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Case Studies

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Pension & Retirement - Case Study 2

Background & Objective:

Dr C is a member of the NHS Pension scheme and wished to make an additional contribution into her existing Personal Pension.

After requesting information from the NHS on her contributions we discovered that she had unused pension contributions of around £60,000 accumulated over the last three tax years.

Solution:

By making a contribution of £60,000 into her personal pension in the current tax year, apart from benefiting from the tax relief, the contribution would be outside her estate for inheritance tax purposes immediately. The contribution of £60,000 attracted immediate tax relief at 20% so in effect Dr C only had to invest £48,000 of her own money.

Because she's a higher rate tax payer she'll also be able to claim a further 20% tax relief (£12,000) via her annual tax return, meaning she will have received £24,000 in tax relief from HMRC.

Dr C expects to be a basic rate tax payer when she retires, she has received 40% tax relief on the contribution now but will only be liable to 20% tax on any income she withdraws on retirement after she's used up her maximum tax free cash allowance.

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