Quantcast

Can I put more into my pension and forgo the government gross up?

Barbara | Hertfordshire| 10/07/2018 | 1

  • Robo Adviser

Barbara's question in full

I had a small company pension and used a "pension specialist IFA" to transfer it to a private pension when I left the company. He failed to meet the company's timescales and so they only returned my contributions. We finally settled the matter by his making a payment to me but it was less than I would have received, as he said when I reinvested it the government would gross it up. Needless to say I don't want to put it into his recommended fund where he will receive a commission so I was going to start a Nutmeg pension. Nutmeg require a minimum investment of £5,000. As I have less than £5,000 per annum income I am a bit confused about how much I can put into a pension. I know the government will only gross up a maximum of £2,880 per year but can I put more than this in and forgo the gross up? Many thanks Barbara

Richard Allum's Response

You can pay up to the annual allowance of £40,000 onto a pension so there’s plenty of room there. You’re right that tax relief is restricted to the higher of £3,600 gross contribution (£2,800 net) and 100% of your relevant earnings. This is generally income from employment or self-employment but does not include pensions, investment income, interest and rent etc.

You can pay in more than £3,600 gross (or your earnings if more) but would not be entitled to tax relief on the excess.  Many pension providers won’t accept more than this as it’s a bit of a hassle for them!

You would be much better off paying in £3,600 gross (£2,880 net) now and then topping it up with the difference on 6 April 2019 when you’ll have a new allowance available. You could keep the excess in an ISA until then so it benefits from the same investment tax breaks.

Hope this helps!

 

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

richard allum.jpg

Richard Allum

Related Questions

Got a Question?

Got a question? Ask our experts

Ask Our Experts

Sign up for Holly's blog

Stay up to date

Our free weekly blog with Holly's
no-nonsense opinions, tips & food for thought.
If you change your mind, you can unsubscribe at any time. We'll never share your details and you can unsubscribe any time.