Savings vs Pension

[NearlyOAP]

Simple question really, I am quite behind with how much I should have been putting in workplace/private pension, so my question is: Is it worth putting a lump sum from savings (that has already been taxed at source) in to a pension that will then be taxed again (above personal allowance) when I retire?

How old are you? When do you expect to retire? What’s your current annual income versus your projected retired income?

Not sure. However can you increase your pension costs to max contribution and use the savings to make up whatever you lose from wage package?

Thank you for your replies
StreamingCervix; I am 50, would like to retire at 65 max, projected retired income is approx 10% of current income.
CornishTiger; Not a bad idea, what is maximum contribution? Is this a fixed amount or based on a calculation?

Pension rates and allowances

What are your savings currently in? Cash savings in building society etc, or invested in stocks & shares?

General wisdom is that stocks & shares will outperform savings interest rates in the long term (but in reality it depends on the timing of your investments and withdrawals).

You can pay into a private pension and they'll add the tax-reimbursement element (or at least, that's what happens with stakeholder pensions). Are you able to pay into a work pension at the moment? You'll also get employer contributions that way.

Thank you for your reply. Currently in 3-5% saving accounts. Already maxing employer contribution.

Any personal contributions to a pension scheme will still attract tax relief, as long as you have relevant earnings and are not putting in more than the maximum.
Most workplace pensions will also allow you to put in more than the set amount.

As PP said, if you put £80 in a private pension HMRC will add £20 tax relief.

Also when you take it out 25% will be tax free and the other 75% could be tax free if you keep your income below the personal allowance when you retire.

If you’re a basic rate taxpayer then a stocks & shares ISA is worth considering - you don’t get tax relief on the way in but you don’t pay tax on the way out, and you can access the money at any time (although you’re not far off minimum pension age so that’s less of a worry).

Of you’re a higher rate taxpayer then the 40% tax relief on a pension is a no brainer.

Definitely put it in a pension you’ll get the tax relief on it as well.

The financial advantage in utilising the pension, above your tax threshold is that you get the 25% lump sum tax free. This includes the additional tax relief you will receive on contributions.

Exactly this basically. £80 invested today will be £100 in a few days once tax relief has been added. It will be years before your savings account achieves the same return.
Pensions are often misperceived because « you get taxed again » on them vs ISAs when in fact the contributions are pre-tax, you can take a 25% tax free lump sum and then you only get taxed on annuities once you’ve reached the £12.5k threshold. They’re really advantageous from a tax perspective, even compared to ISAs.
Of course the catch is the money is locked until retirement, so you have to balance how much you can spare vs how much you want to keep accessible.

Thank you all for your advice, my mind has been made up. Pension it is, now I need to decide on standard PP or SIPP and with who.