Author Topic: Key thresholds for pension contributions/withdrawals  (Read 6713 times)

vand

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Key thresholds for pension contributions/withdrawals
« on: July 08, 2024, 03:59:47 AM »
What are the key numbers and thresholds that we have identified that one should be aware of around pensions contributions/withdrawals and restriction rules? I have:

Contributions

  • £2,880 net - annual amount you can contribute with no other earned income
  • £10,000 gross - annual amount you can contribute if you have already triggered MPAA
  • Contributions at standard tax band (£12,570 - £50,270) - you will gain standard rate tax relief ie 20% (+ NIC relief if via salary sacrifice, ie 8%)
  • Contributions at higher rate tax band (£50,270 - £100,000) - you will gain higher rate tax relief ie 40% (+ NIC relief if via salary sacrifice ie 2%)
  • Contributions at the band of personal allowance withdrawal (£100,000 - £125,140) - you will gain relief higher rate tax ie 40%,the £1 withdrawal of personal allowance for every £2 of income, 33.3%, (+ NIC relief if via salary sacrifice, ie 2%)
  • Contributions at the additional rate tax (> £125,140) - you will gain additional rate tax relief ie 45%  (+ NIC relief if via salary sacrifice ie 2%)
  • 60k or your annual taxable income - the maxium amount you can ordinarily contribute in any given tax year
  • 3yrs - the number of years of unused carry forward available, provided conditions are met that you have sufficient income in the current year + have been a member of the pension scheme during that time


Withdrawals

  • £1,073,000 - this is the cap on the amount of a pot that is eligible for the 25% tax-free portion. 
  • 25% - the amount of the pot that can be taken tax-free
  • £268,250 - this is the result of the 2 points above - ie the maximum amount that can be taken out as the tax free portion (but this is not the same as the total amount you can get out tax-free due to the annual personal allowance.. see next)
  • £12,570 - the annual personal allowance limit - this is the amount you are can take tax free once you have taken all of the tax-free element of your pension
  • £16,760 - the amount you can take tax-free on an ongoing basis when taking into account the personal allowance + 25% tax free element (provided your pot is large enough to support that annual amount)
  • £50,270 - the upper limit of the basic standard rate of tax, and the amount which you can take out and remain at the standard rate bax band once you have exhausted all your tax-free element
  • £67,026 - the maximum amount you can withdrawal on an ongoing basis and remain a basic rate tax pay, taking into account the 25% tax-free element, and provided your pot is large enough to sustain these withdrawals

Other
  • 55yo - current pension access age, rising to 57 in 2028 and 58 very likely at some unconfirmed point in future
  • 75yo - Withdrawal of 25% lump sum allowance, inheritance benefits subject to tax

please add or clarify as your knowledge allows - this is not a straightforward topic!

MisterA

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Re: Key thresholds for pension contributions/withdrawals
« Reply #1 on: January 13, 2025, 06:28:02 AM »
I didn't really learn anything because I knew all the limits that relate to me, but this a great post, really useful.