Pensions and investments

[OverEggedPudding]

I currently work P/T and earn about £1,100 a month. I work for a company who has a good pension scheme and I am allowed to put 80% of my salary into the pension pot. I have been doing this for 2 years. The rest of the money I transfer into a Stocks and Shares Isa. I agree this with my DH as his pension is somewhat limited and this is one part of our savings scheme for the future.

My Q is, how much can I invest into my pension scheme whether just my company, or another pension. What is the maximum I can invest as a 52 year old woman, working P/T. One of the other reasons I am doing this is because I worked overseas for many years and my state pension is not where it should be. I am at 21 years and need 30 to get a full state pension. I plan on working for at least another 10 years, hopefully till I am 67 which would be another 15 years.

What else can I do now I have this money and a little spare to keep for my old age?

Podcast episode about Pension Annual Allowance: meaningfulmoney.tv/2018/09/05/annual-allowance-and-lifetime-allowance-pensions-masterclass-5/

The most you can pay in and get tax relief added (which the pension provider usually does, for lower rate tax payers, automatically) is equal to: Your gross salary. You count all the inputs: your employer pension contribution + your contribution + tax relief.

Annual salary £13,200 gross.
You are currently putting in 80%, so that is £10,560 If that is all your contribution, not any employer contribution, then tax relief adds £2640 and the total is £13,200.

I would not be paying any more into your pension, as I think you are likely to be at your limit. Talk to HR/Payroll/Pensions dept though, they may be able to tell you how much Pension Annual Allowance is being used and if there is any remaining.

Adding to S&S ISA is fine. That money grows tax free and can be accessed at anytime.

It sounds like your employer could be breaking the law as if on a salary sacrifice scheme you can't take your salary below the minimum wage. If you were contributing to your own pension out of your wages I could imagine that was permissible as your choice.

But maybe it isn't salary sacrifice but the wording makes it sound like an employer scheme

Have you explored the option of buying back or typing up your state pension? I think you can buy a year for around £1500?

You are right not to add to you NI contributions - you should have enough when you retire you can pay the remainder of your salary into a personal pension and claim tax relief. Better than an Isa.

I have bought as much as I can for my state pension. I didn't live here for many years and was allowed to purchase 7 years.

You can do an online pension forecast, you need national insurance number. It will tell you how many years you’ve paid in and also how much it would cost to add in those missing years. I think it’s now 35 years to get a full state pension.

Wow ,you can buy a whole year state pension for 1500?

It used to be around £700. The first few years I bought were around this.

In fact I am only paying about £40 in NI a month, so I am literally paying £480 a year. I only have to earn £120 hours a week, to get NI contributions towards my pension.

Earn £120 a week.

It’s now about £850, I pay this. That is a years contribution, gives about £5 week on your pension.

You can invest 100% of your income and get tax relief on the first £40k.
So as suggested by MovingAtPace the 20% currently going to your ISA could go to a SIPP and you would get 20% tax relief added.

I doubt your employer is breaking the law as suggested on your 80% contribution. Either they don’t use salary sacrifice or you earn 5*minimum wage ph…neither are unusual circumstances.

@Galliano you are wrong. The maximum is the lower of your annual salary and £40k, and this includes all tax relief. If the salary is beliow £40k the maximum is 100% of the salary including the added tax relief, so in reality 80% of the salary - that is why they will be allowed to put only 80% in by the scheme.

OP is already paying the maximum into their pension: 80%, as HMRC will add 25% of that 80%, making a total of 100% of the possible contributions that attract tax relief. OP will not get Tax Relief on the 20% currently being put into an ISA - or if she does then it will get taken back by HMRC via an annual allowance charge at the end of the tax year.

www.moneyhelper.org.uk/en/pensions-and-retirement/tax-and-pensions/the-annual-allowance

You can carry forward unused pension allowance going back 3 years. But you can still only put in a max of your annual gross salary.

Not sure how it would work out for you as it seems you're already maxing out your annual allowance but perhaps get some advice on this.