Paying into a SIPP - how much?

bigfreddiel

How much can I pay into a SIPP, and can I back date a year?

I work part time and last year 2015/16 I earned £25k

I receive a civil service pension so I know that doesn't count as earned income.

I have savings in excess of £25k after I've maxed out my ISA so can I pay £25k into a SIPP for 2015/16 under the carry forward rules?

Cheers fj

bowlhead99

You can't pay into a SIPP for 2015/16 now. Because we are not in 2015/16 any more.

You can pay into a SIPP for 2016/17 if you like, because that's the year we're in.

The amount you can pay in for 2016/17 is limited by the amount of earnings you have in 2016/17. So if this year you'll earn £10k from the part time job and any other employment you go and get, it is £10k. The fact you have some more spare money sitting around in savings that you didn't choose to put into a pension scheme last year, doesn't mean you can shove it all into a pension now - you're limited to this year's earned income.

If this year's earned income is greater than £40k, which it doesn't sound like it is, then you wouldn't be able to fit pension payments equalling all of this year's income into this year's annual pension contribution allowance. In that circumstance you could then carry forward some allowance that you didn't use last year, on top of the £40k allowance you get for this year. For example, you might have only used £5k of your annual allowance last year and have £35k to carry forward to this year, so you could make pension contributions up to £75k of this year's income. That's what is meant by carry forward.

But if you don't have more than £40k earned income this year you won't even use up the current year £40k allowance, so you definitely don't need to worry about what you earned or contributed last year because you won't be bringing those allowances forward. They were there, but you didn't choose to use them, instead hoarding your cash outside a pension. So, the boat has been missed.

As an aside, you probably know that if your total earned income is under £3600 for the current year you can still make £3600 gross contributions for the year - a concession for very low or nil earners. May be of interest as the part time work dries up at some unspecified future point.