We’d like to remind Forumites to please avoid political debate on the Forum.

This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.

📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!

Can my pension conts temporarily exceed my income?

I know that the max I can contribute to a pension (with relief) in the financial year is the lower of my earnings or £40K.

My question is, can I temporarily contribute more to my pension than I have earned (so far) early in the financial year as long as I'm back under the limit by the following April?

To explain, I've just been notified that my job is under consideration for redundancy, but I'm 99% sure that this is just a formality and that I will be made redundant early in the 18/19 tax year. I may well take the opportunity for a decent length holiday (perhaps a month), and then I will be in no rush to take the first job that comes along after that as I work in a specialised area and should be able to earn considerably more by being prepared to wait for the right opportunity. Hence it could be 3 or 4 months or so before I am earning again. If I leave my SIPP direct debits as they currently stand, they (combined with a month's worth of conts to my current employer's scheme) could put my conts ahead of my earnings after 3 months (assuming one month's earnings next tax year).

Thanks
msallen

Comments

  • I know that the max I can contribute to a pension (with relief) in the financial year is the lower of my earnings or £40K.

    What about the £2880/3600 limit??
  • Linton
    Linton Posts: 18,349 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Hung up my suit!
    msallen wrote: »
    .....


    My question is, can I temporarily contribute more to my pension than I have earned (so far) early in the financial year as long as I'm back under the limit by the following April?

    Yes, what matters is the situation at the end of the tax year.
  • Paul_Herring
    Paul_Herring Posts: 7,484 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Photogenic
    msallen wrote: »
    I know that the max I can contribute to a pension (with relief) in the financial year is the lower of my earnings or £40K.

    .. down to £3,600, as noted previously.
    My question is, can I temporarily contribute more to my pension than I have earned (so far) early in the financial year as long as I'm back under the limit by the following April?

    Yes. As long as by April, you are - in fact - under that limit.

    HMRC have enough paperwork to mess up without checking monthly contributions against salaries.
    Conjugating the verb 'to be":
    -o I am humble -o You are attention seeking -o She is Nadine Dorries
  • dunstonh
    dunstonh Posts: 120,198 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    I know that the max I can contribute to a pension (with relief) in the financial year is the lower of my earnings or £40K.

    Not quite. If you earn over £40,000 a year, you can also utilise the previous 3 tax years unused personal allowances.
    My question is, can I temporarily contribute more to my pension than I have earned (so far) early in the financial year as long as I'm back under the limit by the following April?

    When you pay in the tax year is not an issue any more (caveat - it can be in some scenarios - but not this one). The tax year is treated as one period. Whether you pay a single amount on day 1 or day 365 does not matter. The total at the end does.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • msallen
    msallen Posts: 1,494 Forumite
    Tenth Anniversary 1,000 Posts Name Dropper
    Thanks all. I assumed I would be OK, but just wanted a second opinion.
  • Kynthia
    Kynthia Posts: 5,692 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    Are you likely to receive a high redundancy figure? The taxable portion of your redundancy over £30k counts as earnings. So your earnings limit this year might be higher than you think, even if you don't get a job immediately.
    Don't listen to me, I'm no expert!
  • msallen
    msallen Posts: 1,494 Forumite
    Tenth Anniversary 1,000 Posts Name Dropper
    Kynthia wrote: »
    Are you likely to receive a high redundancy figure? The taxable portion of your redundancy over £30k counts as earnings. So your earnings limit this year might be higher than you think, even if you don't get a job immediately.

    Unfortunately not. I've only been with my current employer for 6 years and I can't imagine them paying me anything above the statutory minimum - we were taken over by a US company about 18 months ago, and they have been unwavering in their contempt for the employee rights which their new European staff have. I'm sure that if they could get away with it we'd only get the minimum allowed under US law.
  • Kynthia
    Kynthia Posts: 5,692 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    msallen wrote: »
    Unfortunately not. I've only been with my current employer for 6 years and I can't imagine them paying me anything above the statutory minimum - we were taken over by a US company about 18 months ago, and they have been unwavering in their contempt for the employee rights which their new European staff have. I'm sure that if they could get away with it we'd only get the minimum allowed under US law.

    Yes, I've seen American management nearly collapse when they realise how long someone here will go on maternity leave for, and how much annual leave we get a year.
    Don't listen to me, I'm no expert!
  • Paul_Herring
    Paul_Herring Posts: 7,484 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Photogenic
    Kynthia wrote: »
    Yes, I've seen American management nearly collapse when they realise how [...] much annual leave we get a year.

    To be fair, while American employees aren't entitled to any paid holiday (by law,) in practice full time employees can get around 22 days. But then again, Americans tend to be known for not actually taking all of them.
    Conjugating the verb 'to be":
    -o I am humble -o You are attention seeking -o She is Nadine Dorries
  • michaels
    michaels Posts: 29,224 Forumite
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    My understanding is even if you end up paying too much into your pension over the year all that happens is you declare it on your tax return and pay back the tax relief that shouldn't have been claimed - if it is less than 2k(?) you have to pay it, more than that and it can be taken out of the pension instead.
    I think....
This discussion has been closed.
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 352.1K Banking & Borrowing
  • 253.6K Reduce Debt & Boost Income
  • 454.2K Spending & Discounts
  • 245.1K Work, Benefits & Business
  • 600.7K Mortgages, Homes & Bills
  • 177.5K Life & Family
  • 258.9K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16.1K Discuss & Feedback
  • 37.6K Read-Only Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.