Pension strategy for higher earners
Comments
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TheTracker wrote: »Basically it starts applying at £150k. For every £2 of income over £150k you lose £1 of allowance, to a maximum reduction of £30k. So for £210k your allowance is only £10k. In your case, £30k contribution is safe while your income (including contribution) is under £170k, and £35k while under £160k.
Thanks The Tracker. So if it goes beyond £170k is there a certain set of guidelines that I should follow?0 -
I've also hit full taper this year and will have tax to pay for exceeding TAA. I've also exceeded LTA due to the Brexit sterling crash, so lots of my pension will be taken from me.
For younger people in this fix, maybe consider getting posted elsewhere in the world and work on fresh pension under different rules?I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
Jaguar_Skills wrote: »Thanks The Tracker. So if it goes beyond £170k is there a certain set of guidelines that I should follow?
If my OH is not working, presumably I can put the full amount into her allowance?
Just a risk as we aren't married.
Can I just gift her money?0 -
gadgetmind wrote: »I've also hit full taper this year and will have tax to pay for exceeding TAA. I've also exceeded LTA due to the Brexit sterling crash, so lots of my pension will be taken from me.
For younger people in this fix, maybe consider getting posted elsewhere in the world and work on fresh pension under different rules?
Good to see an old name pop up.
For successful young people I'd suggest, apart from looking internationally, to look at incorporating your evidently valuable skills in your own business, where you may enjoy vastly more flexibility in how you manage the tax efficiency of your earnings. I'm sure there are roles which only exist within the construct of working for the man, but many times the avenue exists to create your own path as a small or medium enterprise and in the process rid yourself of many of the crazy tax constraints imposed on a salaryman. Or at least exchange one set of rules for another!0 -
TheTracker wrote: »incorporating your evidently valuable skills in your own business, where you may enjoy vastly more flexibility in how you manage the tax efficiency of your earnings.
Yeah, that's what I've always done, but then someone went and bought the business and I never got around to leaving!I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
If my OH is not working, presumably I can put the full amount into her allowance?
Just a risk as we aren't married.
Can I just gift her money?
If she is not earning she is limited a maximum £3600 gross annual pension contribution. There is nothing to stop you gifting any amount of money to her but bear in mind IHT liability if you die within 7 years. However she cannot pay more than £3600 or her earned income, whichever is greater, into a pension0 -
... but someone must have sold it?, but then someone went and bought the business
An offer that couldn't be refused?0 -
You would end up paying any tax due to the taper with your annual self-assessment. The instructions for working out your pensions annual allowance are here:Jaguar_Skills wrote: »So if it goes beyond £170k is there a certain set of guidelines that I should follow?
https://www.gov.uk/guidance/pension-schemes-work-out-your-tapered-annual-allowance
The whole edifice is ridiculously complicated. The definition of 'income' for tapering includes not just salary received but also any dividends, interest, rent that you receive, bonuses, and even your own and your employer's pension contributions. Some of these will be hard to impossible to know until the very end of the tax year, perhaps even after the end of it, and so beyond the point at which you have any control over your pension contributions. And including pension contributions in the calculation of a pensions annual allowance borders on circular reasoning.
In essence, unless you have either really simple financial affairs or an accurately functioning crystal ball you may find it hard to impossible to exactly hit your pension annual allowance. Safest is probably to aim to undershoot and hope to use that next year with carry forwards. But of course, that becomes complex even in itself.
Utter nonsense.0 -
Once you start breaching pension allowances, the effective tax rates and outcomes can make for unpleasant reading.
Someone exceeding the taper would face 45% tax on contributions, but remember that pensions are also taxable again on the way out. Allowing for the 25% tax free lump sum this pension saver might lose a further 30% to tax on withdrawal, giving an overall 61.5% loss to tax. Clearly just taking the cash as salary here is better.
The numbers for breaching both the taper and the lifetime allowance are truly grim. 45% tax on contributions, and then both a 25% lifetime allowance excess charge and normal marginal tax of say 40% on withdrawal creates a total 75.25% loss to tax. Ouch.
Just to add some different perspective from other NHS pension dilemma thread: If suppose that OP is in NHS pension and is earning up to 210k. Is it still viable to stay in Pension in above situation?I'm not a Financial advisor.
Please seek independent financial advice.0 -
This is not to argue jst personal though I fail to see the benefit of putting it on ISA, as the money used to subscribe to ISA is already taxed at higher rate at source.
In the meanwhile the OP is already 48yo so within seven years he could get access to some of his pension. Is it not better to put it on SIIP. COuld anyone who know cous shed the light how ISA here will be a better option then SIPP ??
The OP is already overfunding his pension so putting it in a SIPP is not an option. ISA contributions are made with tax paid cash for sure, but all growth is income tax free and CGT free.0
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