I Don’t Work, Can I Still Pay into a Private Pension?

Is it still possible to pay into a private pension if you don’t work anymore? How does it work with tax and any relief?

Question asked by Carol Daniels
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Answered by Andrew Jenkinson

Yes, you can. Any UK resident (under the age of 75) can make pension contributions and receive tax relief on their payments, even if they are a non-taxpayer.

This can be useful if you want to build up a pension in  your own right, for example if your partner is the main breadwinner and you stay at home to look after your children.

Pension for non-earner

As a non-earner, you can still receive 20% tax relief even if you don’t pay tax. In this case, the most you can pay into your pension is £3,600, made up of your contributions of £2,880 and the taxman’s contribution of £720.

You can take your pension benefits from the age of 55, with the first 25% available as a tax-free lump sum. The remaining 75% is available as taxable income. If you are a non-taxpayer (and these pension payments do not push you into tax), this payment would not be taxed.

Personal Allowance and Tax Relief

For example, imagine you invest £3,600, which grows to £10,000. When you decide to take your pension benefits, you can take 25%, or £2,500, as a tax-free lump sum.  If you want to take the remaining 75% as a single income payment of £7,500, then this amount is not taxed if your total income is less than the personal allowance of £11,500 (for the 2017/18 tax year). Your personal allowance is the amount of income you can receive each year without having to pay tax on it.

For more on the tax relief you can receive on pension contributions, use our Pension Contributions Tax Relief Calculator here →

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This information does not constitute financial or other professional advice. You should consult your professional adviser or contact us directly on 02084327333 should you require financial advice. It is important to ensure any insurance policy you take out is suitable for your needs.
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