I am not a tax payer as I do not work. Will the Government pay any money into my private pension?
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.
Pensions are highly tax efficient:
- 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.
- 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!