Can I start a SIPP?

xylophone

https://www.taxguideforstudents.org.uk/going-abroad/national-insurance

https://forums.moneysavingexpert.com/discussion/5495808/complete-qualifying-national-insurance-years&highlight=national+insura%20%20nce

boxwood

xylophone wrote: »

https://www.taxguideforstudents.org.uk/going-abroad/national-insurance

https://forums.moneysavingexpert.com/discussion/5495808/complete-qualifying-national-insurance-years&highlight=national+insura%20%20nce

Thanks for the links. OK is all the following is correct so I know I've got it:

1. kidmugsy's suggestion is that if I earn between £6,032 - £8,424 in a financial year, then that income level entitles me to receive NI Contributions and a Qualifying Year for State Pension, but without either the company or me actually paying NI.

2. For (1) to work, if I am paid monthly, only weeks in the months where I earn £503-£702 will count as a "Qualifying Weeks" towards the necessary 52 weeks.

3. If I make plans to try to start work in December, that leaves 17 full weeks in the current tax year. So I can work and earn, say, £700 a month for 17 weeks. I can then make Class 3 ‘voluntary contributions’ at £14.65 a week for the short fall of 35 weeks for which I will pay £512.75.

4. Next financial year, if I work the whole year at the same salary I will qualify for a Qualfying Year for State Pension without having to make any Class 3 contributions.

5. For the SIPP I wanted to start, I can only receive the 20% "tax relief" added to my SIPP contribution on earned income, so this year the most I can add to the SIPP is my 4 months x £700 salary = £2,800. This will be topped up by 20% £560. Next year if I work all 52 weeks at 12 x £700 I could put £8,400 in my SIPP and get 20% top up adding another £1,680.

Correct?

Thank you again!

zagfles

boxwood wrote: »

Thank you again.

I think I understand the principle now, and will take the approach that if I am paid monthly I need to ensure my monthly income is between £503 and £702.

There was one thing in an earlier post, I keep looking at the figures and tables on the link you posted, but I cannot understand this point made earlier:

So if you get paid monthly and earned £7000 all in one month, it would not be a qualifying year for the state pension because only £3863 would count and you need £6032.

I understand the £6,032 is needed. But I don't see where the figure £3,863 comes from. How is that arrived at as the amount out of £7,000 that would "count"? I've tried subtracting it from £7,000 to see if the non-"counting" part makes it clearer and still can't see where the figure comes from. If I paid £7,000 all in one month, wouldn't just £702 be the maximum that could "count" in any one month? I know it's not going to make a difference to the advice (very much appreciated again thank you) but it's annoying me I can't see how that figure is arrived at.

£3863 is the monthly UEL, see #32 & #19. You need NI'able earnings of the annual LEL, ie £6032. Earnings above the UEL don't count, and pay periods where you earn below the LEL don't count.

dutchism1958

Hi,
Rangersfc quoted in #8
If you are a member of a company pension scheme , any contributions made to your pension will limit the amount of further payments to SIPP.

I am a deferred member of a DB final salary company pension scheme,but had to give up work to care for my wife 6 years ago. I earn nothing(apart from carers & attendance allowance) but we live off my wife's personal & state pensions.
I won't be drawing the pension until I am 66,so 6 years hence. Would I also qualify as a non-earner to put £2880 pa into a SIPP to get the tax relief or would there be issues because of my company pension?.
Thank You.

[Deleted User]

May i just ask, if i wasnt earning, but paid 2880 into my SIPP every year, i would get 720 paid into the SIPP from the Gov every year?

xylophone

May i just ask, if i wasnt earning, but paid 2880 into my SIPP every year, i would get 720 paid into the SIPP from the Gov every year?

Yes payments of £2880 into a SIPP or other Personal Pension operating Relief at Source will receive the £720 you can contribute and receive the tax relief up to age 75.

[Deleted User]

Cool, and is it correct, that you can claim the previous 3 years allowance?

boxwood

"Cool, and is it correct, that you can claim the previous 3 years allowance?"

I have looked at HL website and for SIPP carry forward it says:
carry forward lets you take advantage of any unused allowance from the previous three tax years. That’s up to £40,000 from each year.

But it says the criteria is:
You had a pension in each tax year you wish to carry forward from, regardless of whether or not you actually made a contribution (the State Pension doesn’t count).
You have earnings in the current tax year of at least the total amount you are contributing. Although this does not apply to contributions your employer makes.

That would suggest you cannot open a SIPP and make 4 years (3 cf + current) contributions in the first year.
Also their info talks about high earners, it does not say anything about whether 3 years carry forward can be used to pay in the maximum for non-earners if they had no income in the prior 3 years.

Can anyone confirm or explain SIPP cf for non-earners/low income?

zagfles

boxwood wrote: »

"Cool, and is it correct, that you can claim the previous 3 years allowance?"

I have looked at HL website and for SIPP carry forward it says:
carry forward lets you take advantage of any unused allowance from the previous three tax years. That’s up to £40,000 from each year.

But it says the criteria is:
You had a pension in each tax year you wish to carry forward from, regardless of whether or not you actually made a contribution (the State Pension doesn’t count).
You have earnings in the current tax year of at least the total amount you are contributing. Although this does not apply to contributions your employer makes.

That would suggest you cannot open a SIPP and make 4 years (3 cf + current) contributions in the first year.
Also their info talks about high earners, it does not say anything about whether 3 years carry forward can be used to pay in the maximum for non-earners if they had no income in the prior 3 years.

Can anyone confirm or explain SIPP cf for non-earners/low income?

Carry forwards only applies to the annual allowance. The annual allowance is completely irrelevant for low earners since they are constrained by a different, separate limit, the tax relief limit, for which there is no carry forwards. This limit is your earnings or £3600 if greater (gross amounts). Eg if you earn £10k you can only contribute £10k gross into a pension, ie £8k net.