AVC Allowance allowance £40K

Tiggy777

Hi all

I would like to boost my LGPS pension pot by paying in most of my salary.

I understand I can pay in up to £40k pa and can carry forward my previous 3 years of under used allowance .

How does this work does year 3 start with 40,000 minus payments from year 4 ?

Just want to ensure I start at the correct point ?

Many thanks for your time

Regards

T

hugheskevi

I would like to boost my LGPS pension pot by paying in most of my salary.

If the contribution is via a net pay arrangement, you will not receive basic rate tax relief on any contribution from earnings below your Personal Allowance.

If you use a relief-at-source arrangement you would receive basic rate relief even on contributions from earnings below the Personal Allowance.

I understand I can pay in up to £40k pa and can carry forward my previous 3 years of under used allowance .

You can have a pension input of up to £40k, which is not the same as you paying in £40k.

The LGPS Defined Benefit pension you accrue will generate a pension input of the annual amount of pension accrued multiplied by 16.

Similarly, if you purchase additional Defined Benefit pension, it is not how much you contribute which matters, but how much the pension input is calculated to be (which may be considerably more than you contributed).

I understand I can pay in up to £40k pa and can carry forward my previous 3 years of under used allowance .

How does this work does year 3 start with 40,000 minus payments from year 4 ?

Carry forward only matters if you exceed your Annual Allowance, with the standard Annual Allowance being £40,000.

In whichever year you exceed £40,000 you then look back at your pension inputs from the previous 3 years, using any unused Annual Allowance starting with the earliest of the 3 years.

For example, if you breached in 2018/19 you would start by carrying forward any unused Annual Allowance from 2015/16. If there is insufficient carry-forward in 2015/16, you then look to 2016/17 and then to 2017/18. If there is insufficient carry-forward to cover the breach, you have a tax charge to pay.

You repeat that process each year you exceed the Annual Allowance, remembering that previous years may have already used up some of the unused Annual Allowance from earlier years.

Tiggy777

Many thanks for the reply

Tiggy