Putting a cash sum into a pension
Discussion
Reading the other thread from the Northerner, some people are talking about 40 tax relef being axed which sounds highly likely.
I have 20k cash and 30k in an isa, should I be putting some of that into my pension and getting the extra 20% back? Can I put it into another vehicle as my fund has dropped by 10% already. So a neutral return but get the relief. I’m 59.
I have 20k cash and 30k in an isa, should I be putting some of that into my pension and getting the extra 20% back? Can I put it into another vehicle as my fund has dropped by 10% already. So a neutral return but get the relief. I’m 59.
There has been talk about removing this for donkey's years, but it has never happened.
One reason is that it is the whole principle of pensions is that they defer tax payable today until you actually start drawing from them, whereby you then pay tax on the income.
To tax someone twice is therefore going to be the end of pension saving.
Perhaps the most important aspect of it though, is it is nigh on impossible to apply this to final salary pensions (of which every politician and civil servant has).
This would mean:
a) The government adopted one rule for us and another for them, or
b) All higher rate tax paying politicians and civil servants took a cut to their pensions
I don't think either option has any appeal to them!
With regarding putting some money into a pension to cut investment losses then, yes, you will get the tax relief going in, but you will also have tax to pay coming out (your ISA is already tax free).
So the reality is that you need to look at the whole picture. If your financial planning is structured properly it will be highly efficient and until this is established no one can say whether what you are looking at is a great idea or just not worth it.
Give me a shout if you would like any help on this.
One reason is that it is the whole principle of pensions is that they defer tax payable today until you actually start drawing from them, whereby you then pay tax on the income.
To tax someone twice is therefore going to be the end of pension saving.
Perhaps the most important aspect of it though, is it is nigh on impossible to apply this to final salary pensions (of which every politician and civil servant has).
This would mean:
a) The government adopted one rule for us and another for them, or
b) All higher rate tax paying politicians and civil servants took a cut to their pensions
I don't think either option has any appeal to them!
With regarding putting some money into a pension to cut investment losses then, yes, you will get the tax relief going in, but you will also have tax to pay coming out (your ISA is already tax free).
So the reality is that you need to look at the whole picture. If your financial planning is structured properly it will be highly efficient and until this is established no one can say whether what you are looking at is a great idea or just not worth it.
Give me a shout if you would like any help on this.
JulianPH said:
There has been talk about removing this for donkey's years, but it has never happened.
One reason is that it is the whole principle of pensions is that they defer tax payable today until you actually start drawing from them, whereby you then pay tax on the income.
To tax someone twice is therefore going to be the end of pension saving.
Perhaps the most important aspect of it though, is it is nigh on impossible to apply this to final salary pensions (of which every politician and civil servant has).
This would mean:
a) The government adopted one rule for us and another for them, or
b) All higher rate tax paying politicians and civil servants took a cut to their pensions
I don't think either option has any appeal to them!
With regarding putting some money into a pension to cut investment losses then, yes, you will get the tax relief going in, but you will also have tax to pay coming out (your ISA is already tax free).
So the reality is that you need to look at the whole picture. If your financial planning is structured properly it will be highly efficient and until this is established no one can say whether what you are looking at is a great idea or just not worth it.
Give me a shout if you would like any help on this.
After the mess with Cummings, I think the Government has shown they are quite relaxed with the approach of option a) One reason is that it is the whole principle of pensions is that they defer tax payable today until you actually start drawing from them, whereby you then pay tax on the income.
To tax someone twice is therefore going to be the end of pension saving.
Perhaps the most important aspect of it though, is it is nigh on impossible to apply this to final salary pensions (of which every politician and civil servant has).
This would mean:
a) The government adopted one rule for us and another for them, or
b) All higher rate tax paying politicians and civil servants took a cut to their pensions
I don't think either option has any appeal to them!
With regarding putting some money into a pension to cut investment losses then, yes, you will get the tax relief going in, but you will also have tax to pay coming out (your ISA is already tax free).
So the reality is that you need to look at the whole picture. If your financial planning is structured properly it will be highly efficient and until this is established no one can say whether what you are looking at is a great idea or just not worth it.
Give me a shout if you would like any help on this.
I mean, he put up a robust defence, M’Lud, but seriously: a short drive “for half an hour” to test his eyes? Unbelievable!!
That said, I think the fear of b) means Julian is right, I doubt there would be any foreseeable changes. Unless you drive for 30 minutes to foresee them
Thanks J
Sorry I don't expect to be in higher tax bracket when I start to draw income, so I'm assuming that I'll pay tax at that point at lower rate, hence my seeing putting the difference between my higher rate relief and my lower rate liability as "profit". Or am I being totally naive
Sorry I don't expect to be in higher tax bracket when I start to draw income, so I'm assuming that I'll pay tax at that point at lower rate, hence my seeing putting the difference between my higher rate relief and my lower rate liability as "profit". Or am I being totally naive
Macneil said:
Thanks J
Sorry I don't expect to be in higher tax bracket when I start to draw income, so I'm assuming that I'll pay tax at that point at lower rate, hence my seeing putting the difference between my higher rate relief and my lower rate liability as "profit". Or am I being totally naive
Not at all. If you are paying at the higher rate now you get 40% tax relief going in.Sorry I don't expect to be in higher tax bracket when I start to draw income, so I'm assuming that I'll pay tax at that point at lower rate, hence my seeing putting the difference between my higher rate relief and my lower rate liability as "profit". Or am I being totally naive
Then if you are taking it out at the lower rate you are effectively paying just 15% on anything over your personal allowance (which is tax free) as 25% is tax free (either as a lump sum or part of your withdrawals).
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