Carry forward sanity check

Victorwelldue

Hello

In tax year 22/23 I'm aiming for my pension pot to be credited £53K gross via salary sacrifice & bonus sacrifice.
In 21/22 it was credited £28K gross (not via SS)
In 20/21 it was credited £15K gross (not via SS)
In 19/20 it was credited £11K gross (not via SS)

This year I expect to earn approximately £63K basic + £20K bonus. I sacrifice down to £30K & will be sacrificing entire bonus.

Just want to make sure it will be alright to put in that extra £13K above AA limit this year (and possibly a bit more via personal contribution) without falling foul of any rules I may have missed? I believe pension can only have up to 100% of earnings in any one year even when using carry forward, so my daft question here is I assume they base that rule on your real salary and not the amount after sacrifice?
 

NedS

As long as the contribution is covered by earnings (looks OK) and does not exceed the annual allowance (inc carry forward), then you are fine. At the most simplistic level, assuming your figures above are correct, carry forward from the oldest year would be used first, so if you only contributed (including any employer contributions) £11k in 2019/20, you have £29k carry forward from that year available to use in the current tax year so you are well covered.

If in any doubt, use the HMRC annual allowance calculator here:

https://www.tax.service.gov.uk/pension-annual-allowance-calculator

zagfles

The thing to get you head around is that with sal sac is you are contributing nothing to your pension. You are coming to an arrangement with your employer that they pay you less, and in return they pay more into your pension. So if your "notional" salary is £63k plus £20k bonus, but you sal sac the £20k bonus plus £33k, then your pay is £30k and your employer pays £53k into your pension. Plus whatever their normal employer contribution is, don't forget about that, you need to include that in the AA calculation.

It's impossible to exceed the tax relief limit (100% of earnings) using sal sac, as you are contributing nothing. You don't get tax relief on employer contributions. So you only need to worry about the annual allowance. You look to be fine but can use an AA calculator like above or https://www.hl.co.uk/pensions/contributions/carry-forward-rule/annual-allowance-calculator

If you wanted to contribute in another way as well eg to a SIPP, you do need to consider the tax relief limit as well. Your pay would be £30k, so you'd only be able to pay £30k gross into a SIPP, ie £24k net. And you'd obviously have to include the gross SIPP cont in the AA calculation.