good video, maybe also mentioning that if your company contributes to your pension pre tax, you also save on national insurance. Every penny counts, nevermind long term compounding :)
Used this approach in my planning as it’s a no brainer. Think they will eventually equalise tax rates for pension relief, so would take advantage of this while you can.
Nice video. I have been doing this since 2020 (Covid made me think twice about my finances) and now move 40% to pension. If you can afford to cut back a little on net salary then the benefits are enormous and you don’t feel like HMRC are robbing you every year 😀
Very informative video. I'm someone on 75k a year and contributing 5% per month towards pension. In order to avoid the 40% should I speak to my employer around increasing my monthly contribution? Correct me if I'm wrong but I believe this means I wouldn't have to settle the bill with HMRC come self assessment.
You pay 40% tax but they move your tax free amount down so you’re effectively being taxed at 60%. Add on national insurance to that and you’re paying even more.
I'm 60 and expect to work to at least 65, I am also a higher rate tax payer, my employer has a salary sacrifice scheme which i partly utilise. Id like to increase the salary sacrifice to take me below the higher salary tax rate. In order to subsist in the next 5 years i would like to utilise PCLS from the growing pension fund upto the £268k max allowed. I'm aware of the recyling rules but dont believe I would be doing that as the increased contributions would be from earnings, whereas the draw down would be spent. Are there any gotchas here? i.e. am I best to get advice before doing this?
So. If I earn approx £36k. I can opt to pay myself £12k (using the taxable allowance). And put the rest into a pension an pay no tax or. NI. I have already got 35 yrs state pension years. I would effectively be giving myself approx a 30% pay rise
Hello, yes, you can put earnings into a pension, and save the tax and NI contributions. Obviously it is a trade-off, as giving up flexibility and current expenditure for better future income, but can be great financial planning.
Hello Because with an employer scheme, it can be done through the salary payment system (PAYE) which means you get automatic tax relief, and have no need to engage with HMRC. If you are doing yourself in your private pension, you will only get basic rate tax relief (20%) and if you are entitled to more, you will need to go to HMRC to reclaim that extra relief, which can be a laborious process.
I do the same. I put my salary and my bonus in AVC. Why give HMRC free money when you can safely invest it in your pension? Especially as I am 55 I put over 60k on pension last year and I can start taking pension now if I choose to. Having said that my P60 took a hammering as it shows very little income below 50k now so not sure what will happen when I remortgage next and proof of income is so small
@@cameronjamespensiontransfer True, but the performance of an employer scheme needs to be examined. Some gain only 4% a year and don't allow you to change investments. Even a SIPP invested in single world ETF (SWDA) will return 10% a year. That makes a tremendous difference after 10-30 years!
@@cameronjamespensiontransferI claimed the additional 20% tax relief by sending a letter to HMRC with the proof and 4 months later a check arrived. The process was easy and fast but you need to wait for the processing only.
Hello. Yes, if there are contributions going towards AVC's, then yes, they are included as pension contributions. Do you have some form of DB Scheme with an AVC attached?
Salary sacrifice into my workplace pension and monthly contributions into my SIPP is how I save for my pension. Agree with the comment below that if the rules could change then take advantage of them today.
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good video, maybe also mentioning that if your company contributes to your pension pre tax, you also save on national insurance. Every penny counts, nevermind long term compounding :)
Hello
Great point!
Used this approach in my planning as it’s a no brainer. Think they will eventually equalise tax rates for pension relief, so would take advantage of this while you can.
Great stuff!
Nice video. I have been doing this since 2020 (Covid made me think twice about my finances) and now move 40% to pension. If you can afford to cut back a little on net salary then the benefits are enormous and you don’t feel like HMRC are robbing you every year 😀
Yes, lots of flexibility and options out there!
Very informative video. I'm someone on 75k a year and contributing 5% per month towards pension. In order to avoid the 40% should I speak to my employer around increasing my monthly contribution? Correct me if I'm wrong but I believe this means I wouldn't have to settle the bill with HMRC come self assessment.
Yes, if your employer offers salary sacrifice, it would save you a lot of admin.
Excellent information, could you tell us what is the tax we pay between £100000 -125000?
You pay 40% tax but they move your tax free amount down so you’re effectively being taxed at 60%. Add on national insurance to that and you’re paying even more.
Yes, as David mentions, tax on the portion above £100k is initially incredible painful, as you lose £1 of you annual allowance for each £2 over £100k.
My understanding is that the pension is taxable at 40% ... so you are back to square one ..
Hello
Only if you are a higher rate taxpayer in retirement, but most people pay a lower rate of tax in retirement than they did in employment.
I'm 60 and expect to work to at least 65, I am also a higher rate tax payer, my employer has a salary sacrifice scheme which i partly utilise. Id like to increase the salary sacrifice to take me below the higher salary tax rate. In order to subsist in the next 5 years i would like to utilise PCLS from the growing pension fund upto the £268k max allowed. I'm aware of the recyling rules but dont believe I would be doing that as the increased contributions would be from earnings, whereas the draw down would be spent. Are there any gotchas here? i.e. am I best to get advice before doing this?
Hi Simon. I believe you are speaking with one of our advisers this week, so get all those questions ready for your meeting.
So. If I earn approx £36k. I can opt to pay myself £12k (using the taxable allowance). And put the rest into a pension an pay no tax or. NI. I have already got 35 yrs state pension years. I would effectively be giving myself approx a 30% pay rise
Hello, yes, you can put earnings into a pension, and save the tax and NI contributions. Obviously it is a trade-off, as giving up flexibility and current expenditure for better future income, but can be great financial planning.
So I earn 129K so do I need to put 40k in to my company pension to get the tax relief and additional pension contribution?
Hello. If you would like to obtain the tax relief, then it just needs to go into a pension, does not have to be the employers
Why is it more difficult to do it outside an employer pension scheme? Wouldn't an S&S SIPP be almost as good?
Hello
Because with an employer scheme, it can be done through the salary payment system (PAYE) which means you get automatic tax relief, and have no need to engage with HMRC. If you are doing yourself in your private pension, you will only get basic rate tax relief (20%) and if you are entitled to more, you will need to go to HMRC to reclaim that extra relief, which can be a laborious process.
I do the same. I put my salary and my bonus in AVC. Why give HMRC free money when you can safely invest it in your pension? Especially as I am 55 I put over 60k on pension last year and I can start taking pension now if I choose to. Having said that my P60 took a hammering as it shows very little income below 50k now so not sure what will happen when I remortgage next and proof of income is so small
@@cameronjamespensiontransfer True, but the performance of an employer scheme needs to be examined. Some gain only 4% a year and don't allow you to change investments. Even a SIPP invested in single world ETF (SWDA) will return 10% a year. That makes a tremendous difference after 10-30 years!
@@cameronjamespensiontransferI claimed the additional 20% tax relief by sending a letter to HMRC with the proof and 4 months later a check arrived. The process was easy and fast but you need to wait for the processing only.
@user-si7fj5rh5u yes got cash in my account and put it in my mortgage
Would avc count as a pension contribution?
Hello.
Yes, if there are contributions going towards AVC's, then yes, they are included as pension contributions. Do you have some form of DB Scheme with an AVC attached?
Salary sacrifice into my workplace pension and monthly contributions into my SIPP is how I save for my pension. Agree with the comment below that if the rules could change then take advantage of them today.
Yes, if you don't need the money until retirement, then saving all that tax, and obtaining other tax benefits from pensions can be a great option.