How much can you pay into pension

Mick70

If receiving a final salary pension of £29k and say mange to find a job paying £20k , how much could I pay into my DC Pensions pot each year , is it limited by earnings of £20k OR the £29+£20k combined ?
thanks 
simply asking as unsure if redundancy is on horizon , possibly 

mick 

Secret2ndAccount

Only your salary, not your pension. So 20k including the tax relief. If your employer contributes too that's permitted on top of your 20k
If you got made redundant then, next year, after April 6th, 2880 into a SIPP, which would get made up to 3600 with tax relief.

QrizB

Pension income doesn't count towards your "earnings" for pension contribution purposes.

So £20k.

billy2shots

Secret2ndAccount said:

Only your salary, not your pension. So 20k including the tax relief. If your employer contributes too that's permitted on top of your 20k
If you got made redundant then, next year, after April 6th, 2880 into a SIPP, which would get made up to 3600 with tax relief.

Thread hijack,


I've been thinking about the personal contribution on top of company contributions for a while so this really stood out. 

My wife is part of my Ltd company (one of 20 employees). She works part time with me, part time as a TA paying into an LGPS.

We have some spare cash. 

If her 'wages' total £24k, are we able to pay in £24k (total including government top up) of private money?

With pension contributions from my ltd company and her LGPS added to private contributions plus government top up, she could pay more into pensions than her taxable wage (in total). 

Malthusian

It would normally be more tax-efficient for your wife to be paid an employer contribution directly from the company's bank account, rather than to pay her income which she then pays back into a pension.
The "earned income" limit only applies to personal contributions, not employer contributions. With employer contributions the constraint is that the contribution has to be "wholly and exclusively for the purposes of the business", which is usually not much of a barrier - you should check with the company accountant how much the business can reasonably pay in.
So yes, she could pay (or have the company pay) more into her pension than her wages.
If she pays post-tax income back into a pension she will get income tax relief but not National Insurance relief.
Is your wife receiving dividends? Once you hit the National Insurance threshold it is usually more tax-efficient to pay you and your wife as dividends rather than wages (corporation tax + dividend tax is usually lower than employee's NI + employer's NI + income tax).

dunstonh

My wife is part of my Ltd company (one of 20 employees). She works part time with me, part time as a TA paying into an LGPS.

Having your spouse as an employee on your limited company is an old fashioned way of doing it.  It also forces her to be included in auto-enrolment.   Normally, the best way is to have her as a sharedholding director.  That way, she isn't an employee (but can still receive salary) and can have dividends.  It also allows employer pension contributions that are not based on salary.

There are scenarios that can influence what is the best structure for a company.

Why is your wife an employee and not an officer of the company?

If her 'wages' total £24k, are we able to pay in £24k (total including government top up) of private money?

When working out how much you can pay, always use the gross figure.  This is because the tax relief is not a government top up.  It is a relief. i.e. a reduction on the contribution you personally pay.

We have some spare cash. 

Is that in the company or outside of the company?

If it's outside of the company, it would probably be more efficient to take less in dividends, make employer contributions, and use the cash outside of the company to replace the dividends.

billy2shots

Thanks for the replies however my question was very specifically worded. 
I wanted to leave the ltd company out of it but mentioned it as pension contributions will be made via it. 

I didn't want to waste time with context but here it is now. 

I am in the process of my wife becoming a shareholder. 

She has been enrolled in a pension scheme for longer than 3 years (LGPS)

We have plenty of ltd company funds and she has a mountain of carry forward that could be used (particularly when she becomes a shareholding director). 

We will pay money into her SiPP straight from the ltd company,

However......


To avoid coming a cropper of the wholly and exclusively HMRC test and rules we are limited in the amount we can pay in. HMRC wouldn't be too happy with a payment of £120,000 going in this year. 

We currently have a surplus of private funds. 

Paying private money into a SiPP would give 20% 'bonus' a bit like a LISA. 
We don't need this money until later on and I already plan on maximising our S&S ISAs this year (timing the market of course).

I don't want to save this money and exceed the personal savings allowance and I am leaning towards private SiPP contributions over using a GIA to avoid CGT tax and dividend tax (on top of business dividend tax). 

We plan of creating a POT big/small enough that with future LGPS pension, my wife would be able to withdraw all proceeds from her SiPP tax free using her personal allowance (unless rules change of course).



So my original question still stands.

Can my wife personally contribute Up to her joint taxed income regardless of how much her employer and our ltd company have paid in?

@Malthusian
@dunstonh

Linton

There are 2 limits on how much someone can contribute to their pension(s):

1) The total gross personal contribution to all ones pension(s) in any one tax year with benefit from tax relief is limited to gross earned income in that tax year.  There is no carry over from previous years.
2) There is also an annual allowance of £40K for all pension contributions, both employer and employee.  There is some carry over from previous tax years. If you exceed the AA the excess will be effectively taxed as income.

The 2 limits are independent, both must be satisfied to avoid extra tax.

MX5huggy

As Linton has said there are the 2 limits. 

The AA limit is complicated in your wife’s case because LGPS is a DB scheme. The amount of AA used up by the LGPS is not simply her contribution plus her employer contributions but her Pension Input Amount (PIA). This is a calculated figure representing the increase in value of the benefits over the last year. Pay rises and inflation create large PIA figures, PIA should be on her LGPS statement but it is for last year so you have to estimate it for this year. 

The other thing to look at is extra pension options with LGPS, I pay Salary Sacrifice AVC’s so save tax and NI on my contributions then I will benefit from taking the AVC funds as tax free lump sum (up to limits). Meaning I don’t take tax free lump sum from my LGPS which is poor value.