Paying into a pension separate to my employer
Discussion
This is bread and butter to some of you here, so please bear with me...
My employer pays 2.5% into my pension, and I do the same, I’m a higher rate tax payer, it’s done via salary sacrifice and so I understand, as thats deducted at source, It’s a gross amount and so I don’t worry about it, don’t need to claim any tax on it - it looks after itself and is simple for me to understand.
With the threat of higher earners loosing the 40% tax relief around the corner, and with me having around £5000 in savings not doing much - I thought about putting this into my pension pot (either a sipp or into the same one as my employer pays) as a boost to that pot, and benefit from the current tax relief arrangements - but as that’s from my savings and ultimately nett pay - how do I go about turning the £5k I transfer into the £8300ish it’d have been had I done it salary sacrifice at the start of the year? Is it even possible or have I missed the boat by not using salary sacrifice?
My employer pays 2.5% into my pension, and I do the same, I’m a higher rate tax payer, it’s done via salary sacrifice and so I understand, as thats deducted at source, It’s a gross amount and so I don’t worry about it, don’t need to claim any tax on it - it looks after itself and is simple for me to understand.
With the threat of higher earners loosing the 40% tax relief around the corner, and with me having around £5000 in savings not doing much - I thought about putting this into my pension pot (either a sipp or into the same one as my employer pays) as a boost to that pot, and benefit from the current tax relief arrangements - but as that’s from my savings and ultimately nett pay - how do I go about turning the £5k I transfer into the £8300ish it’d have been had I done it salary sacrifice at the start of the year? Is it even possible or have I missed the boat by not using salary sacrifice?
mattcooke99 said:
This is bread and butter to some of you here, so please bear with me...
My employer pays 2.5% into my pension, and I do the same, I’m a higher rate tax payer, it’s done via salary sacrifice and so I understand, as thats deducted at source, It’s a gross amount and so I don’t worry about it, don’t need to claim any tax on it - it looks after itself and is simple for me to understand.
Just on this point.....just because your employer only matches up to 2.5% doesn't usually mean YOU cannot put in more - is that not a better way to do things for you?My employer pays 2.5% into my pension, and I do the same, I’m a higher rate tax payer, it’s done via salary sacrifice and so I understand, as thats deducted at source, It’s a gross amount and so I don’t worry about it, don’t need to claim any tax on it - it looks after itself and is simple for me to understand.
An old rule of thumb is to save half your age in % terms......so if you are 30, aim to get 15% into your pension plan (including any employer contributions).
More is obviously better, putting more in earlier helps too (compounding effects), although not many of us had 'spare cash' lying around in our 20s or 30s, I guess!!
Don't actively limit your investment just because that is what they match to.
Equally.....building up ISAs can be helpful as you get older and might want to get your hands on the money before your "pension freedom" age....wish I'd suggested that to a younger me ;-)
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