How much can I pay into a pension?
Discussion
I'm trying to work out how much I'm allowed to pay into a pension. At my age I understand that I can pay is a max of 20% of my income, but is that based on gross or net income? Also, I understand that a company pension can pay in a maximum of 15% at any age, but is that subtracted from the 20% that I can pay into a personal pension or in addition to it?
Also, if I were to earn 10% extra by doing freelance work in my spare time, would the amount I could pay into a personal pension increase to reflect this, as it would now be 20% of my work wage plus my freelance income?
Basically I'm wondering all of this as I'm thinking I could do freelance work with the sole purpose of making the maximum possible pension contribution. Currently my employer pays 6% of my wage and I contribute nothing as my wage is too low for me to be able to afford to, but if I were to do freelance work in my spare time I could use the money from that soley to boost my pension contribution assuming I didn't earn enough to breach the limit?
Finally, could I pay in a different amount each month to reflect the fluctuating income from the freelance work, or do you have to pay in a fixed amount every month?
Also, if I were to earn 10% extra by doing freelance work in my spare time, would the amount I could pay into a personal pension increase to reflect this, as it would now be 20% of my work wage plus my freelance income?
Basically I'm wondering all of this as I'm thinking I could do freelance work with the sole purpose of making the maximum possible pension contribution. Currently my employer pays 6% of my wage and I contribute nothing as my wage is too low for me to be able to afford to, but if I were to do freelance work in my spare time I could use the money from that soley to boost my pension contribution assuming I didn't earn enough to breach the limit?
Finally, could I pay in a different amount each month to reflect the fluctuating income from the freelance work, or do you have to pay in a fixed amount every month?
I think you are getting confused.
Your maximum pension contribution is 100% of your earnings up to a limit of I think £50,000 per year. There are other rules to do with countback and such if they apply and you can afford to pay more in.
I think you may be getting confused with your occupational scheme contribution amounts
Sorry, reread your comment and there is a simple answer, yes you can. Set up a Stakeholder Pension and it must by law take a minimum contribution of £20 and you can pay into it whenever you can afford. They are also controlled on costs etc.
May be worth looking at something like https://www.moneyadviceservice.org.uk/ possibly
Your maximum pension contribution is 100% of your earnings up to a limit of I think £50,000 per year. There are other rules to do with countback and such if they apply and you can afford to pay more in.
I think you may be getting confused with your occupational scheme contribution amounts
Sorry, reread your comment and there is a simple answer, yes you can. Set up a Stakeholder Pension and it must by law take a minimum contribution of £20 and you can pay into it whenever you can afford. They are also controlled on costs etc.
May be worth looking at something like https://www.moneyadviceservice.org.uk/ possibly
Edited by richtea78 on Thursday 16th August 22:46
richtea78 said:
I think you are getting confused.
Your maximum pension contribution is 100% of your earnings up to a limit of I think £50,000 per year.
You're right. I was reading this, which was the only thing I could find when I googled for information, but I think it must be out of date as direct.gov states that there was a rule change in April 2006. I think you can actually pay in more than £50,000 but you only qualify for tax relief up to that amount.Your maximum pension contribution is 100% of your earnings up to a limit of I think £50,000 per year.
Because as you allude to, some people may want to defer tax till later in life when they earn less and therefore will be taxed less.
Get 40% or more tax relief now and take only personal allowance out later. Zero tax at both ends.
Its a tool in the toolbox of life. Its not a hammer to use for everything.
Get 40% or more tax relief now and take only personal allowance out later. Zero tax at both ends.
Its a tool in the toolbox of life. Its not a hammer to use for everything.
Kudos said:
Why pay it into a pension with crap returns and can't access it for many years? Only worth it if employer is matching contributions or you're a 50%taxpayer and all other debts cleared IMO
"Crap returns" are a function of the underlying investment strategy, nothing to do with the pension wrapper.Kudos said:
Why pay it into a pension with crap returns and can't access it for many years? Only worth it if employer is matching contributions or you're a 50%taxpayer and all other debts cleared IMO
Yep agree, also if you have a history of early demise in the family factor that in - running on family average I've got 12 years left taking me to 60 - I don't put anything in my pensionDSLiverpool said:
Yep agree, also if you have a history of early demise in the family factor that in - running on family average I've got 12 years left taking me to 60 - I don't put anything in my pension
If you die before retirement then the fund will be available for your dependants. At retirement, your family history will be taken into account if the annuity you will receive.Hence the post above is fairly unhelpful!!
Sidicks
sidicks said:
DSLiverpool said:
Yep agree, also if you have a history of early demise in the family factor that in - running on family average I've got 12 years left taking me to 60 - I don't put anything in my pension
If you die before retirement then the fund will be available for your dependants. At retirement, your family history will be taken into account if the annuity you will receive.Hence the post above is fairly unhelpful!!
Sidicks
IF you save money - possibly a large amount of money - all your life in a pension and then buy an annuity with the fund and then before long you die, the annuity company will have paid you a very small amount (as taxable income) and will keep the entire balance, including any profit they've made from investing the fund prior to your death.
