Revisiting the idea of SIPPs

gadgetmind

jem16 wrote: »

and you're nowhere near the annual allowance limit.

That's something of an understatement, sadly. Still she doesn't earn enough to pay tax, which makes the tax relief rather nice.

gterr

Perelandra wrote: »

I may be stating the obvious, but just in case...

I wouldn't worry too much about the fees in retirement at this stage. If you're starting a pension now, you should find it a relatively easy process to transfer that pension to another provider when the time comes if your existing provider's fees are not to your liking. So yes, it may be murky at the moment as to what they are- but there's no commitment to a particular provider at this point.

Quite so. I'll choose a provider that charges a low transfer-out fee, just in case, and will probably stick to just one or two funds (trackers) until I see how things develop.

gterr

jem16 wrote: »

As you're taking her contributions into account by looking only at her taxable income, then yes provided it's for tax relief purposes and you're nowhere near the annual allowance limit.

If you're getting close to the annual allowance limit you have to also consider the increase in value in the DB pension.

I'm getting a bit confused now about "annual allowance" in the context of other pensions schemes running. Are we talking about the £40,000 limit or annual earnings?


Have discovered that husband's pension scheme is a DB one, not a DC. He only works part-time, gross salary approx. £7900 pa. His latest pension statement suggests his (annual) pension entitlement is growing at the rate of about £120 a year. Do I need to contact the pension company and ask for the monetary value of the benefits built up in the present tax year if we're only considering a pension contribution to a SIPP of £7900 max (i.e. his maximum earnings) each year?

jem16

gterr wrote: »

I'm getting a bit confused now about "annual allowance" in the context of other pensions schemes running. Are we talking about the £40,000 limit or annual earnings?

When we talk about annual allowance we mean the maximum that you can contribute each tax year - the £40k limit at the moment.

Have discovered that husband's pension scheme is a DB one, not a DC. He only works part-time, gross salary approx. £7900 pa. His latest pension statement suggests his (annual) pension entitlement is growing at the rate of about £120 a year. Do I need to contact the pension company and ask for the monetary value of the benefits built up in the present tax year if we're only considering a pension contribution to a SIPP of £7900 max (i.e. his maximum earnings) each year?

As you're nowehere near the £40k limit this would not be necessary. It would really only ever be a problem if there has been an unusual increase in the value of the DB pension - ie an increase in salary through promotion or similar.

gterr

Nearly there. Thanks for all the help. One more very basic question, please:


If I want to contribute the equivalent of my total annual earnings this tax year, we are talking about my earnings up until April 5th 2015, presumably. If I don't know exactly what my paid employment will bring in I will have to err on the lower side, presumably?


And what about my small self-employed income? My profit won't be calculated until after the end of this tax year. Do I still have to try to use this year's profit figure, or do I use the one from last tax year (2013-2014)?


Thanks for your time.

kidmugsy

gterr wrote: »

Have discovered that husband's pension scheme is a DB one, not a DC. He only works part-time, gross salary approx. £7900 pa.

His permitted net annual contribution is
(£7,900, minus his annual contribution to his DB pension) x 0.8


That involves HIS contribution to the DB; not his employer's.

kidmugsy

gterr wrote: »

If I want to contribute the equivalent of my total annual earnings this tax year, we are talking about my earnings up until April 5th 2015, presumably. If I don't know exactly what my paid employment will bring in I will have to err on the lower side, presumably?

Yes

gterr wrote: »

And what about my small self-employed income? My profit won't be calculated until after the end of this tax year. Do I still have to try to use this year's profit figure, or do I use the one from last tax year (2013-2014)?

You can't use last year's; again you'll have to err low.



There might be some malarkey available using Pension Input Periods, but that's beyond my ken.

gadgetmind

kidmugsy wrote: »

There might be some malarkey available using Pension Input Periods, but that's beyond my ken.

That's only a factor if you get close to the £40kpa annual allowance. For tax relief purposes, you're deemed to have put the money in on the day you do so, for annual allowance purposes, it depends on the utterly bizarre PIP system.

The difference between these does allow a degree of "malarky", which I have exploited to date, but moving forwards I have tax year aligned all my schemes so that I can rest the grey matter a little.

gadgetmind

But yes, you do need to use inspired guesswork for contributions. Dunno what happens if you go over - I guess you have to fess up and hand back the tax relief.

gterr

jem16 wrote: »

When we talk about annual allowance we mean the maximum that you can contribute each tax year - the £40k limit at the moment.

As you're nowehere near the £40k limit this would not be necessary. It would really only ever be a problem if there has been an unusual increase in the value of the DB pension - ie an increase in salary through promotion or similar.

kidmugsy wrote: »

His permitted net annual contribution is
(£7,900, minus his annual contribution to his DB pension) x 0.8

That involves HIS contribution to the DB; not his employer's.

Do these answers conflict, or am I more confused than I realised?
If I use his taxable pay (as Gadget suggested) will I be OK?