Could someone check my SIPP calculation?

7_week_wonder

Thanks Zagfles,
I am getting myself more and more confused, I'll have one more go and then give up!

The letter from my pension scheme states "It is the value of accrual of pension and lump sum benefits over the course of a PIP (Pension Input Period) which is measured against the Annual Allowance..."

If I look at the calculation for 2014 - 2015:
I contributed 6.5% of £42630 (i.e. £2771);
but because they take into account the accrual of (previous) pension and lump sum, the calculation from the pension scheme shows that, in 2014 - 2015, I used £9965.31 of my annual allowance rather than £2771.

So if I'm working out the figures for 2015-2016, although I'm contributing 6.5%, the amount that comes off my annual allowance will be substantially more than that (~£10k)

Does that make any sense?

zagfles

7_week_wonder wrote: »

Thanks Zagfles,
I am getting myself more and more confused, I'll have one more go and then give up!

The letter from my pension scheme states "It is the value of accrual of pension and lump sum benefits over the course of a PIP (Pension Input Period) which is measured against the Annual Allowance..."

If I look at the calculation for 2014 - 2015:
I contributed 6.5% of £42630 (i.e. £2771);
but because they take into account the accrual of (previous) pension and lump sum, the calculation from the pension scheme shows that, in 2014 - 2015, I used £9965.31 of my annual allowance rather than £2771.

So if I'm working out the figures for 2015-2016, although I'm contributing 6.5%, the amount that comes off my annual allowance will be substantially more than that (~£10k)

Does that make any sense?

So why are you worried about exceeding the AA plus carry forwards when you are so so far below it?

Are you confusing the two limits - the 100% of earnings limit and the annual allowance?

They are completely separate limits worked out in completely different ways. The AA is the increase in value of your DB pension (and in the case of DC, contributions from you and your employer) for which you have the figures. Unused allowance from previous years can be carried forwards. You can completely forget about the AA this year as you are nowhere near it.

The 100% of earnings limit has nothing to do with the AA, it's your contributions only. There is no carry forwards. You can pay all your taxable earnings into pensions, so you can contribute to a SIPP your earnings minus what you contribute to your company pension. See post #3.

I think the problem is there is a lot of simplistic rubbish in the media saying stuff like pension contribution limits are your earnings subject to a £40k max, £3600 min. This is utter rubbish as it tries to combine two limits which have completely different rules as to what's included (for instance employer conts, carry forwards etc)

7_week_wonder

zagfles wrote: »

So why are you worried about exceeding the AA plus carry forwards when you are so so far below it?

I know I'm safe on my employer pension, but I'd like to put as much as of my windfall as possible into a SIPP without exceeding my threshold (which, we've agreed, is my annual salary). So, using extreme examples:

If I put a lump sum of £100k into my SIPP this year I would exceed my threshold;

If I put £1k into my SIPP this year I would be well within my threshold;

I *think* I can put somewhere about £25,600 into my SIPP this year and not exceed my threshold. What I'm trying to work out is exactly what that number is.

zagfles

7_week_wonder wrote: »

I know I'm safe on my employer pension, but I'd like to put as much as of my windfall as possible into a SIPP without exceeding my threshold (which, we've agreed, is my annual salary). So, using extreme examples:

If I put a lump sum of £100k into my SIPP this year I would exceed my threshold;

If I put £1k into my SIPP this year I would be well within my threshold;

I *think* I can put somewhere about £25,600 into my SIPP this year and not exceed my threshold. What I'm trying to work out is exactly what that number is.

See post #3!! Also I've editted my previous post trying to understand what's confusing you.

7_week_wonder

zagfles wrote: »

So why are you worried about exceeding the AA plus carry forwards when you are so so far below it?

Are you confusing the two limits - the 100% of earnings limit and the annual allowance?

They are completely separate limits worked out in completely different ways. The AA is the increase in value of your DB pension (and contributions to DC pensions from you and your employer) for which you have the figures. Unused allowance from previous years can be carried forwards. You can completely forget about the AA this year as you are nowhere near it.

The 100% of earnings limit has nothing to do with the AA, it's your contributions only. There is no carry forwards. You can pay all your taxable earnings into pensions, so you can contribute to a SIPP your earnings minus what you contribute to your company pension. See post #3.

I think the problem is there is a lot of simplistic rubbish in the media saying stuff like pension contribution limits are your earnings subject to a £40k max, £3600 min. This is utter rubbish as it tries to combine two limits which have completely different rules as to what's included (for instance employer conts, carry forwards etc)

Thank you, thank you! Whilst I was typing my previous reply, you edited your post and you've spotted my mistake. I *was* confusing the two limits and was trying to work out this year's allowance.

So, as you've repeatedly said (post 3!), all I have to do is take my contributions to my employers pension away from my salary and that is what I can put into my SIPP.

Thank you so much for your patience - I owe you a very large virtual drink :beer:

zagfles

7_week_wonder wrote: »

Thank you, thank you! Whilst I was typing my previous reply, you edited your post and you've spotted my mistake. I *was* confusing the two limits and was trying to work out this year's allowance.

So, as you've repeatedly said (post 3!), all I have to do is take my contributions to my employers pension away from my salary and that is what I can put into my SIPP.

Thank you so much for your patience - I owe you a very large virtual drink :beer:

Enjoying it now!

Make sure you keep the pension statement so if HMRC query you exceeding the AA you have proof of carry forwards available.

Obviously if you carry on making such large SIPP contributions over the next few years you will need to worry about the AA. But not a one-off, or even a two-off.