Teachers pension additional contribution tax relief

OldBeanz

AA-Audrey said:

In shortAA-Audrey said:

Dazed_and_C0nfused said:

You have to use the current tax years allowance before you can use carry forward so it's usually for higher earners who are earning more than £40k.

If you are looking at how much you can pay and get tax relief then you probably need to be a bit more precise.

Presumably your normal pension contributions are a fixed % so you can take your expected teachers earnings and deduct that to arrive at your taxable pay.

Your rental income is irrelevant as far as how much you can contribute is concerned but it will affect the amount of tax relief you can benefit from.  But it's the profit you need to focus on not the gross rents.

I assumed it was simply £11750 and tax relief at source. 

The terminology around pensions can be a bit confusing.  If you were paying these particular contributions via payroll they would be net pay i.e. instead of having taxable pay of c£23/24,000 it would be £11250/12250.

Relief at source is where the pension provider adds basic rate tax relief to your contributions, usually in a defined contribution scheme.

So total c£30k additional pension spread out over salary sacrifice and SIPP???

No, you only have c23/24000 pensionable earnings so cannot contribute more than that.

Where does salary sacrifice come into this?

Do you have another job/pension not previously mentioned?

Thanks. This is helpful. i am assuming with the employer contribution (c£6000) this reduces it further.

Saying all that, with a defined benefit scheme (such as TP), I thought the amount relevant re: tax relief is the increase in pension each year x16. This brings me back to the original question vis a vis increasing my defined benefit by £3k ‘in an instant’ and then paying by instalments. 

Hope that makes sense, thanks for all your help so far 

In short, for tax relief purposes, do I need to think about the fact I’ve just added £3k defined benefit to my pension or the instalments I am/will be paying each month. if the latter then it’s all good

You are good.
To work out how much you can pay through 'net pay' you need to work out how much tax you are going to pay in total. So this would include your leasing profit. Net pay salary arrangements are such that HMRC does not return any more than you paid in tax. Ignore employer contributions.
To work out how much you can pay in via a SIPP or AVC would be (your salary less TPS and other pension contributions) *.8.  The pension provider then adds the 20%. Ignore employer contributions. There is a maximum contribution of £40k but you do not need to be concerned by that at present.
With inflation rocketing, I would be looking to maximise additional contributions to the TPS now as the whole amount is linked to inflation.

AA-Audrey

Thank you so much. Yes, I might reconsider my split between tp and a sipp. The former is a good deal… for now. It’s simply that I might want to retire before 67 and while I’d be happy to take an acctuarial reduction for a couple of years I might want something to cover me from c60-65.

Thanks again

OldBeanz

AA-Audrey said:

Thank you so much. Yes, I might reconsider my split between tp and a sipp. The former is a good deal… for now. It’s simply that I might want to retire before 67 and while I’d be happy to take an acctuarial reduction for a couple of years I might want something to cover me from c60-65.

Thanks again

Yes my son is a teacher, now working abroad. He left after 4 years with £10k+ in his pension and will continue to buy NI contributions so at 30 is well set up for life wherever it takes him.
I would imagine you will have more opportunities to fill the gap before retiral than buy additional TPS and you never know where life will take you.

AA-Audrey

Just one final question (hopefully). To confirm that I would only really need to worry about the employers contribution - and ask for my pension input amount which says what this is worth - if it were to take the increase in pension for the year over £40k, which obviously it won’t. 

Also, once I’ve set up the additional pension to come out of my gross salary, any net salary (which goes into my pocket) could effectively be invested in a sipp (0.8 of it) as I’ve paid tax on it. 

Thank you. Defined benefit schemes are confusing re tax 

OldBeanz

DB pension increases are not usually an issue at your pay level. Your TPS contributions rate are

Up to 28309.99

7.4%

Be aware you may well progress to a higher contribution level during the year so check.
So you can contribute ((c£27500-(c£27500*0.074+APC Contributions))*.8). This will give a higher figure as your net pay will include NI contributions.

AA-Audrey

OldBeanz said:

DB pension increases are not usually an issue at your pay level. Your TPS contributions rate are

Up to 28309.99

7.4%

Be aware you may well progress to a higher contribution level during the year so check.
So you can contribute ((c£27500-(c£27500*0.074+APC Contributions))*.8). This will give a higher figure as your net pay will include NI contributions.

Super. Thanks
when I’m old and rich (?) I will remember your helpful advice