You may not need to tell HMRC - they will know anyway as your pension provider will automatically claim basic rate relief from them. If you pay higher rate tax you will certainly want to tell HMRC in order to claim higher rate rax relief, as discussed previously.
Also worth remembering that you cannot pay in more than you earn in the current tax year, so be careful if you earn less than £60k.
As @JimDog is in the USS scheme, I’d imagine he would likely elect to make AVCs via payroll, and his employer would work out the tax situation accordingly (so no need to claim via a tax return). I’m going to leave it here as I am not an expert.
Yes, if you’re using an employer’s scheme you shouldn’t have to worry about it, but never assume that both they and HMRC always get it right!
In the past I paid into my own private pension scheme in addition to an employer’s scheme so I had more control over it
As I understand it, the purpose of the UK government/HMRC offering UK taxpayers the ability to carry forward up to 3 years of their Income Tax annual allowance is precisely so that they are able to put in more than this year’s annual allowance if they qualify for being able to carry previous years forward.
Or have I misunderstood what the carry forward of the annual allowance is designed to do?
May I ask whether you are organising to use the carry forward function of your annual allowance on your own, or are you employing an IFA or similar to help you with that?
I am organising this myself. I don’t have the services of an IFA yet. I will certainly engage with one in good time, especially when I need to consider drawdown options.
Assuming you plan to make AVCs through USS, you will have access to an excellent tax/allowance calculator on their pension portal. You can obtain an estimate of your current in-year AA position.
(Also, worth comparing USS’ fees with those of an independent SIPP provider. I believe USS fees are heavily subsidised for members.)
My advice is to get a good financial advisor we’re lucky our eldest son handles it all. As an insensitive to keep him on his toes I’ve told him if it goes wrong we’re coming to live with him.
Another thing in all reality your super only really has to get you to the mid 80’s after that you’re not likely to do much travelling etc and providing you own your own home you could comfortably live off the state pension.
Of course this is only based in Australia it may be different elsewhere.
I may be wrong but one thing to be mindful of here is that if you use the AVC route via your provider (as you say cheaper etc,), unless the provider can also provide SIPPs (highly unlikely?), you should position to cash in the run-up to accessing your benefits so as to manage downside market risk, this in anticipation of switching the monies in to a SIPP perhaps(?), assuming you aren’t going to annuitise benefits.
Yes, I think that is right Pete, mid 80’s is very generous. My step-dad (RIP) died 16 years ago and my mum has pretty much lived on a single pension since then in their own home (mortgage free), actually from the age of 71 - and she has been very active too.
In our own situation we have a slightly different scenario. We will likely inherit shares of both parents homes and our only daughter will unlikely have children. So whilst we need to cover living costs now, there will be a time when we will have more than we need, as will our daughter, and there the trail ends…
According to a number of pension and investment product providers latest updates, be prepared for what may be significant hits on pension tax relief, capital gains and possibly inheritance too at some point in the next 18 months. LTA is still not probably coming back, ILSA and ILSDBA are doing a sufficient job apparently.
LTA probably should come back IMV, but at a level retrospectively index linked to the original 1.8 million pot limit introduced by Labour (Darling?). Subsequently reduced to a silly level in recent years.
AA tax is a really pernicious unpredictable tax for many who can’t control input which is calculated actuarially (me included) retrospectively.
More open-minded about IHT and capital gains as they don’t directly affect me, if the ydid I might be of a different opinion.
Potential is to fiddle with pension tax rules and raise CGT at the same time, which cuts off the tax benefits of the prime alternative route for long term retirement investors, i.e. it stops pensioners (and would be pensioners) switching their pension monies away to direct investment, open ended funds etc. as they’d be in an even worse position tax wise.
Probably in time this would result in more savings going offshore again, just like they used to, although a lot of those avenues have already been taxed more and are usually stupidly expensive. But I can easily see cost effective products returning to the market if the demand is there, some will be fine, some will be astonishingly awful and some investors will be fleeced. Hey-ho, here we go.
Could be but it’s been proposed and dismissed before, the admin. is just an absolute f***** nightmare.
For a start, consider anyone making pension contributions by salary sacrifice. Right now, the appropriate amount of tax relief is applied immediately, no admin required. Now, you would need software to apply differentials. And corrections. And adjustments for those on variable pay. How about those who get a bonus once a year which just tips them into high rate. Course, you could ban salary sacrifice but then what about the NI savings? More people would be having to make manual returns and claims, HMRC already can’t cope. And as noted above, that’s just the start…There’s loads of other s*** to iron out.
It would take years. And cost loads of money to the Govt. and the economy, probably more than the 20% relief they’d ‘save’.
It would also be inflationary, putting less into assets and more money into circulation.
And significantly reduce the pension pots of substantial numbers of public service workers who are high rate payers.
And on the topic, what about those final/average salary pension schemes, how do they work that out?
Are the Unions going to stand for a substantial number of their workers being disproportionately taxed more by not being able to get their ‘due’ tax relief on their pension contributions?
Then you’ve got legislation to sort out. Remember the promise to abandon LTA in March ‘23? It’s still not in statute. HMRC are currently advising people who haven’t taken tax free cash before, but now want some, not to, because they don’t know what the rules are going to be yet.