Pension Tax Relief for High Earner - How does it work?

Simpleton101

SavingStudent1 said:

Random question:

I know the OP specifically said they wanted to put a lump sum payment of £6330 into their SIPP, but for example, if they didn't have a SIPP, could they have avoid being taxed at 40% by just putting £11,000 more into their salary sacrifice pension scheme to reduce their taxable income to £51,000?

Also, is there a benefit of not doing the above and instead doing it as above i.e. (opening a SIPP) and putting £11,000 in there?

My company puts a limit on how much one can put into a pension, I don't know the specific reason why, it's certainly not because my pay could fall below the minimum wage. Secondly the company is refusing to alert HMRC of any AVC contributions so I'm unsure if tax relief will be the same as putting it into the SIPP.

HappyHarry

SavingStudent1 said:

Random question:

I know the OP specifically said they wanted to put a lump sum payment of £6330 into their SIPP, but for example, if they didn't have a SIPP, could they have avoid being taxed at 40% by just putting £11,000 more into their salary sacrifice pension scheme to reduce their taxable income to £51,000?

Also, is there a benefit of not doing the above and instead doing it as above i.e. (opening a SIPP) and putting £11,000 in there?

Bear in mind individuals pay 12% or 2% NI on their salary, and employers pay 13.8% NI on the salary too.

By salary sacrificing, the individual would save on their own NI contributions as the money paid to the pension would not be subject to NI. Employers also often add some of their own NI savings to the pension scheme.