calculating pension carry forward sum for a SIPP

ro2778

I'm trying to get my head around SIPPs and pension carry forward.

I'm 33 and lets say this tax year I will earn 90k. I have been working for the past 5 years and have a pension with work via PAYE. I can look up the exact amounts, or request figures for the previous years but I have made a contribution each year, my employee has made a contribution and presumably there has been some government contribution in the form of tax relief?

I'm trying to work out what my maximum SIPP allowance is this year, taking into account carry forward from the past 5 years because I don't think I would have reached the 40k annual limit over the past 5 years. Is there a technical term I can use to request this information from my pension provider?

In the end I suspect the pension carry forward sum for this tax year will be greater than my projected gross salary. So I take it this means the maximum contribution I can make this tax year is equivalent to my gross salary? Let's say that is 90k, how do I proceed?

I take it I need to find a SIPP provider, any recommendations and what fees would I expect to pay? How much would I have to contribute if I wanted to pay 90k into my SIPP this tax year? From what I've read it seems 20% is added straight away, therefore 72k is 80% of 90k and the other 18k is added by the SIPP provider who in turn get this money from the government? Then I have to reclaim a further 20% via self assessment which will result in a change to my tax code so that a further 18k is returned to me in the next tax year? Is that right?

Next question I have is currently I don't like the look of the stock market, so can I hold cash on the SIPP until such a time that I think it's worth investing? What are the ongoing fees for SIPPs and are they different if money is in cash or in funds? Also currently the SIPP rules says you can't touch the money until you turn 55 but this is planned to go up to ?57 in 2019 I think I read. However, if I put money into the SIPP this year, will it always be the case that, that money + capital gains can be accessed when I turn 55? Also the lump sum rule is 25% can be removed tax free at 55 years old, will that rule always apply to the money I invest this tax year or can the lump sum rule change in future and apply retrospectively to any money invested into my SIPP this year?

Dazed_and_confused

You have misunderstood how higher rate tax relief element works.

You are not able to simply claim an extra 20% back from HMRC just because you are a higher rate payer.

The extra tax relief you are entitled to arises because the SIPP payment increases your basic rate tax band so you pay more tax at 20% and less at 40%.

So in very round figures (and assuming you don't live in Scotland and have no other taxable income) the effect of paying a gross contribution of £90,000 would be that you no longer have to pay any 40% tax so instead of paying

£11500 tax free (Personal Allowance)
£33500 x 20% = £6700
£45000 x 40% = £18000
Total £24700

You would pay
£11500 tax free (Personal Allowance)
£78500 x 20% = £15700

Tax saving of £9000

So the overall cost of the £90,000 you have in your pension fund is £72,000 less £9000 tax saving = £63,000, not the £54,000 you were hoping for