Pension Rules

Albermarle

Pls confirm my understanding that as I only earn 17k before tax, I cannot put the last 3 years of earnings into a pension. But can put in 2021's contribution (and that will be my earnings minus my contribution of my defined benefit's occupational pension).

Yes except it is not for 2021 but for the tax year 21/22 ( ending on Tuesday next week )

Also, what's the minimum number of years  it is worth doing for before retirement , eg  for 3 years, when you considering the charges for Sipps if use a low cost platform, of course?

It depends on what you plan to do with the pension pot . It is how and when you intend to take it that is important . Your actual date of retirement is not really relevant . For example you might retire and not touch the pot for ten years.

In any case you could still contribute right until you stop earning , even if you wanted to take it soon afterwards , but you might want to keep some in cash , rather than invested , in that case.

zagfles

mears1 said:

zagfles said:

dunstonh said:

The Sipp providers helpdesk have said that I could put the previous 3 years unused pension contributions into a Sipp. They will automatically apply the 20% tax relief. They were quite definite about the previous 3 years, even though I disagreed with them. Can someone confirm whether this is true?

No.  As you earn under £40k a year, you cannot use carry forward.

Rubbish. See you can't even trust IFAs to get this right. OP is in a DB scheme, so could probably make use of carry forwards on income above £30k. Not relevant to OP now but may be they get a payrise/do more hours, or others in a similar position. You need to consider the limits separately instead of incorrect simplistic statements. There is no rule that says you can't use carry forwards if you earn under £40k. See https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/interaction-of-tax-relief-and-annual-allowance/

Pls confirm my understanding that as I only earn 17k before tax, I cannot put the last 3 years of earnings into a pension. But can put in 2021's contribution (and that will be my earnings minus my contribution of my defined benefit's occupational pension).

Nobody can put previous years' earnings into a pension and get tax relief, except those who earn less than £3600. The tax relief limit is 100% of earnings (or £3600 if more). This applies to everyone, whether you earn £17k, £60k or £200k. There is no carry forwards on this limit, for anyone.

The annual alllowance is an additional constraint on higher earners. That does allow carry forwards. But since you're constrained by the tax relief limit, the AA isn't an issue for you. It would be if your earnings plus pension input amounts were over £40k. For someone in a DB scheme, this would usually mean the AA becomes an issue on income around £30k, maybe less in some circumstances. But very unlikely to be an issue on £17k.

mears1

If my earnings allow me to put £10K into a SIPP, is the amount I can put in the SIPP a)my actual earnings ie. £10K or b)
80% of my earning ie £8K and the Sipp provider adds the 20%? Thank you.

xylophone

You contribute £8000 and the  provider claims £2000 from HMRC and adds it to your pension.

Dazed_and_C0nfused

xylophone said:

You contribute £8000 and the  provider claims £2000 from HMRC and adds it to your pension.

And that's irrespective of how much income tax you have actually paid 

dunstonh

mears1 said:

If my earnings allow me to put £10K into a SIPP, is the amount I can put in the SIPP a)my actual earnings ie. £10K or b)
80% of my earning ie £8K and the Sipp provider adds the 20%? Thank you.

Assuming no other income and no employer contribution, then £10k would go into the pension. Which would get tax relief of £2000 meaning your payment would be £8,000.,

mears1

Thank you all for clearing this up for me.