Maximising pension contribs when drawing two salaries.

[Taita]

Good afternoon,

A friend of mine has just started a new job (54k) but will carry on drawing a salary from his previous employer (42k) for the next few months.

Is there a way of minimising his tax liability? He is fairly financially astute and hasn't mentioned any existing debt apart from £3-3.5k on a 0% card that he is paying off monthly).

His NEW employer will match up to 10.5% which he is signed up to, his contribs are matched 1.5x. There is a share purchase programme, but apparently he wants to keep it in cash not stock if possible.

I didnt' really have a huge amount of ideas apart from to see if he can pay a LOT more into his pension for the next four months to bring his tax bill down slightly or see if he could get his new employer to hold his wages for four months then give him a golden hello. Equally I've no idea about the legalities of it.

Anyone got any ideas? I'm due in the pub on Saturday with answers!

[Chris Type R]

Could it go into a SIPP to mitigate tax ?

[otherman]

He can pay as much as he likes into his company pension, tax free. Good opportunity to pump it up.

[AdeTuono]

otherman said:

He can pay as much as he likes into his company pension, tax free. Good opportunity to pump it up.

Only up to £40k p.a.

[Taita]

So I should tell him to put 80% of his salary for the next four months into his pension?

[7184c]

Assuming it’s payment for notice period and he’s still on decent terms a settlement agreement could give him up to 30k free of tax and would reduce employer ni so better for all parties.
This would be confidential and can be split into 3 payments just like salary if they don’t want to pay all at once.

[Taita]

I like that idea.

He worked for a big lumbering organisation so not sure how open to the idea he will be. But can suggest it.

Pension of 80% of new job salary for 4 months looks good so far.