Pension limit - really 100% salary?

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  • chucknorris
    chucknorris Posts: 10,786 Forumite
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    ThinkingOutLoud wrote: »
    True Chuck, although if the OP has under-contributed in prior years, he can use money from any source to make up his cash input to the "relevant permitted maximum contributions". i.e. he can use other income to make back contributions not to calculate his total "salary".

    If you are carrying forward unused annual allowance, you still are capped by relevant earnings in that particular tax year that you are actually contributing, if you want to claim the tax relief.
    Chuck Norris can kill two stones with one birdThe only time Chuck Norris was wrong was when he thought he had made a mistakeChuck Norris puts the "laughter" in "manslaughter".I've started running again, after several injuries had forced me to stop
  • ThinkingOutLoud_2
    ThinkingOutLoud_2 Posts: 1,402 Forumite
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    chucknorris wrote: »
    If you are carrying forward unused annual allowance, you still are capped by relevant earnings in that particular tax year that you are actually contributing, if you want to claim the tax relief.
    We agree. That was what I meant by ""relevant permitted maximum contributions".

    I think my post and Clifford's were because we were not sure the OP would get clearly get your point rather than any disagreement.
    I am just thinking out loud - nothing I say should be relied upon!
    I do however reserve the right to be correct by accident.
  • chucknorris
    chucknorris Posts: 10,786 Forumite
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    ThinkingOutLoud wrote: »
    We agree. That was what I meant by ""relevant permitted maximum contributions".

    I think my post and Clifford's were because we were not sure the OP would get clearly get your point rather than any disagreement.

    Ah, I see, not so much you, but I thought Clifford was just having a go for the sake of it.
    Chuck Norris can kill two stones with one birdThe only time Chuck Norris was wrong was when he thought he had made a mistakeChuck Norris puts the "laughter" in "manslaughter".I've started running again, after several injuries had forced me to stop
  • Triumph13
    Triumph13 Posts: 1,730 Forumite
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    I'm just amazed that there is a circumstance where £128k pa of personal income could be accurately termed irrelevant!
  • chucknorris
    chucknorris Posts: 10,786 Forumite
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    Triumph13 wrote: »
    I'm just amazed that there is a circumstance where £128k pa of personal income could be accurately termed irrelevant!

    I think I can understand why, after all, the pension tax relief is a subsidy that is supposed to be helping fund eventual retirement. As much as I would like to use investment income to gain further tax relief, I can fully understand the Gov taking the line that anyone with significant investment income, does not need to be subsidised to fund their retirement.
    Chuck Norris can kill two stones with one birdThe only time Chuck Norris was wrong was when he thought he had made a mistakeChuck Norris puts the "laughter" in "manslaughter".I've started running again, after several injuries had forced me to stop
  • MoneySavingUser
    MoneySavingUser Posts: 1,667 Forumite
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    As others have pointed out:

    You are misunderstanding how this works. I expect the change in your take home pay is because you are paying more into the scheme than before (i.e. some of your NI saving is also going in) rather than you are only saving £10.

    Please post some actual numbers of what you mean.

    (as an aside I think by optout the OP means opt out of SS not the pension scheme itself).

    What you need to do is:

    1.Salary sacrifice down to the minimum wage which is usually for someone who works 7.5 hours a day

    260 working days * 7.5 hours * the nmw for your age range

    2. Pay 80% of anything left over into a SIPP or a personal pension
  • AlanP_2
    AlanP_2 Posts: 3,252 Forumite
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    Before you pay anything below Minimum Wage into a SIPP consider your Tax Allowance of £11k (£11.5k) from next month.

    Is it worth paying everything into a SIPP to get 20% tax relief only to draw it out later and pay 20% tax on it?

    May not be relevant to the OP but just in case.
  • jamesd
    jamesd Posts: 26,103 Forumite
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    edited 3 March 2017 at 2:33PM
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    The 25% tax free lump sum provides the benefit in that case.
  • ThinkingOutLoud_2
    ThinkingOutLoud_2 Posts: 1,402 Forumite
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    AlanP wrote: »
    Is it worth paying everything into a SIPP to get 20% tax relief only to draw it out later and pay 20% tax on it?
    I note your caveat.

    As James D says - only 75% the money coming out will taxable. So that is a 5% kickback.

    Plus, it looks like the OP is now contributing a lot to retire early, but didn't necessarily contribute more than the scheme minimum before (assumption not fact).

    If so and his salary is only now 40k - we might wonder if his sustainable drawdown pension will amount to over 11.5k, especially as taken early. If not, then he won't be paying tax on any of the drawdown and hopefully can use savings to supplement until state pension arrives to help.
    I am just thinking out loud - nothing I say should be relied upon!
    I do however reserve the right to be correct by accident.
  • System
    System Posts: 178,093 Community Admin
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    chucknorris wrote: »
    Ah, I see, not so much you, but I thought Clifford was just having a go for the sake of it.


    Just for sake of clarifying something that appeared to be worded a bit ambiguously.

    In other areas of pension law, the actual source of the funding is critical, eg with recycling.
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