Workplace pension question

[Prolex-UK]

Stupid question alert.

Just been opted in to this.

Only got 18 months left before i jack it in

Question is

With interest rates so low i was thinking to top up the 5% mandatory to say 30% and stop my current saving of 1500 a month.

I am a higher rate tax payet

Thinking i get tax relief on the 30% and an extra pension

Mrs prolex not convinced as the extra money i give to the pension is lost in as much as we cant access the capital.

I am a ir35 contractor with a contract until march 31st 2021

Thanks in advance

[Keypad]

How lucky do you feel?

Put the money into a pension and drop dead a week after retiring, as a colleague of mine did - not a good investment.
Live 30+ years and it might seem a very good idea. But of inflation takes off (who knows?) maybe not.

[Pheo]

I’m going to presume it’s a stakeholder; if so you don’t have to buy an annuity so the above scenario can be avoided.

Not really enough info to help. What rainy day buffer do you have? Do you have any outstanding debts? Existing pensions? When are you due to retire?

Normally the tax relief and additional money due to matching of a pension makes it a no brained but it tends to depend on what your overall situation is.

[JulianPH]

It doesn't matter what sort of personal pension it is, there is no requirement whatsoever to buy an annuity anymore.

OP - Yes, you will get higher rate tax relief on your pension contributions on any earning you put in that are in the higher rate tax band.

Earnings that fall out of this band will only receive the basic rate of tax relief. You may want to consider an ISA for any of this money as it is more flexible in terms of access and everything becomes tax free.

Don't forget that for higher rate earning placed into a pension the provider will reclaim the basic rate of tax internally and you must reclaim the higher rate on your tax return. This money can go straight into your pocket.

So For a £1,500 contribution a month you would need £18,000 of gross income in the higher rate bracket to get the higher rate relief.

You would pay in £14,400 and your provider would reclaim £3,600 in basic rate tax.

You can then claim a further £3,600 back in your pocket on your tax return.

So it has only cost you a net £10,800 to get £18,000 into your pension.

[JulianPH]

I forgot to mention, it will be a QWPS (Qualifying Workplace Pension Scheme) not a stakeholder pension, in any event.

OP - This is good because the fees are low, but if you wanted to pick your own investments then you are free to open your own personal pension/SIPP and put this money there instead.

You can have as many different pensions going and claim full tax relief of each contribution as you like, providing you don't exceed the limits.

[Prolex-UK]

Thanks Julian

Will take your advice.

We are lucky in that we were able to sell our house in se london with a good profit as it was at the end of crossrail.

We moved up north where i still work for a council in london

Er indoors has 17 years of a local govt pension to take in 16 years and is working still

Thanks again