£40 000 annual contribution limit

frugal90

we are trying to build up the value of my wife's sipp which she has running alongside her teachers pension- does anyone know how to value the teachers pension as part of the annual allowance- she has not contributed to the sipp for the last three years and I believe that this allowance can also be used - is that correct does anyone know?


thanks in advance

SomeUser

If you're financially savvy and the administrators are helpful it's quite simple, however to be sure I'd recommend getting an IFA to help (because of the carry forwards etc and because I doubt the administrators will be a great help).

http://www.hmrc.gov.uk/pensionschemes/annual-allowance/pension-input.htm

gadgetmind

The £40k from previous years can be used *but* she needs enough taxable income in the current year to use it.

MRMX9

There is guidance on this on the Teachers pensions agency website – the calculation is set out below. As has been said you can use previous years allowances or if that isn’t sufficient you can offset the tax charge against your pension pot. If there is a risk of breaching the limit the TPA will also send you a statement warning you of this post year end.

https://www.teacherspensions.co.uk/members/faqs/new-and-active-teachers/annual-and-lifetime-allowances.aspx

I assume your wife is getting a large payrise/promotion – as otherwise there is little chance she would breach the limit given the current public sector pay cap of 1%.

“The growth in benefits is assessed over a Pension Input Period (PIP) which, in the Teachers’ Pension Scheme, ends on 31 March each year. For example, the PIP end date falling in the 2011/12 tax year will be 31 March 2012. Therefore, the value of Teachers’ Pension Scheme benefits at 31 March 2012 will be compared to the value of benefits at 31 March 2011, uprated by the Consumer Price Index (CPI).


The Annual Allowance limit for 6th April 2011 to 5th April 2014 is £50,000. From 6th April 2014 this has been reduced to £40,000. The limit is applicable to all of your pension savings not just those in the Teachers’ Pension Scheme, you must include growth in any other pensions schemes you also have.


If the growth (Pension Input Amount) exceeds the Annual Allowance, the individual will need to carry forward unused AA from the previous 3 years, if available.
The calculation for Annual Allowance is:
Opening Calculation = Pension x 16 + Lump Sum x Consumer Price Index (CPI)
Closing Calculation = Pension x 16 + Lump Sum
Closing Calculation - Opening Calculation = Pension Input Amount

Please note the Lump Sum is not applicable if a member has a normal pension age of 65.
Please visit the HMRC website for more help with calculations.“

hyubh

SomeUser wrote: »

I doubt the administrators will be a great help.

The administrator isn't going to give individual tax advice, but one place the OP could look is the wife's annual benefit statements - I don't know about the TPS, but LGPS administrators have included AA calcs on ABSs since it came in, which will indicate the allowance used up by the DB pension and any AVCs as applicable.

gadgetmind

I do wish HMG would knock it on the head with all of this annual allowance nonsense.

chucknorris

frugal90 wrote: »

we are trying to build up the value of my wife's sipp which she has running alongside her teachers pension- does anyone know how to value the teachers pension as part of the annual allowance- she has not contributed to the sipp for the last three years and I believe that this allowance can also be used - is that correct does anyone know?


thanks in advance

Have you considered buying additional pension within the TPS? I do have a SIPP but my priority is to buy the max allowed within the TPS, which I will achieve next August, after that I will concentrate on my SIPP>

frugal90

she is buying back years to age 20 at the moment.
The sipp is intended to cover early retirement from age 55 through to 60 when she will take her teachers pension


lots of good information -thanks