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Does the Government contribute to private pensions if you don't pay tax?

Mrs Khan | Essex| 02/07/2019 | 0

  • Private Pension

Mrs Khan's question in full

I am not a tax payer as I do not work. Will the Government pay any money into my private pension?

Anna Sofat's Response

Tax Relief

Anyone over the age of 18 can contribute to a pension and obtain at least 20% tax relief.

So as a non-taxpayer UK resident, you can invest £2880 per year into your private pension and the Government will add a further £720.

If you are a higher rate tax payer, then you declare the pension contribution in your tax returns, and you should get further tax relief – HMRC usually adjust your tax code so you pay less tax, or in some cases they'll send you a cheque for the tax relief.

 

Tax efficiency

Pensions are highly tax efficient:

  1. Any growth can accumulate tax free, and you can take out 25% as a tax free lump sum anytime after the age of 55. On the balance 75% you pay income tax at your marginal rate of tax.
  2. Pensions are also inheritance tax efficient, as the funds in your pension are outside of your estate as long as you have nominated someone to receive the benefits upon your death.

 

So all in all, pension contributions are something you should give serious thought to, whether you are a tax payer or not!

 

Regards,

Anna

 

 

Just be aware...

We are not regulated to give personal financial advice - This isn’t full-fat regulated financial advice. Boring Money is a publisher and not regulated by the FCA. 

This means we can't help with specific personal circumstances or recommend specific investment products. It also basically means that if we say something daft, you have no recourse to come back and complain.

We’re only allowed to give you a steer or share an opinion or tell you the facts - That said, we promise that our answer to you is an independent unbiased perspective with no commercial gain to make. If you need regulated financial advice, you can find a good adviser via sites such as Unbiased & Vouchedfor.

Our Expert

Anna Sofat - small.jpg

Anna Sofat

Anna is an award winning Chartered & Certified Financial Planner, as well as the Founder & MD of Addidi, which advises enterprising women and their families, to plan and manage their wealth. Addidi also provides a collaborative club for women to invest in SMEs. Prior to founding Addidi, Anna was the MD at Fiona Price & Partners, the first business set up specifically to provide financial advice for women by women.

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