making sure they get the maximum tax relief benefit from the extra pension contributions and then when they have made themselves a basic rate payer again then focus a bit more on the mortgage.

    There really is no right or wrong answer, you need to figure out what fits your circumstances, life style etc.
    • stationairy
    • By stationairy 27th May 19, 8:05 AM
    • 212 Posts
    • 9 Thanks
    stationairy
    • #8
    • 27th May 19, 8:05 AM
    • #8
    • 27th May 19, 8:05 AM
    Thanks yes am a UK resident and live and work in england

    What would my contribution need to be to take me back to the lower bracket and just to put that in real terms what would that extra percent contribution. Save me in tax?
    • getmore4less
    • By getmore4less 27th May 19, 5:55 PM
    • 36,220 Posts
    • 22,308 Thanks
    getmore4less
    • #9
    • 27th May 19, 5:55 PM
    • #9
    • 27th May 19, 5:55 PM
    You won't know your income till you get Al your bonus.

    Once you get your mortgage rates down to sensible levels just up your regular pension contributions to get close nad and adjust when you have the final numbers.

    Your debt gets inflated away.
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