Carry forward ?

Microbe65

I would like to use carry forward to make additional SIPP contributions above the £40k annual allowance. Do I need to notify HMRC of this?

Gross earning estimated £50k, with DB pension (NHS) benefits estimated to be £16k for 2017/18 and similar for previous years. The SIPP has been for 2017/18 only and so no contributions for previous tax years.

Am I correct in assuming that I could use carry forward to make a gross SIPP contribution of (£50k - £16k) £34 this year?

Dazed_and_confused

What's the primary driver for this, increased pension fund or tax relief

Microbe65

Dazed_and_confused wrote: »

What's the primary driver for this, increased pension fund or tax relief

Increased pension fund. The plan is to use the SIPP (at 55) in three years time, to provide an income for 5 years until I can take the first part of my NHS pension (1995 scheme) at 60

stoozie1

Your pension input amount seems abit high tome. Did you have an on demand statement sent?

What does it show for the previous periods?

Linton

I think you could contribute more than £34K gross if one assumes that you have sufficient £40K allowance from previous years. The increase in DB benefits figure counts against the £40K limit as it covers both your and your employer's contribution to the pension. Just your actual contribution to your DB pension should count against the earned income limit.

zagfles

Microbe65 wrote: »

I would like to use carry forward to make additional SIPP contributions above the £40k annual allowance. Do I need to notify HMRC of this?

No. Just keep records in case they query it.

Gross earning estimated £50k, with DB pension (NHS) benefits estimated to be £16k for 2017/18 and similar for previous years. The SIPP has been for 2017/18 only and so no contributions for previous tax years.

So if the PIAs (pension input amounts) for the previous 3 tax years were £16k, you have £72k to carry forwards (3 x 24k).

Am I correct in assuming that I could use carry forward to make a gross SIPP contribution of (£50k - £16k) £34 this year?

More. Looks like you're limited by the earned income limit, not the AA as you have lots of carry forwards.

The earned income limit is separate to the AA and uses completely different criteria - PIAs/employer conts aren't counted, no carry forwards, so you could contribute £50k minus your contributions to the NHS scheme. Which is basically your P60 income (since your conts will already be deducted).

Microbe65

stoozie1 wrote: »

Your pension input amount seems abit high tome. Did you have an on demand statement sent?

What does it show for the previous periods?

It could be as it was an estimate and I erred on the side of caution. I have requested a pension statement to get a definite amount

Microbe65

zagfles wrote: »

No. Just keep records in case they query it. So if the PIAs (pension input amounts) for the previous 3 tax years were £16k, you have £72k to carry forwards (3 x 24k).More. Looks like you're limited by the earned income limit, not the AA as you have lots of carry forwards.

The earned income limit is separate to the AA and uses completely different criteria - PIAs/employer conts aren't counted, no carry forwards, so you could contribute £50k minus your contributions to the NHS scheme. Which is basically your P60 income (since your conts will already be deducted).

Thanks, that's very helpful. Can carry forward be used each year, providing that the unused AA hasn't been utilised in the preceding three tax years?

Stochasticity

Every tax year you can carry forward unused annual allowances from the three previous tax years. So this is the last year to use unused annual allowance from the 2014/15 tax year. Once the carry forward is used, you cannot use it again.

However, as noted above, you must have sufficient earnings for your own pension contributions to receive tax relief in the first instance (and therefore to be assessed against the annual allowance). Focus first on this (and making sure that you maximise the income tax relief available to you), and only second on the annual allowance.

If you just have a one-off lump sum to contribute to pensions, you could receive more tax relief if you spread contributions to your SIPP across several tax years ahead of retirement (as more might be offset against earnings in the higher rate band). You do not need to delay investing, as you can invest outside of your SIPP (ideally an ISA, if you have available ISA allowance) in the meantime and then gradually move the investment across to your SIPP.

stoozie1

Good plan to get a statement. My OH is nhs 1995/2015 and we just got an input statement showing less input amount than his total contributions this year, and a previous 2 years of negative therefore nil input amount. His gross earnings are similar to yours which is why I mentioned it.

zagfles

stoozie1 wrote: »

Good plan to get a statement. My OH is nhs 1995/2015 and we just got an input statement showing less input amount than his total contributions this year, and a previous 2 years of negative therefore nil input amount. His gross earnings are similar to yours which is why I mentioned it.

Does it have a final salary link still? If payrises are below inflation with a FS link then that could explain low/zero PIA.

For a CARE scheme a third of salary as the OP was assuming is a fairly typical PIA. But the inflation figure used to revalue the CARE scheme and the inflation figure used when revaluing for AA purposes are likely to be different, which would affect the PIA. So some years it might be a lot more than a third of salary, other years a lot less.