Is withdrawing from one pension and then depositing to another pension and getting 20% topup poss?

zagfles

Jaynishriya said:

zagfles said:

sgx2000 said:

Linton said:

sgx2000 said:

So.  If I paid in £20k  (the lump from my 1st pensio that started paying 30 months ago)
Would that trigger recycling rules?
Or would this just be taken as anyone starting a new sipp?

Other than under the £2880/£3600 allowance, you cannot contribute more than your earnings to your pensions in a single tax year and get the tax refund.  Pension income is not "earnings".

I am still working.
So my employer pays £3200 into my workplace pension
I earn £37k
So in theory i could pay up to £33,800 into a sipp and the government would top this up by 25% ???

No. You could only pay £29600, assuming £37k is your taxable income after any workplace pension conts taken off and you have at least £200 carry forwards available. Your employer contributions are irrelavent for the tax relief limit. They do count for the AA, so your total pension input would be just over £40k so you'd need a bit of carry forwards.

My partner is close to approaching retirement, so making large contributions to AVC linked to her DB pension. As the deductions are made from her gross earnings, her taxable income for this tax year will be reduced to just about 1K but she has been making small monthly contributions to her SIPP as well. She expects to claim her DB pension (along with the AVC tax-free) upon retirement but leave the SIPP invested.

Should she be careful not to add more than £1k this tax year into her SIPP? Or is she entitled to add up to the maximum allowance of £2880 and get tax relief on that?

It's debatable. I asked a similar question years ago, see https://forums.moneysavingexpert.com/discussion/5468797/technical-question-on-the-basic-3600-tax-relief-limit/p1

If it was sal sac it'd be fine, since they're employer contributions, and she could contribute the £2880 as that's her only contribution. But the AVC can't be sal sac as it'd violate min wage rules. So it must be "net pay". Very unlikely to be RAS, never heard of a DB scheme with linked AVC taken by RAS, but they might exist.

"Net pay" and RAS contributions count towards the tax relief limit, with net pay "tax relief" is obtained by reducing taxable income but it's still tax relief. However, net pay contributions within the personal allowance don't actually get any tax relief - which is the debatable point. So, assuming she doesn't have any other income to use up her personal allowance, as she's not actually getting tax relief on some of the "net pay" contributions then it could be argued she hasn't exceeded the tax relief limit.

But it's a grey area, personally I'd stick with the £1k gross, ie £800 net max.

But as well as this, you need to check contributions against the annual allowance, the increase in value of the DB will count as well as the AVC and SIPP.

Jaynishriya

zagfles said:

Jaynishriya said:

zagfles said:

sgx2000 said:

Linton said:

sgx2000 said:

So.  If I paid in £20k  (the lump from my 1st pensio that started paying 30 months ago)
Would that trigger recycling rules?
Or would this just be taken as anyone starting a new sipp?

Other than under the £2880/£3600 allowance, you cannot contribute more than your earnings to your pensions in a single tax year and get the tax refund.  Pension income is not "earnings".

I am still working.
So my employer pays £3200 into my workplace pension
I earn £37k
So in theory i could pay up to £33,800 into a sipp and the government would top this up by 25% ???

No. You could only pay £29600, assuming £37k is your taxable income after any workplace pension conts taken off and you have at least £200 carry forwards available. Your employer contributions are irrelavent for the tax relief limit. They do count for the AA, so your total pension input would be just over £40k so you'd need a bit of carry forwards.

My partner is close to approaching retirement, so making large contributions to AVC linked to her DB pension. As the deductions are made from her gross earnings, her taxable income for this tax year will be reduced to just about 1K but she has been making small monthly contributions to her SIPP as well. She expects to claim her DB pension (along with the AVC tax-free) upon retirement but leave the SIPP invested.

Should she be careful not to add more than £1k this tax year into her SIPP? Or is she entitled to add up to the maximum allowance of £2880 and get tax relief on that?

It's debatable. I asked a similar question years ago, see https://forums.moneysavingexpert.com/discussion/5468797/technical-question-on-the-basic-3600-tax-relief-limit/p1

If it was sal sac it'd be fine, since they're employer contributions, and she could contribute the £2880 as that's her only contribution. But the AVC can't be sal sac as it'd violate min wage rules. So it must be "net pay". Very unlikely to be RAS, never heard of a DB scheme with linked AVC taken by RAS, but they might exist.

"Net pay" and RAS contributions count towards the tax relief limit, with net pay "tax relief" is obtained by reducing taxable income but it's still tax relief. However, net pay contributions within the personal allowance don't actually get any tax relief - which is the debatable point. So, assuming she doesn't have any other income to use up her personal allowance, as she's not actually getting tax relief on some of the "net pay" contributions then it could be argued she hasn't exceeded the tax relief limit.

But it's a grey area, personally I'd stick with the £1k gross, ie £800 net max.

But as well as this, you need to check contributions against the annual allowance, the increase in value of the DB will count as well as the AVC and SIPP.

Thanks, @Zagfles, appreciate your comments and advice. Sounds complicated but we’ll stick with the £1k gross, £800 net max for this tax year.

You are right about the AVC being ‘net pay’ not sal sac.  Also, it’s not a big DB pension so she is well within her annual allowance even with her added AVC/SIPP contributions.

She has in fact small amounts of other income including rental from BTL, but with the large AVC contributions she is making during this tax year – and the fact that she will retire part way through the year – means that she is unlikely to go above her above personal allowance, and this might also be the case also over the next couple of years. SIPP contributions are RAS and also declared through self-assessment, but that doesn’t make any difference to her tax liability as she is not a higher rate tax payer. The original idea of having the SIPP was to claim enough income from it (after she retires) to make up to her personal allowance limit before her state pension kicks in, which is not until 2024. So I think that should be her preferred option if she defers taking her DB pension - along with the AVC - until her SPA, as the DB benefits will also then not be subject to any reductions.