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?
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!
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