Pension Input Amount

AlanP_2

As explained in my other post my wife is a member of the LGPS along with an associated AVC that she contributes to and we are going to open a "stand alone / self managed" SIPP or PP to maximise the higher rate tax benefits.

The input limit was £50k p/a until it reduced to £40k p/a in April 2014 I understand.

The things I am struggling with are:

1) Who / How is the amount put into a range of different pots monitored by the Tax Man? We are not trying to "cheat" the system just to understand where and how it all gets pulled together.

2) Does the automatic 20% tax relief reclaimed by the SIPP / PP fund count towards the £40k or just the cash we put in?

3) I understand you can carry forward 3 years unused allowance and thus go over the £40k p/a limit whilst staying within the rules. Is this correct?


Thanks

Linton

1) The tax man needs to know your total gross pension payments to work out the deduction to be taken from your gross income to calculate the taxable income. So he can impose a maximum of £40K for the deduction.

2) The £40K is gross.

3) I believe so but dont know the details. Google should help.

jem16

AlanP wrote: »

1) Who / How is the amount put into a range of different pots monitored by the Tax Man? We are not trying to "cheat" the system just to understand where and how it all gets pulled together.

It will all be pulled together via your NI number.

2) Does the automatic 20% tax relief reclaimed by the SIPP / PP fund count towards the £40k or just the cash we put in?

The full gross payment counts. You will also have to take into account the amount used for the LGPS which counts both employee and employer's contributions. This figure is more difficult to work out with a Defined Benefit scheme and you will probably need to ask the LGPS for it.

You also need to find out the Pension Input Periods for any pension you pay into as they are not always the same.

3) I understand you can carry forward 3 years unused allowance and thus go over the £40k p/a limit whilst staying within the rules. Is this correct?


Thanks

It is correct as far as the annual allowance is concerned. However as far as tax relief is concerned, that is limited to the year the contribution was made. So in your wife's case it would be £60k.

hyubh

jem16 wrote: »

You will also have to take into account the amount used for the LGPS which counts both employee and employer's contributions.

Not really - for the DB part it's the increase in the notional value of the pension using HMRC's 16:1 factor, allowing for CPI. The actual contributions are neither here nor there. Having said that, for the AVC the figure used is indeed the total contributions made.

This figure is more difficult to work out with a Defined Benefit scheme and you will probably need to ask the LGPS for it.

Should be on the OP and his wife's annual benefit statements.

You also need to find out the Pension Input Periods for any pension you pay into as they are not always the same.

LGPS one will be from 1 April to 31 March (all LGPS funds have the same financial year).

jem16

hyubh wrote: »

Not really - for the DB part it's the increase in the notional value of the pension using HMRC's 16:1 factor, allowing for CPI. The actual contributions are neither here nor there.

That really was what I was referring to but worded it rather badly.

Should be on the OP and his wife's annual benefit statements.

Strangely enough it used to be on my annual pension statements but last year the SPPA stopped putting it on. When I asked them why I was told it was because very few people wanted to know it!

LGPS one will be from 1 April to 31 March (all LGPS funds have the same financial year).

As I think do most Public Sector pensions. However not all PP/SIPPs have the same input period which makes it awkward.

AlanP_2

Jem16 / hyubb - Thanks very much.

The 16:1 calculation is on the statement as you say, but as this arrives in November for the previous April (not unreasonably) it's too late to add pension unless there is a c/f facility (which I [STRIKE]think[/STRIKE] thought I had read somewhere there is).

We realised the tax relief was "in year" only but thanks for highlighting it.

hyubh

AlanP wrote: »

The 16:1 calculation is on the statement as you say, but as this arrives in November for the previous April (not unreasonably) it's too late to add pension unless there is a c/f facility

Which there is... Previous three years, using the allowance that was effective in the tax years concerned (i.e., 50K not 40K).