A quick check before I open a SIPP for the first time

zagfles

BobQ wrote: »

OP I have just noticed the above. I could interpret the above as meaning that you are doing your own calculation of "annual contribution" in a DB pension.

You do realise that how much you pay in contributions each year is not relevant for DB?

The calculation that needs to be done is based on the assumed value of the pension in cash terms. Essentially it values the pension at the start of the PIP (basically 16 times the pension earned to date plus any lump sum) and repeats this at the end of the PIP. The difference is the figure you need not the value of your contributions (see the links I posted).

Also it's important to use the correct inflation figure to revalue the starting amount - this can make a massive difference. The HMRC PIP calculator uses the correct figures:

http://www.hmrc.gov.uk/tools/annual-allowance/calculator.htm

[Deleted User]

' what I send will magically become 20% more in the SIPP account once received'

At the risk of being pedantic (as I am certain that the respondents know this) it is actually 25% which is added to the investment by HMRC. A SIPP contribution of £8000 will become £10000, relief having been given at 20% on the £10000.

Just in case the op wonders why £2000 and not £1600 is added to the investment.

newlease

BobQ wrote: »

OP I have just noticed the above. I could interpret the above as meaning that you are doing your own calculation of "annual contribution" in a DB pension.

You do realise that how much you pay in contributions each year is not relevant for DB?

The calculation that needs to be done is based on the assumed value of the pension in cash terms. Essentially it values the pension at the start of the PIP (basically 16 times the pension earned to date plus any lump sum) and repeats this at the end of the PIP. The difference is the figure you need not the value of your contributions (see the links I posted).

I am not doing my own calculation. The information I gave is from my Annual Statement of Benefits which you had incidentally said wasn't relevant. That's the one document I receive every year with all this information. The annual allowance used is stated around 15k, my contributions from salary are more like 3k which is indeed not relevant.

So, unless I'm missing something nothing for me to calculate.

Also, I'm a she (Louise).

newlease

zagfles wrote: »

PIPs are now aligned with the tax year. That's what the PP was referring to - "going forwards".

There is a transition this year splitting the year into two mini tax years. The OP will not have a PIP ending on 31 Dec 15. The PIP which started on 1 Jan 15 ended on 8 July 15, and the current PIP started on 9 July 15 and will end on 5 Apr 16.

The transition for DB schemes is quite complicated, I've not read it...

https://www.gov.uk/government/publications/pensions-technical-note-transitional-provisions-for-aligning-pension-input-periods/pensions-technical-note-transitional-provisions-for-aligning-pension-input-periods

Interesting, thanks for this. I will have to read in greater detail to make sure I don't risk going over the 40k limit. Even if the period is treated/extended as Jan 15 to Apr 16 I should still be safe, my 12 month annual allowance is around 15k and I plan to put in 10k from gross income so 25k, say 30k maximum for 15-16.

newlease

[Deleted User] wrote:

' what I send will magically become 20% more in the SIPP account once received'

At the risk of being pedantic (as I am certain that the respondents know this) it is actually 25% which is added to the investment by HMRC. A SIPP contribution of £8000 will become £10000, relief having been given at 20% on the £10000.

Just in case the op wonders why £2000 and not £1600 is added to the investment.

Indeed, my mistake. I was calculating by dividing by 0.8, which is of course same as multiplying by 1.25 and not 1.20. I should have written it more clearly as 20% tax relief.

BobQ

newlease wrote: »

I am not doing my own calculation. The information I gave is from my Annual Statement of Benefits which you had incidentally said wasn't relevant. That's the one document I receive every year with all this information. The annual allowance used is stated around 15k, my contributions from salary are more like 3k which is indeed not relevant.

So, unless I'm missing something nothing for me to calculate.

Also, I'm a she (Louise).

Louise I was not aware that the PIP alignment was going on so have learned something. If your ABS gives you this figure as the increase in benefits over the PIP fine. Some employers only issue this figure on request.