If I make 60K pounds a year in the UK, I can apparently contribute 48.5K of it to a pension scheme and not have to pay any tax for that year because there is a personal allowance of 12.5K. Is this true? What investment options are available in such a scheme? Are these schemes privately managed? Can one access US capital markets and invest in individual stocks through such a scheme? Also, what if one is outside the UK when one makes withdrawals? Are they taxed at UK rates or at other rates? When can one start making withdrawals?

Also according to the answer here U.K social security eligibility if I pay into the system 12% of 6136 i.e about 736 pounds per year for 10 years I qualify for a state pension of 10/35*175 pounds/week (2600 pounds/year) for the remainder of my life. Is my interpretation right?

1 Answer 1


You can only contribute £40,000 per annum to your pension. However if you've not contributed that amount in the most recent 3 tax years you can carry over your unused allowance and therefore contribute more than £40,000.

If you exceed your allowance you'll need to pay tax on the excess which rather defeats the purpose of your contributions.

You must ensure that you're at least paid the UK minimum wage so if you only earn £40,000 you can't contribute all of it to your pension.

Your personal allowance is the amount of your earnings that you don't pay tax on, you can contribute that to your pension (subject to the minimum wage rule above), but there's little point as you're not saving any tax when you make that contribution.

The investment options you have available are specific to the pension scheme you invest in. You may be able to invest in US capital markets via a US fund, you're unlikely to be able to invest in specific stocks unless you have a personal pension and manage it yourself though.

It depends on your age when you can start making withdrawals from a personal or private pension but you'd usually need to be at least 55 years old and potentially a year or two older than that if you're under 50 right now.

The money you withdraw is taxed as part of your normal income, usually you'd pay a lower rate of tax because your annual pension income would be less than your annual earnings prior to retirement.

You'd need 35 years of contributions to qualify for a full state pension currently. You can look up where you are on the government's website. The minimum number of qualifying years to get any state pension at all is 10.

  • Thank you. Does one get the personal allowance while being taxed if one is outside the UK at the time of withdrawals from the pension pot? Also, can one contribute their after-tax pounds to any pension pot and never get taxed on that money from that point onwards? Commented Sep 26, 2020 at 22:02
  • You should try to ask one question at.a time and ask them as new questions rather than comments. The penultimate paragraph in my answer addresses your second question though. Commented Sep 26, 2020 at 22:08
  • I asked my first question in the fifth line of my original question. I did not see an answer to that in your response, and so I asked it again. Your penultimate question answers how the money I withdraw will be taxed at withdrawal if it was originally pre-tax. My question is how it will be taxed if it were originally after-tax. Something like the Roth in the USA where one contributes after-tax to a Roth IRA and never gets taxed on that money - not even at withdrawal. That said, your reply is very helpful. Thank you. Commented Sep 26, 2020 at 22:14
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    Post tax money you'd put in an ISA, not a pension. That's the closest UK equivalent. Pensions for pre-tax only, ISA for post-tax only. Commented Sep 26, 2020 at 22:16
  • I checked the contribution limit for ISA. It's 20000 pounds per year. So can one potentially stash away 60000 pounds per year? 40000 pre-tax and 20000 after-tax? Commented Sep 27, 2020 at 1:37

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