Annual Allowance

OldBeanz

Presumably the inflation figure is worked out in September?

RichandJ

OldBeanz wrote: »

Presumably the inflation figure is worked out in September?

Yes, annual CPI rate from September applied to the first accrued pension figure before deducting that from the latest accrued figure & multiplying the result by 16.

OldBeanz

What about allowances for previous years can they be taken into account as the figures are quite tight?

jamesd

Yes, you have unused allowance from past years and you can use the unused part from up to three past years. So work out what is used from those years and that'll tell you what's available. But this only applies to the annual contribution limit, it doesn't mean you get tax relief on the amount if it's over your pay amount.

As a basic rate tax payer in a public sector pension you have a higher than usual chance of qualifying for flexible drawdown that would let you take out all of the money in a personal pension pot whenever you like. The requirement is £20,000 of guaranteed income from things like defined benefit pensions and annuities. This can let you get the nice tax gain of pension contributions without the flexibility loss.

hyubh

OldBeanz wrote: »

Presumably the inflation figure is worked out in September?

Yes, the CPI figure as others have said. However, if you haven't met the 50K limit excluding inflation, then by definition, you don't need to bother with either including inflation nor working out the (positive) implications of rollover relief.

OldBeanz

If I can use earlier years then I do not have any issues.

The challenge with the £20k limit is that I want to go in the year before the amount is due for review (so will not have had met requrements) and my OAP is 5 years later when I will be in the same position. My nightmare is that I end up having to buy an anuity for £100pa or other relatively trivial amount.

jem16

OldBeanz wrote: »

If I can use earlier years then I do not have any issues.

You can use the earlier years for unused annual allowances but you won't get tax relief on any more than your annual salary which is what I thought you were asking about?

OldBeanz

Yes it was.

Sent the figures to my pension office and asked them to work it out. No doubt I will be back in a couple of weeks for clarification!

I have stopped the other pensionsnotpaid through salary and thiink I need to pay £20k gross for two years. I reckonn I should be able to do this but want to be safe rather than sorry!

I may spend some of that on a laptop wth a properly working keyboard.

ffacoffipawb

jamesd wrote: »

Yes, you have unused allowance from past years and you can use the unused part from up to three past years. So work out what is used from those years and that'll tell you what's available.

How does use of unused allowances work?

For the next tax year (2014/2015) the annual allowance falls to £40,000.

If I pay in £42,000 THIS tax year (2013/2014) leaving £8,000 unused from THIS tax year's £50,000 allowance can I pay £48,000 in the next tax year - i.e. next year's £40,000 maximum plus the unused £8,000 carried forward based on this year's allowance.

Or because I have paid in more than £40,000 (next year's new allowance) I can only pay in £40,000 NEXT tax year because there is nothing to carry forward based on next year's lower allowance as I have paid more than £40,000 this year?

i.e. is the basis of the calculation the ACTUAL unused allowance (current 2013/2014) or the NOTIONAL unused allowance based on the new reduced annual allowance (next 2014/2015)?

Assume that input period is the tax year for simplicity.

(I know what I am trying to ask but looking back this seems a poor / long winded way of wording it)

jem16

ffacoffipawb wrote: »

If I pay in £42,000 THIS tax year (2013/2014) leaving £8,000 unused from THIS tax year's £50,000 allowance can I pay £48,000 in the next tax year - i.e. next year's £40,000 maximum plus the unused £8,000 carried forward based on this year's allowance.

That would be my understanding. Perhaps this might help?

http://www.scottishlife.co.uk/scotlife/localuserpage.asp?ae_bae=T&page=3951