Saving towards my pension, is it worth it ?

14
Found 28th Feb
So this tax year I'm going to exceed the £45k barrier on income tax allowance. I'm expecting a £2,500 bonus and £4,500 wage in March.
Would it be worth putting say £5,000 into my company pension so as to avoid paying 40% tax ?
I know my wage that month will be minimal but I don't really need the money and all I end up doing is buying thing's I don't need that I find here on hotdeals.
I'd appreciate any advice. Thanks
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Sounds pretty sensible. Alternatively, do you have a mortgage that you can over pay on or any other debt that could be reduced?
The short answer is yes. But it depends on a couple of things.
If you transfer the money into your company pension and your gross income puts you into the higher rate tax band, it will immediately attract tax relief of 40%. So, basically you see the gross contribution go to your pension.
But, if you are doing this to purposefully move yourself out of the Higher Rate band into the the Basic rate band, your employer must be using a salary sacrifice scheme. This effectively means that the money never shows on your p60 and your gross income may fall into the basic rate band. If you have a lot of interest on savings, this may be to your advantage as you would receive the higher £1000 personal savings allowance. (instead of the £500 allowance for higher rate tax payers). It may also help if you have other income streams.
Lastly, some company schemes enhance contributions made by employees, which may be to your advantage. If that is not the case here, you may want to consider starting a SIPP. Tax relief can still be claimed and you get a wider choice of investment, some of which may be more expensive than your company scheme.
None of this is advice as to what you should do, by the way.
I put in the bare minimum to my pension, mainly because I think it's not very good.

My cash & shares ISA is doing well so I put my spare savings into that (and my mortgage) another bonus with the ISA is that it's accessible if needed but a pension is not. Also with the ISA I can select the different funds depending on performance, I use Hargreaves Landsown and they have a huge list of funds to choose from and you can compare them to see how they are performing. The best fund at the moment is returning 30-odd %
I could do with a spare 4k if you don't need it
I too am a higher rate tax payer my company use standard life for the company pension I put an extra 5k a year into the pension scheme as a lump sum every March just before the end of the tax year so 5k becomes 6250 that’s 20% extra the other 20% I have to claim back from the tax man quite easy I give Hmrc a ring tell them I have made a one off payment into my pension and they will send out a cheque for the other 20% takes 6wks to get the cheque but didn’t have to provide any proof think they do some checks with the pension scheme standard life
Other people I work with do the same
yummy yummy money
i earn pennies but i always put small amount in a private pensions, that i have no Idea what is doing but least i get something than nothing, when that money will otherwise be wasted on unwanted thing's
First of all, well done for earning a decent salary!

Any earnings that brings you into the higher tax bracket would be wise to put into a pension as that is tax free and you only get taxed at the other end (after 25% tax free lump sum) so win win really. If you don't need the money, definitely put it into a pension pot.
Live fast, die young.
Please add me to your will first though.
Just to clarify a few points on my pension, I believe the deductions are before tax so they won't appear on my p60,
my company pay 6% of my basic salary in to the scheme, they won't put any extra in on top.
And my mortgage interest rate is 0.99% so not really worth over paying.
Also one last point, it's my overtime, bonus and shift premiums that allow me to earn the decent wage. I wish it was actually my salary so I could spend more time home with the family.

I appreciate all your advice guy's.
Can I ask what job you do please? Hope you don't mind
mb0214 h, 17 m ago

Just to clarify a few points on my pension, I believe the deductions are …Just to clarify a few points on my pension, I believe the deductions are before tax so they won't appear on my p60, my company pay 6% of my basic salary in to the scheme, they won't put any extra in on top.And my mortgage interest rate is 0.99% so not really worth over paying. Also one last point, it's my overtime, bonus and shift premiums that allow me to earn the decent wage. I wish it was actually my salary so I could spend more time home with the family. I appreciate all your advice guy's.


even better for you if the pension contribution is taken before tax is deducted as it means you don't have to claim the extra tax above the basic rate back from the inland revenue.
Misslovely28th Feb

Can I ask what job you do please? Hope you don't mind


Mechanical engineering. I like my job but we have a toxic management style. And another annoying thing is that there are people work along side me with absolutely no qualifications doing basic read screen assembly who are earning the same money.... No acknowledgement for the skills we have.
Just as an aside. If you decide to go down the SIPP route, with the current turbulence in the world stock markets, it may be wise to get the money inside the SIPP tax wrapper, then drip feed the funds that you buy over the coming 12 months. This doesn't have any effect on your tax situation, but saves you buying with a lump sum into a falling market, which might look a bit scary in a years time. Over 20 years or so, it will still be a good investment for your retirement.
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