paying max Sipp whilst in LGPS

AlanP_2

As in my post 2 above - salary minus personal contribution as AA isn't going to be the limiting factor here.

OldBeanz

You have not stated what you intend drawing the pension.
If you want to take the SIPP at the same time as the LGPS pension is drawn then it most if not all Local Authorities you can take all the AVC as tax free cash (there are limits but are relatively large). You can only contribute taxable income (that above £12.5k). Some are now doing salary sacrifice so you can save on NI as well. Paid out of taxable income and paid tax free is the cherry on top of the gold plated LGPS pension.
If you want to draw your SIPP at a different time then the sums change.

merlin321

SO was contributing to AVC but due to her low pay did not get much of an upgrade to her contributions. But if she pays into a Sipp then will get 25% on all contributions. At least that's the way I see it.
When she draws on her lg pension age 60, all of pension and Sipp will come within 12.5 k tax allowance.
Still totally confused on max that she can put in Sipp. Annual statement states increase of £94.

NoMore

merlin321 wrote: »

SO was contributing to AVC but due to her low pay did not get much of an upgrade to her contributions. But if she pays into a Sipp then will get 25% on all contributions. At least that's the way I see it.

Thats a misunderstanding and should not be a reason to change from AVC to SIPP. The AVC contribution is taking pre tax and the SIPP contribution is taken post tax and you claim the tax back , but it still ends up being the same amount put into the pension.

AlanP_2

NoMore wrote: »

Thats a misunderstanding and should not be a reason to change from AVC to SIPP. The AVC contribution is taking pre tax and the SIPP contribution is taken post tax and you claim the tax back , but it still ends up being the same amount put into the pension.

No it doesn't in this situation where putting anything in to the AVC that takes Gross Pay below £12.5k per year won't attract tax relief as only tax that "would have been paid" is saved not tax that hasn't been paid.

To gain tax relief when the tax woudn't be paid you need to use something like a SIPP that attracts full relief on all contributions up to HMRC annual limits.

AlanP_2

merlin321 wrote: »

SO was contributing to AVC but due to her low pay did not get much of an upgrade to her contributions. But if she pays into a Sipp then will get 25% on all contributions. At least that's the way I see it.
When she draws on her lg pension age 60, all of pension and Sipp will come within 12.5 k tax allowance.
Still totally confused on max that she can put in Sipp. Annual statement states increase of £94.

If you post details on current salary and current LGPS contributions straight off a payslip we should be able to advise.

merlin321

Thanks for the replies. Current salary, £1439/month. Personal pension payments at 5.8%, so £83.48.
And on payslip states employers pension £397.

Dazed_and_confused

SO was contributing to AVC but due to her low pay did not get much of an upgrade to her contributions. But if she pays into a Sipp then will get 25% on all contributions.

Current salary, £1439/month. Personal pension payments at 5.8%, so £83.48.

She was either contributing a lot, has had a big salary increase or you have misunderstood as she would be entitled to exactly the same relief with each option, just it materialises in different ways.

A net pay contribution saves her from paying as much income tax but does not add anything extra to the pension.

A relief at source contribution to a SIPP has 25% added by the pension company (courtesy of HMRC) this increasing the pension fund but it wouldn't save her any personal tax.

AlanP_2

So taxable pay is £16266.24 after taking the LGPS contribution off.

Maximum that could be put in to the AVC and get full tax relief is taxable pay less £12500 allowance so £3766.24.

You won't see an increase over that in the pot but won't pay any tax.

How much was being paid in before that you thought there was minimal benefit from?
.

Linton

AlanP wrote: »

So taxable pay is £16266.24 after taking the LGPS contribution off.

Maximum that could be put in to the AVC and get full tax relief is taxable pay less £12500 allowance so £3766.24.

You won't see an increase over that in the pot but won't pay any tax.

How much was being paid in before that you thought there was minimal benefit from?
.

If she contributes sufficient to her AVC to get her net income down to her tax allowance she can then pay 80% of the tax allowance into a SIPP or Personal Pension. HMRC will refund the 20% tax she did not actually pay into the SIPP, leaving 20% of her tax allowance in her purse.

If she wants to squeeze a bit more into her pension she could add in 80% of her NI contribution.