Adding lump sums to pension

Fattyfoggon

Fattyfoggon

Well-known member
Just wondered if any one has added a lump sum to their work pension I have been in touch with a couple if financial advisors and they have suggested that would probably be the best way of investing some savings I have as I would receive tax relief from the government and that I could go back 3 years to use any unused tax relief. The financial advisor can do it for me but would obviously charge a fee, just wondered how easy is it to do and would I need to use the financial advisor to do it for me i.e. are there any pitfalls if I just did it my self?
 
Fattyfoggon said:
Just wondered if any one has added a lump sum to their work pension I have been in touch with a couple if financial advisors and they have suggested that would probably be the best way of investing some savings I have as I would receive tax relief from the government and that I could go back 3 years to use any unused tax relief. The financial advisor can do it for me but would obviously charge a fee, just wondered how easy is it to do and would I need to use the financial advisor to do it for me i.e. are there any pitfalls if I just did it my self?
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Did it often but I always used my financial advisor. It’s very tax efficient and remember if you’re late 40s or older you can get 25% back tax free at 55 so worth doing if you don’t need it in the meantime. Better to have it taken off your salary before tax, but sounds like it’s cash you already have.

Also might be worth considering paying off any debts or mortgage first if you have them, avoid paying that nasty interest stuff.
 
Anymore info
Your age
How much you earn which tax bracket
How much you want to put in
Funds plenty others than your works pension fund

risk you want to take

More info then you can get better help
 
Anyone can start a SIPP - its not part of your works pension, but it gives you an additional pension. Lots of stockbroker platforms run SIPPs such AJ Bell, Interactive Investor, Hargreaves Lansdown. You can just leave it in cash if you don't know what to invest in, but you earn no interest and some fees say 0.25%

Ref Works pension I would expect they are all different. You can contact the administrator and explain what you want to do and they will advise.

A financial advisor has to make a living they can do the work for you, but it will be a few hundred pounds in fees. Get an advisor to quote you a fee.

Tax relief is available if you have paid income tax recently and not used all the relief up in your work pension. You shouold have pension statments to say how much you have used up or you can look at your pay slips. Say you have paid £4,000 in income tax last year put only received £2,000 in relief you have upto £2,000 to still claim. So if you invest £8,000 lump sum you can get £2,000 topped up by HMRC, assuming you are basic rate tax payer. Leaving £10,000 invested.

It is a very nice gift from HMRC. For the whole country I beleive tax relief on pensions costs UK governement £39bn some people are getting £16,000 a year in tax relief.
 
Ingleby_Flash said:
Did it often but I always used my financial advisor. It’s very tax efficient and remember if you’re late 40s or older you can get 25% back tax free at 55 so worth doing if you don’t need it in the meantime. Better to have it taken off your salary before tax, but sounds like it’s cash you already have.

Also might be worth considering paying off any debts or mortgage first if you have them, avoid paying that nasty interest stuff.
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Is that right though ? If it is savings them income tax has already been paid on it so there is no tax benefit.
Paying off mortgage other debts would surely be better and using the money saved monthly to increase pension contributions (tax free)

Im no expert though so correct me if I'm wrong.
 
Konrad_the_Barbarian said:
Is that right though ? If it is savings them income tax has already been paid on it so there is no tax benefit.
Paying off mortgage other debts would surely be better and using the money saved monthly to increase pension contributions (tax free)

Im no expert though so correct me if I'm wrong.
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No, you are correct if it is savings, paying debts off first is probably better Although as Redwurzel explains better than I did, he can use unused tax relief. I wonder if it would be better to do AVCs from salary and cover the difference from savings, especially if he’s higher rate tax payer if the tax relief has been used.
 
Ingleby_Flash said:
No, you are correct if it is savings, paying debts off first is probably better Although as Redwurzel explains better than I did, he can use unused tax relief. I wonder if it would be better to do AVCs from salary and cover the difference from savings, especially if he’s higher rate tax payer if the tax relief has been used.
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I regret not doing AVC myself. I was paying 40% tax so it was free money. However there were a lot of changes going on with pensions so I kept putting off.
Although I did get an excellent final salary pension and an excellent lump sum so only slight regrets.
 
yeah its cash I have in savings atm, I am 57 and still working (but could rap in at any time between now and 60) and I am a higher tax rate payer with no debts or mortgage to be honest seems a no brainer as if I understand it correctly as the tax relief does seem like free money. Will see what the rates the advisor would charge and see if I can some info from pension fund on the process if I was to do it myself thanks for the replies
 
Fattyfoggon said:
Just wondered if any one has added a lump sum to their work pension I have been in touch with a couple if financial advisors and they have suggested that would probably be the best way of investing some savings I have as I would receive tax relief from the government and that I could go back 3 years to use any unused tax relief. The financial advisor can do it for me but would obviously charge a fee, just wondered how easy is it to do and would I need to use the financial advisor to do it for me i.e. are there any pitfalls if I just did it my self?
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You can open a trading account and do it yourself , I did get the info yrs ago from my broker at the time but never ended up going ahead with it .
So try someone like AJ BELL and read there info online . Accounts are open instantly
 
Fattyfoggon said:
yeah its cash I have in savings atm, I am 57 and still working (but could rap in at any time between now and 60) and I am a higher tax rate payer with no debts or mortgage to be honest seems a no brainer as if I understand it correctly as the tax relief does seem like free money. Will see what the rates the advisor would charge and see if I can some info from pension fund on the process if I was to do it myself thanks for the replies
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If you're a high rate tax payer then lumping into an AVC from your salary and living off your savings would seem to make sense. Some of the blokes I worked with put up to 50% of their monthly salary into AVC's in the last couple of years. I chose to pay off my mortgage early, once I could do so comfortably. I didn't work out the pro's & con's of each though. Maybe it's just growing up with my dad constantly telling me "before anything else make sure you have a roof over your head" that influenced me. :LOL:
 
Konrad_the_Barbarian said:
If you're a high rate tax payer then lumping into an AVC from your salary and living off your savings would seem to make sense. Some of the blokes I worked with put up to 50% of their monthly salary into AVC's in the last couple of years. I chose to pay off my mortgage early, once I could do so comfortably. I didn't work out the pro's & con's of each though. Maybe it's just growing up with my dad constantly telling me "before anything else make sure you have a roof over your head" that influenced me. :LOL:
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Best thing then it's yours no matter

Then your pension

Hopefully 18 months for me 👍
 
Middlesbrough123 said:
It’s just what my brother mentioned in the passed so I’m assuming he’s 100% correct and there’s no if’s or butts
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You can contribute up to 100% of your earnings to your pension each year or up to the annual allowance of £40,000 (2021/22). This means the total sum of any personal contributions, employer contributions and government tax relief received, can’t exceed the £40,000 annual pension allowance.

Contributions that exceed your annual salary or the £40,000 allowance are subject to an annual allowance charge in line with income tax. Under the right circumstances you may have the option to carry forward any unused allowances from the previous three years, totalling up to £120,000, on top of your current year’s annual allowance.
 
FatCat said:
You can contribute up to 100% of your earnings to your pension each year or up to the annual allowance of £40,000 (2021/22). This means the total sum of any personal contributions, employer contributions and government tax relief received, can’t exceed the £40,000 annual pension allowance.

Contributions that exceed your annual salary or the £40,000 allowance are subject to an annual allowance charge in line with income tax. Under the right circumstances you may have the option to carry forward any unused allowances from the previous three years, totalling up to £120,000, on top of your current year’s annual allowance.
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Can’t a business match what you put in so based on your figures that would then be £240k
 
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