Can unused Pension Contributions for last 3 years from my W/place pension be paid into a Privte pens

Simplicity77

Hi I leave my company pension due to redundancy and the workplace pension provider says they cannot pay any part of my redundancy into my workplace pension. I also have 3 years' worth of carried forward allowance. Can I pay any unused allowance and redundancy into a SIPP and claim the tax relief on this??

NedS

Yes, you can make additional contributions to a SIPP, but these are still subject to the normal restrictions of being bound by your relevant pensionable earnings in that tax year and by the Annual Allowance. As long as you have the relevant earnings to cover any large contributions, you my be able to use carry forward to exceed the annual allowance.

AlanP_2

Yes, BUT


You need enough qualifying earnings this tax year to cover the gross contribution (with BR tax relief added). Redundancy payment counts towards that so you need to get your calculator out. If you are talking £40k+ then Annual Allowance and carry forward will be a factor.

Don't forget to deduct any pension contributions made this year already. Employer contributions don't count against the earnings limit but do against the Annual Allowance.

Simplicity77

Thanks for your responses. Yes, my redundancy will be below around £50k and I wanted to put £20k towards my company pension to avoid tax (some this year and the last 3 years). They said No lump sums into it, so felt a bit upset. I wasn't sure if I could open SIPP and pay the £20K into it to fully use up my current years allowance and then the rest for the previous 3 years. 

Dazed_and_C0nfused

I wanted to put £20k towards my company pension to avoid tax (some this year and the last 3 years). 

Nothing you do now pension wise can save you any tax from the previous 3 tax years.

You can only ever get tax relief for the tax year the contributions paid in 

xylophone

Below might help.

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

Albermarle

The first £30K of a redundancy payment can not be included in the calculation of a persons relevant earnings for the year.

OP - You need to calculate your 'relevant earnings ' for this tax year ( or an estimate of them as there are still some months to go ) . This will define the maximum amount you can add to a pension this tax year and get tax relief.

So as a simple example
Employment earnings are relevant earnings lets say you earned - £25,000
However already you have added £4K to your pension and got £1K tax relief,
So the maximum you can add further is £20,000 gross. Which means you can add £16K and £4K tax relief will be added.

Here is some guidance on how to calculate relevant earnings when a redundancy payment is involved .
Redundancy payments being used for pension contributions - Royal London for advisers

They said No lump sums into it, so felt a bit upset. I wasn't sure if I could open SIPP and pay the £20K into it to fully use up my current years allowance and then the rest for the previous 3 years. 

Unusual they will not accept lump sums, but anyway easy to open a new pension online, so not a big issue.

Simplicity77

That's really helpful for the website link to tax service. Kudos to you for sending me that. I did use it but its asking me if my salary was below £110,000 and then £200,000 and then assumes £40K allowance. How does that work out to auto calculate at £40k if my salary was below that? I was on £28k, so I thought being below £110k or £200K it would ask me this question, but it just max's out the calculation to £40k and doesn't ask as my sal is at £28k and I cannot add more than my annual salary. Confusing..

AlanP_2

Because the link is to an annual allowance calculator and the limit for those up to £110k salary is £40k.

There are two separate limits:

1) Relevant Income in year as explained above - This CANNOT be exceeded so carry forward is not applicable.

2) Annual Allowance - Normally £40k with up to 3 years carry forward.

So if (1) exceeds £40k and you have unused AA from previous years you can use carry forward up to the lower limit set by (1) or (2).

You can't have relevant income of £39k and contribute £40k or £50k in to a pension.

Simplicity77

Got you. Thanks, all my questions are now answered. Appreciate the help.