Technical question of lump sum pension contribution

IamWood

I'm planning to make a lump sum pension contribution soon to top up my pension account. The payment would be approximately £70,000, for the allowance of this tax year and the year before.

A couple of technical question please:

1) As a 40% taxpayer, I am aware that I can claim extra 20% tax relief for £40,000 during the tax year 2020. Can I apply for tax relief for the remainder of £30,000 for the tax year 2019 (hopefully filing a late tax return)?

2) To minimize the timing risk, ideally I would like to transfer the fund to a cash pension fund and then gradually transfer the money to other pension funds over the next 12 months. How should I do it? Are there any known SIPP platforms that offer this service if I prefer not to put the money into my work pension provider?

Thank you!

wjr4

1) no 
2) any sipp provider should allow this 

IamWood

Thank you @wjr4

To clarify 1).
Can I only get the basic tax relief of 20% with the extra £30,000 from my pension provider or nothing at all?

Albermarle

No you can not make any backdated claim for tax relief on pension contributions .
However you can bring forward unused annual allowance from the last 3 years ,So if the total amount going into your pension in the last 3 tax years was £30K , you could bring forward £10K from each to make the maximum possible addition to your pension this year of £70K . However the catch is that you would need sufficient earned taxable income this tax year to take advantage of that. 

Linton

IamWood said:

Thank you @wjr4

To clarify 1).
Can I only get the basic tax relief of 20% with the extra £30,000 from my pension provider or nothing at all?

HMRC will always add the full 20% tax relief  paid into a private pension with taxed money.  Which year's pension allowance you are using is irrelevent.  You havent yet told us what type of pension you will be contributing to.

*********This thread is a duplicate of one on the Pensions Board.**************

IamWood

Thanks @Linton.
My work pension is with Legal & General(5% + 5% employer) through salary sacrifice scheme. I prefer to contribute the lump sum to a separate SIPP account, I am looking at Vanguard recommended by this forum. Any other recommendation, please?

Linton

IamWood said:

Thanks @Linton.
My work pension is with Legal & General(5% + 5% employer) through salary sacrifice scheme. I prefer to contribute the lump sum to a separate

 SIPP account, I am looking at Vanguard recommended by this forum. Any other recommendation, please?

The salary sacrifice presumably means your actual salary is £75K-£3750= £71250.  As your SS contribution is actually paid by your employer you are just OK to contribute £70K gross=£56K net.

But it does means you are already using £7.5K of the £40K pension  allowance.  So you would have to go back another year to keep within the limit.

All platforms are pretty similar in practice with differing charges and differering levels of service.  The downside of Vanguard as a platform is that they only sell their own funds.  Other plaforms provide a very much greater range,

IamWood

Thank you @Linton.

Will it make sense to contribute all my last two months wages into my pension for the sake of tax and NI relief?

Linton

IamWood said:

Thank you @Linton.

Will it make sense to contribute all my last two months wages into my pension for the sake of tax and NI relief?

Do you mean you SS pension - if so you cant pay all your earnings into a pension as the SS payments are treated as employer contributions and you would therefore be seen as having zero wages, contrary to the minimum wage laws.

If you mean your SIPP, then yes you can contribute everything but you dont save any NI.

IamWood

Another silly question please.

Does lumpsum payment mean 'a single payment'? Or it can be multiple payments.

Since I am not able to reclaim the extra 20% tax relief from tax year 2019-2020. Can I
1) make a lumpsum payment, say £40,000 for tax year 2020-2021
2) then make multiple payments through the following 12 months, for the tax year 2019-2020. (to save the platform fee and spread the timing risk)

Does this make sense? Or am I unnecessarily complicating the operation?

Dazed_and_C0nfused

There are no circumstances where you can make a pension contribution now for 2019:20.

I think you may be getting mixed up with carry forward but that doesn't alter the fact that you can only ever make a pension contribution in the current tax year.  And any tax relief due will be based on your income tax position for the tax year the contribution is made in.