Using unused allowance (carry forward)

ffacoffipawb

gadgetmind wrote: »

See the diagram on page 4. All contributions to the pension during the PIP are deemed to have been paid in on the last day of the PIP for Annual Allowance purposes.

Salary is paid on 25th of the month.

If the pension contribution deducted from the 25th March 2015 salary does not appear in the pension until 6th April 2015, is the payment deemed to have been made on 25/03/2015 so in the 2014/15 tax year or on 06/04/2015 so in the 2015/16 tax year?

The employee has no control over the latter so the fair definition should be the former, but is there any definitive definition of this?

What if contributions are paid across several months late?

gadgetmind

ffacoffipawb wrote: »

If the pension contribution deducted from the 25th March 2015 salary does not appear in the pension until 6th April 2015, is the payment deemed to have been made on 25/03/2015 so in the 2014/15 tax year or on 06/04/2015 so in the 2015/16 tax year?

For tax relief, the 2014/15 tax year.

For annual allowance it's in the 2015/16 tax year. Note that if your PIP for the scheme ends in (for example) mid-April, then the next pension payment would hit the 2016/17 tax year!

I had a scheme with a PIP in mid-July, so had some inputs heading off to a distant tax year, but then switched to paying into a tax year aligned scheme. I ended up with one year having 17 contributions, and payments made after July hitting my pension (for AA purposes) being "input" before the earlier ones.

ffacoffipawb

gadgetmind wrote: »

For tax relief, the 2014/15 tax year.

For annual allowance it's in the 2015/16 tax year. Note that if your PIP for the scheme ends in (for example) mid-April, then the next pension payment would hit the 2016/17 tax year!

No argument over the tax relief issue, but rather unfair to lose some input year's allowance and having a reduction in the following input year allowance through the employer's tardiness in paying contributions over!

Probably not an issue with carry forward, but even so ...

Snakey

Just as I think I understand these things, I read something that makes me realise I don't!

Normally it's a six and two threes because you get paid and make contributions evenly, so (barring incompetent employers etc) it's always twelve of everything in any given year, but for me in the current year it does make a difference because I wasn't employed in March 2015.

I think I understand how the PIP/Annual Allowance works - if I pay from my March 2016 salary and it goes into my pension in late April 2016, then I get tax relief against my 2015/16 income but it uses next year's AA (so, suppose I'd hit my £40k maximum in February and had no carry-forward from earlier years, I could make more in March without getting a charge).

My remaining question, then: when I am looking at the other limit - the "pension contributions must not exceed total earned income" limit - does the same rule apply? It seems to me that this comparison ought logically to insist on a closer relationship between the pension contribution and the pay packet out of which it was taken, compared with the AA which is an arbitary number. I'd prefer it didn't, though - because of the way things are falling this year, it would suit me better if I could count March's salary but ignore March's pension contribution. Next year I will not be anywhere near the total earnings limit.

Anyone any ideas?

ffa: agreed that's a bummer. Imagine if you'd put £40k in, in June, thinking it'd go in before the Budget!!

gadgetmind

ffacoffipawb wrote: »

rather unfair to lose some input year's allowance and having a reduction in the following input year allowance through the employer's tardiness in paying contributions over!

These rules gave no consideration to fairness, logic or sanity at any turn.

Probably not an issue with carry forward, but even so ...

Absolutely critical for me at several stages, hence me needing to know exact PIPs for every scheme, and exact payment date of every pension contribution.

About 18 months ago, I came up with a "wizard wheeze" that my accountant only understood given a diagram, a (company funded) IFA couldn't get his head around, and that Friends Life said wasn't allowed until I quoted pensions legislation and their own pdf (linked up there ^^^) at them, at length.

It aligned all PIPs, soaked up all remaining carry forwards, optimised earnings across three tax years, but was complex as all hell.

All done now, I'm glad to say!

ffacoffipawb

gadgetmind wrote: »

Absolutely critical for me at several stages, hence me needing to know exact PIPs for every scheme, and exact payment date of every pension contribution.

Doesnt help if contributions are paid late then!

zagfles

See http://www.hmrc.gov.uk/manuals/rpsmmanual/RPSM06107020.htm

It looks like under a net pay arrangement (ie where conts are deducted from pay before tax), it would be the date of deduction from pay, but for a personal/GPP (where conts are deducted from after-tax pay and the provider claims tax relief) it would be the date received by the plan.

It doesn't mention salary sacrifice, but then it wouldn't - they're employer contributions, they're not technically a deduction from pay, they're an alteration of your contract of employment to exchange pay for employer pension conts. So I would imagine they'd have to be the date the employer pays them.

gadgetmind

ffacoffipawb wrote: »

Doesnt help if contributions are paid late then!

Quite, which is why I moved my PIP from near end of month to middle of month. With tax year aligned PIPs, their is a risk of a payment "missing" the 5th, so I now find an excuse for a chat with our company secretary near the end of March, and slip into this him having his annual chat to payroll.