Calculating the top-up amount I can pay into my pension pot

Yukster

I have an NHS pension and I recently set up my SIPP at the end of the 2019/20 tax year. So in addition to my NHS employee contribution i was able to pay the remainder of my allowance (my 80% and HMRC 20% top-up) into my SIPP.  I was advised by my accountant that I shouldn't include my HNS pension employer's contribution into my NHS pension as part of this calculation. is  that right?

Becuase I had a fair amount of carry-over from the previous four years I was able to pay more than £40,000 per tax year upto to the total amount of my gross earned income for in 2019/20 and beyond. So if for example my gross earned income was £80,000 in 2019/20 tax year and I have £40,000 of allowance that I haven't used in four previous years, I can pay a total of £80,000 into my pension pot in that tax year (in fact I pay 80% of that and HMRC adds 20%).  Here is the dilema. My NHS pension employee contribution is deducted from my salary before tax and my SIPP provider told me that becuase my NHS employee conrtibution received tax relief via payroll, it shouldnt be included when calucating the amount i can pay into my pension pot. That doesnt sound right to me. What is your advice?   

Albermarle

Just as an aside , are you claiming back higher rate tax relief with regard to the SIPP contributions ?

MX5huggy

You need to know your NHS pension input amount, this is not what you paid in + what your employer paid it but a calculation of the increase in value of the benefits you will receive. Should be available for previous tax year on your NHS statement. But you need it for this year (basically use last years and add a bit). 

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/annual-allowance/?icid=banner_articles

And good old Doug here 

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/interaction-of-tax-relief-and-annual-allowance/

Yukster

Albermarle said:

Just as an aside , are you claiming back higher rate tax relief with regard to the SIPP contributions ?

Absolutely 

Yukster

MX5huggy said:

You need to know your NHS pension input amount, this is not what you paid in + what your employer paid it but a calculation of the increase in value of the benefits you will receive. Should be available for previous tax year on your NHS statement. But you need it for this year (basically use last years and add a bit). 

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/annual-allowance/?icid=banner_articles

And good old Doug here 

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/interaction-of-tax-relief-and-annual-allowance/

Thanks, MX5huggy. Unfortunately, I couldn't find anywhere on my statement an amount listed as an input amount. I found the Scheme Pensionable Earnings Statement where it is listing the 'pension earned' amounts per calendar year since I joined. But I doubt that this is the input amount that you are referring to. If it isn't, would you be able to advise what the term is on the statement for the input amount, so I can be sure I am using the right amount in my calculation?

payless

Mine ( not NHS) .. says Standard AA £40k. Your used AA £xx 

unfortunately I get this 5 months after the end of the tax year , so my SIPP contributions are based on a estimate, albeit I also have headroom due to carry forward rules.

payless

As stated the annual growth in the value of your NHS pension is the amount used to assess how much AA used… see NHSBA site. 

Yukster

payless said:

Mine ( not NHS) .. says Standard AA £40k. Your used AA £xx 

unfortunately I get this 5 months after the end of the tax year , so my SIPP contributions are based on a estimate, albeit I also have headroom due to carry forward rules.

It would be much easier if my NHS pension statement listed the used AA amount...

I understand that I should use the 'annual growth in the NHS pension value' amount in my calculation but I am keen to find where I can find that amount listed in NHS pension statement. I called NHS pension to ask them but I got the distinct feeling that the person I spoke to is guessing rather than giving me the right info. Does anyone know what term is used in the NHS statement for this?

Yukster

Having done a bit of detective work, it transpires that this amount doesn't appear on the HNS statement so they are going to post that information to me, mystery solved.Thanks for bearing with me

zagfles

Be aware that calculating the maximum you can pay into your SIPP if you're in a DB scheme is not straightforwards, even when you get the PIAs from the scheme. It's a cause of massive confusion here, even regulars here inc IFAs get it wrong all the time.

There are two limits, the tax relief limit and the annual allowance, and must be considered separately as the calculations are different. The Pru link above is a good explaination.

Yukster

I am very aware that the calculation is complicated. The advice above has been really helpful but unfortunately, I am still struggling to do this even after reading the Pru link above.  I should contact a financial advisor to get this done for me? Can anyone recommend someone who can do this?