AA/carry forward for low earner

TARDIS

Thanks folks, that’s brilliant. 

Will keep an eye on the PIA/CPI for the next few years - can easily reduce other half’s SIPP contributions but hopefully won’t be needed. 

MK62

TARDIS said:

Would appreciate other’s thoughts on this please.

My partner earns £22k a year and pays £2 into a DB pension.

According to their employer’s calculator their estimated pension input amount will be around £23k for 2022/23. The calculator uses 9.4% for CPI. As it’s likely to be higher next month I think this estimation is probably too low.

Previous years’ pension input amounts are less than £10k each year.

1. I think they can pay up to £20k gross into a SIPP - is that right?

2. If so they could breech the £40k annual allowance limit, so can they use carry forward even though they’re a low earner?

 Thanks 

I may have misunderstood the rules here, but I was under the impression that for calculating PIAs on DB schemes for the current tax year (22/23), you use the previous September's (ie Sept 2021) annual CPI figure.....which is 3.1%.

hugheskevi

MK62 said:

TARDIS said:

Would appreciate other’s thoughts on this please.

My partner earns £22k a year and pays £2 into a DB pension.

According to their employer’s calculator their estimated pension input amount will be around £23k for 2022/23. The calculator uses 9.4% for CPI. As it’s likely to be higher next month I think this estimation is probably too low.

Previous years’ pension input amounts are less than £10k each year.

1. I think they can pay up to £20k gross into a SIPP - is that right?

2. If so they could breech the £40k annual allowance limit, so can they use carry forward even though they’re a low earner?

 Thanks 

I may have misunderstood the rules here, but I was under the impression that for calculating PIAs on DB schemes for the current tax year (22/23), you use the previous September's (ie Sept 2021) annual CPI figure.....which is 3.1%.

September 2021 CPI figure is used to revalue the closing value from the previous year to produce the starting value for 2022/23.

Presumably, the 9.4% figure cited earlier in the original post is some sort of revaluation of scheme benefits, specific to the individual pension arrangement that increases the scheme pension within 2022/23, and so increases the closing value of the pension arrangement.

Usually, I'd be extremely hesitant to rely on the numbers from any calculator, but in this case, there is so much headroom there is no chance of a tax charge being due, so it doesn't matter what the calculator says.

MK62

hugheskevi said:

MK62 said:

TARDIS said:

Would appreciate other’s thoughts on this please.

My partner earns £22k a year and pays £2 into a DB pension.

According to their employer’s calculator their estimated pension input amount will be around £23k for 2022/23. The calculator uses 9.4% for CPI. As it’s likely to be higher next month I think this estimation is probably too low.

Previous years’ pension input amounts are less than £10k each year.

1. I think they can pay up to £20k gross into a SIPP - is that right?

2. If so they could breech the £40k annual allowance limit, so can they use carry forward even though they’re a low earner?

 Thanks 

I may have misunderstood the rules here, but I was under the impression that for calculating PIAs on DB schemes for the current tax year (22/23), you use the previous September's (ie Sept 2021) annual CPI figure.....which is 3.1%.

September 2021 CPI figure is used to revalue the closing value from the previous year to produce the starting value for 2022/23.

Presumably, the 9.4% figure cited earlier in the original post is some sort of revaluation of scheme benefits, specific to the individual pension arrangement that increases the scheme pension within 2022/23, and so increases the closing value of the pension arrangement.

Perhaps, but the OP did state "calculator uses 9.4% for CPI"..........(coincidentally, June's CPI rate was 9.4%)

There's no way to know the actual closing value today though (unless there is total certainty on pensionable income between now and the end of TY22/23)......though an estimate suffices in many/most cases.....which is all any calculator can do today.

hugheskevi said:

Usually, I'd be extremely hesitant to rely on the numbers from any calculator, but in this case, there is so much headroom there is no chance of a tax charge being due, so it doesn't matter what the calculator says.

Fair enough......

TARDIS

Sorry for not being clearer.
Yes, the estimated closing value includes revaluation of previous benefits by Sept CPI+1.5%. They used June’s CPI in the calculator  so the estimation will be lower than the actual PIA.

Great to know there’s plenty of carry forward to accommodate this - thanks