SIPP Carry Forward Contributions

hennerz

Is it OK to use the carry forward allowance if the individual didn't have a SIPP until this tax year, but did have an employer pension for the past 10 years?

If looking to use past years allowances is it correct to only count the employer and individual contributions or also any government contributions in the form of tax relief?

Is the £40k allowance made up of all 3 of employer, individual and government tax relief?

Thanks!

Sobryma

To use carry forward you need to have been in a pension scheme in the years prior, in addition you are limited to your current years income for contributions (i.e. you can't pay in this tax year more than your total pensionable earnings regardless of carry forward). The allowance comprises total payments into a pension, so employer and gross employee (before any tax relief).http://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/pensions-and-tax/carry-forward

jamesd

Yes, the only requirement is to have been in a pension scheme, any scheme. It's a rule that would normally catch out the youngest people who may not yet have joined even one scheme.

The amount counted is gross which means after tax relief is granted and employer contributions.

kidmugsy

I wonder why they bother with the rule that you must have been in a pension scheme for the previous three years. On the face of it, it is an unnecessary complication in a world that's quite complicated enough anyway.

System

I suppose the argument would be that if you were not in any scheme then you weren't "pensionably active", so therefore didn't have an allowance to carry forward.

kidmugsy

Clifford_Pope wrote: »

I suppose the argument would be that if you were not in any scheme then you weren't "pensionably active", so therefore didn't have an allowance to carry forward.

Very lawyerly of HMG, but not very sensible. Are they trying to encourage pension saving or not? If not, they'd be wiser to cut the annual allowance for everyone than to penalise a handful of potential pension savers.

bigadaj

kidmugsy wrote: »

Very lawyerly of HMG, but not very sensible. Are they trying to encourage pension saving or not? If not, they'd be wiser to cut the annual allowance for everyone than to penalise a handful of potential pension savers.

Well it only affects a tiny percentage of the population, and the need for this only arises when you have already put £40k into your pension in that tax year. So rather than saving for pension it's more tax avoidance, sorry 'smoothing', by people who are unlikely to be reliant on the state.

Like many things in life there isn't necessarily a logic but it's a minor hurdle to leap for potential savings of tens of thousands.

zagfles

kidmugsy wrote: »

I wonder why they bother with the rule that you must have been in a pension scheme for the previous three years. On the face of it, it is an unnecessary complication in a world that's quite complicated enough anyway.

Possibly to do with people coming the UK temporarily for work - so they can't earn £150k and put it all into a pension and so pay no tax them go home? Just a guess...