Should I increase my pension contributions in my new role to avoid tax trap?
Hi everyone!
(Throwaway acc for anonymity)
I know similar questions get asked frequently on here, but I’m looking for advice as I think my situation is fairly unique (?)
I (28F) am currently in a role with a salary of 110k. I’ve secured a new role with a salary of 135k plus a guaranteed 20% bonus for the first year, taking the total cash comp per year to 162k.
Historically, I have contributed enough to my pension i.e. >10k, such that I’m not exposed to the 60% tax trap, however, I’m wondering whether it makes sense to increase my contributions in this new role to continue avoiding it i.e. contributing at least 62k a year?
Context
- I’m based in London and currently live at home with my parents paying no rent (my job is fully remote and my family home has well connected tube lines so it’s always made sense to stay)
- I am not at risk of *not* ‘living my life’ - I’ve really made the most of living at home since graduation in terms of travel and enjoying myself (and will continue to do so either way!)
- I am considering purchasing my first home/flat, by myself, in London next year. I’d be looking to purchase a 2 bed with a budget of 600k and 20% deposit (which I already have saved - see below)
- My current role is a 5% matched pension and the new role will be 10% match on base salary
- I also currently contribute an additional 9k a year to my SIPP
My current financial position
- 62k in my company pension (with NEST 😞 in their highest risk fund)
- 8k in a SIPP (with Vanguard)
- 48k in cash (mix of ISA and savings accounts)
- 138k in investments (S&S ISA)
- No debts (I paid off my student loan a few years ago)
Based on the above, do you think it’s worth me increasing my pension contributions in the new role to ~62k a year to continue to avoid the tax trap, or should I just take the hit to optimise for a) living life b) potential future mortgage? Maybe there’s a balance in the middle?
Interested to hear your thoughts - thanks!