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Hi All,

 

I understand that financial advise is not to be requested but without specifics, can anyone explain this ?

 

I contribute to a group company pension and that contribution is deducted from my wages as a percecentage of my earnings. I have an o/l account with my provider and they allow me to make extra payments into my fund as and when I can afford it.

 

I have done this twice with a few hundred pound , each time I have paid a small lump sum in , the provider adds a tax relief of 25 %. So if I pay £200.00p in they tell that I get £250.00p paid into my fund. Which i think is fine , but where's the catch ?

 

Why don't I simply pay a small amount into my fund via my wages and then top it up with a lump sum payment which gives me a 25% bonus. Is HMRC really giving a dividend of 25% on monies invested ?? Or does it come off my personal allowance.

 

It just seems too good to be true. Or am I just missing something ?? Or am I just thick ?

 

TYVM.... GB...

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On the assumption the money came from your salary, you already paid tax on it, this is you getting the tax on that payment back. Pension input payments are tax free

I assume you are not in the higher tax bracket, as you would principally get 40% back.

 

Depending upon your company you may be able to pay the same amount, which would come out before tax. But there is no real benefit to you.

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Many thanks ...

 

So I'm claiming back tax that I have already paid through my wages deductions - That I pay into a pension that they will tax me on when I try and live on it ? And the provider will charge me to admininister the fund aswell.

 

See now it all makes sense.... Basically there is no benefit to me at all .... only to HMRC and the pension Provider.

 

No point taking out a 10 k loan and moving it into my pension then ?? lol..

 

But saying that , what if dear Aunt Maud leaves me 10 k in her will and I paid that into my pension fund ??

 

thnx again GB.

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Pensions are deferred pay so you put the money in now (your lump sum payment will be after tax has been paid on it ) and the taxman gives the pension scheme the tax paid and when you retire the amount you get as a pension is treated as taxable income. The advantage of this is all of the capital gain is tax free and you get personal tax relief as well so you reduce the actual tax paid quite substantially as well as having a bigger pot courtesy of HMRC.

If you chuck aunty Maud's £10k into your fund that will attract a tax break as well ( you pay tax on the rest of your income so the taxman calls it the same income pot) as long as your earnings are above a certain threshold in that year.

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