Of course there are SOME people who live to be over 900 years of age. One of the best known was Methuselah, and he's not alone. There are others named in Genesis. It isn't entirely clear what the compounding investment of their fund values amounted to over 800+ years or so, but it's possible that the annuity company paid out more than the value of the ORIGINAL funds, though they'd have to be even more than averagely inept to have paid out more than the compounded sum.
(By the way, if you're unlucky enough to survive into vacant-eyed droolery, why on earth would you need more than the scumbag state provides? Coke? Hookers? Proper cars? What, like your grandad and grandma spend on?)
Of course there are SOME people who live to be over 900 years of age. One of the best known was Methuselah, and he's not alone. There are others named in Genesis. It isn't entirely clear what the compounding investment of their fund values amounted to over 800+ years or so, but it's possible that the annuity company paid out more than the value of the ORIGINAL funds, though they'd have to be even more than averagely inept to have paid out more than the compounded sum.
(By the way, if you're unlucky enough to survive into vacant-eyed droolery, why on earth would you need more than the scumbag state provides? Coke? Hookers? Proper cars? What, like your grandad and grandma spend on?)
groak said:
IF you save money - possibly a large amount of money - all your life in a pension and then buy an annuity with the fund and then before long you die, the annuity company will have paid you a very small amount (as taxable income) and will keep the entire balance, including any profit they've made from investing the fund prior to your death.
Of course there are SOME people who live to be over 900 years of age. One of the best known was Methuselah, and he's not alone. There are others named in Genesis. It isn't entirely clear what the compounding investment of their fund values amounted to over 800+ years or so, but it's possible that the annuity company paid out more than the value of the ORIGINAL funds, though they'd have to be even more than averagely inept to have paid out more than the compounded sum.
(By the way, if you're unlucky enough to survive into vacant-eyed droolery, why on earth would you need more than the scumbag state provides? Coke? Hookers? Proper cars? What, like your grandad and grandma spend on?)
Groak adds his usual amount of value to post about pensions I.e. zero...Of course there are SOME people who live to be over 900 years of age. One of the best known was Methuselah, and he's not alone. There are others named in Genesis. It isn't entirely clear what the compounding investment of their fund values amounted to over 800+ years or so, but it's possible that the annuity company paid out more than the value of the ORIGINAL funds, though they'd have to be even more than averagely inept to have paid out more than the compounded sum.
(By the way, if you're unlucky enough to survive into vacant-eyed droolery, why on earth would you need more than the scumbag state provides? Coke? Hookers? Proper cars? What, like your grandad and grandma spend on?)
sidicks said:
Groak adds his usual amount of value to a post about pensions, ie. zero...
Well y'see pensions don't really have any value, they're just a wrapper. Mind you they share that with the overwhelming mass of underlying investments they contain. Pensions don't really do 'value'. And the only way the vast majority who use them can get any value from them is to either die before 'enjoying' them (which at least gets the victim's family the fund rather than a thieving annuity provider) or living to a Methuselan age WITH health (which is an infinitesimal number of the victims).
Take DSL's advice and ENJOY the fruits of your labour while you're young and healthy enough to want and be able to. There's a whole different art to enjoying life when you're old(er). And it really doesn't require much money to do it. Not that annuity victims get much money anyway.
Groak,
Given that you can enjoy a pension from 55 and that until recently you may even have enjoyed it from the age of 50, and given that the average life expectancy in the UK is 78 for blokes and 82 for women (plus change), then 25 years or so isn't a bad crack of the whip.
If you want to enjoy the fruits of your labour at 30.. thats your choice. But don't complain when you're 60 or so and have to put on a brave face because you simply don't have options. If in your experience, life in retirement is best served sitting in your garden shed and making a cup of tea and Practical Classics last all month, then fine.
Given that you can enjoy a pension from 55 and that until recently you may even have enjoyed it from the age of 50, and given that the average life expectancy in the UK is 78 for blokes and 82 for women (plus change), then 25 years or so isn't a bad crack of the whip.
If you want to enjoy the fruits of your labour at 30.. thats your choice. But don't complain when you're 60 or so and have to put on a brave face because you simply don't have options. If in your experience, life in retirement is best served sitting in your garden shed and making a cup of tea and Practical Classics last all month, then fine.
I sometimes wonder how old Groak is. If he's young to middle age, his routine comments indicate he's got no idea about financial survival at older ages. If he is older, he has an obvious chip on his shoulder probably due to following his own advice earlier and not having the finances now to enjoy himself!
I'm retired. I committed significant funds into my future retirement when working. I accumulated quite a significant as a result. I have a reasonable pension. I've been paid out substantially more than I invested and more than the accumulated amount. And, no, I'm not 900 years old, not even 70.
So, getting future pension provision to work for you can be successful.
R.
I'm retired. I committed significant funds into my future retirement when working. I accumulated quite a significant as a result. I have a reasonable pension. I've been paid out substantially more than I invested and more than the accumulated amount. And, no, I'm not 900 years old, not even 70.
So, getting future pension provision to work for you can be successful.
R.
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