Maximum amounts that can be paid into a SIPP

aroominyork

Can I please check amounts that can be paid into a SIPP? Is it correct that the maximum is £40,000 pa when including employer's and employee's workplace contributions? So if employer's and employee's contributions to a workplace scheme are 8% of £55,000 (ie £4,400), I can pay into my SIPP £35,600 gross after basic rate tax is reclaimed, so £28,480 net? And on top of this I can reclaim the difference between basic and higher rate tax that was paid on the gross amount? 

Is it also right that if I did not use up my £40,000 allowances in the previous three tax years the unused amounts carry forward, so (again with 8% workplace contributions) I can potentially pay into the SIPP (55,000 - (55,000 * 8%) *0.8) = £40,480?

Albermarle

Is it correct that the maximum is £40,000 pa when including employer's and employee's workplace contributions?

Employers and employee contributions , plus any tax relief paid into the pension on the employee contributions .

This may or may not be relevant and depends on how the employee contributions are taken from salary . If they are taken before tax is paid or in a salary sacrifice arrangement, then no further tax relief would be added anyway .

Brynsam

Carry forward: https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/pensions-and-tax/carry-forward

aroominyork

Thanks both. Just to check: if in Year 1 I have no earnings and make no pension contributions, then in Year 2 I have £80,000 earnings, can I make £80,000 pensions contributions in Year 2?

Dazed_and_C0nfused

Were you a member of a pension scheme in year 1?

https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/pensions-and-tax/carry-forward

NottinghamKnight

Yes, so long as you were a member of a pension scheme in year 1, which could just mean an old scheme that you haven't contributed to for years.

aroominyork

One more question. I do not know how much of the £40k allowance my wife used three years ago in a previous job - she has kept no payslips. HMRC online shows her taxable pay but not her gross so we do not know how much was contributed to her pension. Is there any way to find this out? 

dunstonh

aroominyork said:

One more question. I do not know how much of the £40k allowance my wife used three years ago in a previous job - she has kept no payslips. HMRC online shows her taxable pay but not her gross so we do not know how much was contributed to her pension. Is there any way to find this out? 

Ask the pension provider for the total contributions made in that tax year (if its a DC scheme)

aroominyork

We transferred that job’s DC pension into her SIPP and recently had a clear out of paperwork, so no trace. It’s not a big problem… I can work on 10% assumption which it wasn’t more than.

If i) tax rates and pension rules stay generally the same and ii) we will be basic rate taxpayers after retirement and iii) we have investments intended for post-retirement in both SIPPs and ISAs and iv) will not need to draw on the ISA funds pre-retirement, then does it make sense to transfer ISA funds into SIPPs – using the previous three years’ unused allowances – and thereby get a 6.25% gain (based on £100 becoming £125 when invested, then £75 taxed at 20% and £25 untaxed)?

Dazed_and_C0nfused

using the previous three years’ unused allowances – and thereby get a 6.25% gain (based on £100 becoming £125 when invested, then £75 taxed at 20% and £25 untaxed)?

How much do you expect her to earn in the current tax year?

dunstonh

We transferred that job’s DC pension into her SIPP and recently had a clear out of paperwork, so no trace. It’s not a big problem… I can work on 10% assumption which it wasn’t more than.

Is carry forward likely to be used again next year or the year after?     Just wondering if you need to be accurate as its three years worth of unused plus current.   If its not going to be used again in the near future then you just need to be sure there is £40k available over the previous 3 years.

Dont be afraid to ask the old provider in writing for the data.  Many will still supply it despite no longer being a customer.