Annual Allowance

Rob749

Hi everyone
I've just retired on 20 July 2018, (age 70), and I'm not sure where I stand in relation the the AA, and hoping for some advice. I was in a final salary scheme which closed this year on March 31st. No problem with that, I have transferred it out as it is only a relatively small amount (5 yrs service).

The problem is that I joined the new company DC scheme run by Aviva. The company paid in a "transition" payment of £12000 to the scheme on April 1st, as part of a compensation package to former DB scheme members. Since then both my employer and I have been contributing to the new scheme under salary sacrifice up to my retirement date. The total in that new scheme is now £13800. I have earned in this tax year £6946 taxable gross.

I think I have unwittingly exceeded my AA, but not sure what to do next. I haven't received any notification from my old company scheme or Aviva. I have contacted the old company pension people and they say all they can do is provide a statement from 2017/18 of contributions and then I can use some complicated formula to work out the AA, to find out if I've exceeded it. Can someone please advise/help? Thank you.

Linton

April 1st is in the 2017-2018 tax year, not the current one.

Rob749

Thanks for the reply, yes it is you're right, my mistake.
I've just tried to check the actual date of payment, on the pension site, but all it gives is the month. Assuming it was in this tax year, can someone still please advise, just in case it is? Thank you.

soulsaver

More info needed: Someone who deals with pensions at your company will know the answer.

Rob749

Ok thanks soulsaver, I've done that and now awaiting reply. What sort of info is needed anyway, just out of interest?

Triumph13

Why do you think you have exceeded the AA? The transfer of the DB to DC has nothing to do with AA. The new payments to your DC total way below £40k. Because of the salary sacrifice you have zero employee's contributions (everything is employer's contributions) so the amount of your taxable earning is irrelevant.

Rob749

I thought, probably wrongly, that the maximum I could put into a pension was up to what I have earned this tax year, according to pensionsadvisoryservice.org and other .gov site, unless I am misunderstanding it.

I have been paying into the new scheme as well as the employer as stated above. My concern was the fact that my employer has paid 12000 into my pension, as compensation for losing the DB benefits, which already exceeds the amount I have earned, and I will be liable for tax on the remainder, and not able to pay in any more this tax year.

Also I thought that employers contributions were counted towards it, according to all the articles I have read.

Triumph13

I see where you are getting confused. There are two, completely separate, limits to the amount you are allowed to pay into a pension. One is the annual allowance, the other is your relevant earnings. You have to meet both tests, but they are calculated very differently.
The annual allowance test looks at the total amount contributed to a pension over the period, irrespective of who put it in there.
The 100% of relevant earnings test looks ONLY at your own contributions and ignores any contributions from your employer.
Both the £12k 'compensation' and anything you have contributed via salary sacrifice would be employer's contributions and therefore only relevant for the first test.

Rob749

Thanks Triumph13, sorry if I seem a bit dim on this, but I'm still a little confused, do you think I have exceeded it given the info I have stated?

Triumph13

I think you are nowhere near it.

On the annual allowance test you have contributions of £13.8k vs an allowance of £40k plus carry forward.

On the relevant earnings you look to have contributions of nil as it is all salary sacrifice and therefore employer's contributions.

Rob749

Thanks to everyone for their contributions, it has given me a better understanding in the pensions minefield !