Annual pension contributions and AA

Redsox64

I’m getting myself in a bit of a muddle… not difficult !! I understand the AA is currently £40K and that includes all pension contributions which I think I am under. I also understand there is a ceiling related to your income as to how much you can contribute. I earn £30265 (part time salary). What are the exact rules?  I’ve just asked for an illustration of my Pension input amount and 20/21 it was £22075.69 which seems high. I have been paying into an AVC and SIPP and am now worried. 

dunstonh

I also understand there is a ceiling related to your income as to how much you can contribute. I earn £30265 (part time salary). What are the exact rules? 

In your case, the maximum you can pay in is £30,265 on that basis as it is below the £40k annual allowance.  

 I’ve just asked for an illustration of my Pension input amount and 20/21 it was £22075.69 which seems high. I have been paying into an AVC and SIPP and am now worried. 

Defined contribution schemes are relatively easy when it comes to annual allowance as you can see the contributions.   When it is a DB scheme it is a bit more difficult.  For defined benefit (DB) pensions, it is the capitalised value of the increase in the accrued benefits over the tax year.

Is your other scheme a DB scheme? (I'm guessing it is as you mention holding an AVC)

Linton

You are correct, there are two separate pension allowance limits with very different rules.

The maximum you personally can put into your pension(s) in a single tax year is limited by your gross earnings.  So in your case , assuming you have no other income or pension contributions, you can contribute a total of £30265 into your pension(s).  To contribute £30265 into a SIPP you actually pay in 80% of £30265=£24212.  HMRC add the missing 20% directly into the pension as a tax refund, even if you hadnt paid that amount in tax.

Unlike the Annual Allowance the earnings limit does not permit carry over from previous years.

Redsox64

Thanks for the replies. Yes it is a Local Government DB scheme. I’ve just checked and I contributed £2700 into my AVC and £6000 into my SIPP for last tax year so with the pension input amount of £22075.69 I am just over my £30265 pensionable pay. Have I got this correct?

NoMore

Your Pension Input Amount only accounts for the AA not against your personal income limit

AlanP_2

AA = £40k and includes the PIA for your LGPS DB as NoMore says plus your SIPP contribution (and possibly your LGPS AVC contribution, some statements include it in the PIA calculation and some don't with our LGPS scheme). 

Income Limit = £30,265 so you can contribute up to that amount across all your pension options. So you need to allow for LGPS contribution, AVC contribution and SIPP contribution.


Based on the numbers you have quoted you are no where near hitting either limit. 

Redsox64

Thanks but my pension input amount in my DB says £22,075.69 for 20/21? Do I add that amount to other contributions?

Linton

Redsox64 said:

Thanks but my pension input amount in my DB says £22,075.69 for 20/21? Do I add that amount to other contributions?

Only for the AA check so you have about £18K left from the £40K limit + any left over from the 3  previous years.  For the income limit I believe you use your actual DB pension contributions.

Redsox64

Thanks. Any idea how I work that out?

Linton

Redsox64 said:

Thanks. Any idea how I work that out?

It should be listed as a deduction on your paylips.

Redsox64

Thank you. I can look at the relevant payslips. Should I also add the employer contribution, if so where do I get this information from?