Maximising Pension Contributions in Final Year of Work

Hi All

I was considering March as the best time of year for me to retire.

I have maxed out my pension contributions over the past few years using monthly contributions.

Before I retire in March, can I pay a lump sum AVC to take me up to the amount that I would have ordinarily paid if I had worked the entire year?

I normally claim 40% tax relief on my pension contributions, but in this case, if I pay a lump sum AVC in March (without moving into the higher rate tax bracket) will I only be able to claim tax relief on my contributions at 20%?

Thanks in advance

LT

Well you can only claim tax relief on pension contributions to the extent that you have actually paid tax in the first place. So, if you only paid 20% tax on the relevant income then that's all you can claim back. Similarly if you were exempt from tax due to low wages then you would not be able to claim any tax back - since none was paid!

Thanks Clubman

I was thinking along those lines as well.

So if I defer retirement by a couple of months while paying tax at the higher rate, my tax paid will have covered the 40% relief claimed.

LT

LiferT said:

So if I defer retirement by a couple of months while paying tax at the higher rate, my tax paid will have covered the 40% relief claimed.

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Hardly a compelling reason to keep working, especially if it will make little material difference to your quality of life in retirement. In your boat I would just stop AVCs in 2025 and just retire in March.