Pension Contribution Over 75's
Paraplanner717
Member
Hi,
Just a query regarding a person opening a pension and making a contribution after the age of 75.
I understand that contributions post 75 are non-tax relievable. My question is if the annual allowance of £60,000still applies at this point.
As the contribution will not receive tax relief, will the client be restricted to contributing a gross payment of £3,600, or could they contribute the full £60,000? Even with no relevant earnings in the tax year.
Any research we have done so far only states that to receive tax relief the maximum input if you have no relevant UK earnings is £3,600. But what if it just a member contribution with no tax relief?
For reference, this client does not have any relevant earnings this tax year.
Comments
They will need to find a provider willing to accept a contribution that does not get tax relief. You could pay in what you liked.
The AA only picks up employer contributions post 75.
The $64,000 question is why you would want to turn capital that you have tax free access to into a pension your beneficiaries will pay tax on 100% of or you would pay tax on at least 75% of.
NB - the £3,600 is usually a tax relieved contribution where you only pay in 80% of it.
https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm053200#whatisnot
If a client was greatly exceeding the IHT threshold, a pension contribution could be a way to move money out of the estate and so it would be essentially a 40% tax saving up front. Of course the benefits taken in the future would then be taxed at the beneficiary's marginal rate, but if this was at basic-rate, you would be better off.
There may be a pitfall here that I am missing however.
It might work - or they could just give it away and hope they survive 7 years! Unless using an exemption to give it away.
And they have to tell HMRC on death if they made contributions in the 2 years before death
I think you will struggle to find a pension provider that allows over 75s to contribute into a pension.
Pension providers introduced a ban on over 75s contributing as it was a clear tactic to dodge inheritance tax.
We did a smaller cont. for someone over 75 recently. Aegon ARC - their existing provider - were happy to accept