How much can I put in SIPP

recruit18

I want to open a SIPP for my wife and I'm looking for advice on how to calcuate the maximum contributions.

She earns approx £8k and currently pays I think 5.5% into the main section of WCC LGPS.

I have read that you can put up to 100% of your salary into a SIPP (below £40k)
and she will get 20% tax uplift on this.

Is the max figure simply the total amounts she earns in the tax year or do I need reduce this due to the fact she pays into a LGPS?

Thanks in advance

Dazed_and_confused

She will get a 25% uplift but her SIPP contribution, inclusive of the basic rate tax relief, does need to be reduced to less than £8,000 because of her existing pension.

If it is a defined benefit pension then it is a slightly more complicated calculation and she might be safest getting the relevant figure from the WCC LGPS administrator (even if it's just a figure for 2018:19 it should give you a more informed idea of the impact of the existing pension).

Dazed_and_confused

More info at

https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/pensions-and-tax/the-annual-allowance

maximumgardener

"minimum wage criteria" could apply, so best to check with Pension provider

recruit18

Thanks for the replies. I will try to get some more info from the LGPS.

If I'm struggling to find out in detail do you think I'd be safe putting in £4k pa which will I assume be grossed up to £5k. Surely the LGPS would be worth less than £3k per year to keep us under 100% of her salary?

dunstonh

I have read that you can put up to 100% of your salary into a SIPP (below £40k)
and she will get 20% tax uplift on this.

It is best not to consider the tax relief an uplift. it isnt. Despite some sites that dumb down referring to it that way. It gets you into trouble if you are looking to maximise contributions. Indeed, what you say would see you exceed the amount allowed.

HMRC go by the gross contribution. Not net. So, she cant pay £8k net (minus the LGPS contribution). It is £8k gross (minus the LGPS contriubtion)

recruit18

dunstonh wrote: »

It is best not to consider the tax relief an uplift. it isnt. Despite some sites that dumb down referring to it that way. It gets you into trouble if you are looking to maximise contributions. Indeed, what you say would see you exceed the amount allowed.

HMRC go by the gross contribution. Not net. So, she cant pay £8k net (minus the LGPS contribution). It is £8k gross (minus the LGPS contriubtion)

Thanks, so do you think I'd be safe paying £4k/pa net?

xylophone

You are no doubt aware that LGPS operates "net pay" so that your wife does not benefit from tax relief through the scheme.

She will however benefit from tax relief on contributions to the SIPP.


https://www.litrg.org.uk/tax-guides/tax-basics/do-you-know-how-tax-relief-your-pension-contributions-works

https://www.lgpsmember.org/ats/about-tax.php

https://forums.moneysavingexpert.com/discussion/5963411/annual-allowance-question


She would deduct the gross annual pension contribution to LGPS from her gross annual salary to give the gross amount she could contribute to the SIPP.

She could then actually pay 80% of this amount to the SIPP provider who would claim tax relief and add it to the SIPP.

recruit18

From my wife's latest LGPS statement it says the CARE pensionable pay is £8,465.14.

It then says the CARE opening balance is £486.27, cost of living adjustment is £4.86 and in year build up is £172.76, giving a CARE closing balance of £663.89.

If I'm reading one of the links correctly, in order to calculate the amount this pension 'uses' in the year I would multiple the in year build up by 16 (=£2,764) and subtract this from the pensionable pay. This would leave £5,800, which would mean we could put into a SIPP £4,640 and let the SIPP provider gross this up.

I have emailed the scheme so hopefully I get a definitive, but am I going about the calcs correctly?

This statement was for 2018 up to March 2018. What happens with the fact the info I have lags with the tax year we are in now? Do you have to try to adjust for what you think the figures will be in current tax year?

FatherAbraham

maximumgardener wrote: »

"minimum wage criteria" could apply, so best to check with Pension provider

The National Minimum Wage cannot possibly be of any consequence to this case.

It's only relevant for limiting reductions in salary when using salary sacrifice schemes.