Annual allowance TPS

SwiftS

I’m a member of the teachers pension scheme. I’ve been making large AVC contributions and I’m worried in case I exceed the annual allowance this year. I need to try and estimate my teachers pension input amount for 22-23 but I’m not sure how to do this. I understand there will be a 10% uplift plus the 1.5% in service uplift. In 21-22 my pension input amount was £15,424 (info given by TPS). My salary was about £41300 gross. My pension statement dated 31 March 2022 showed my pension to be about £10800 (£5800 80th final salary and £5000 career average). I estimate my gross salary 22-23 will be about £42500. Any help would be great! 

MX5huggy

How much AVC did you contribute last year? Is that in the £15424 PIA? 

How much AVC are you doing this year? 

SwiftS

The £15,424 relates to the pension itself (so based on my 9.6% contributions and employer contributions)

In 21-22 I also paid £20,700 in AVC contributions.
I might be on track to pay £21500 In AVCs this year, but I’m wondering if I need
to reduce this if I’m going to hit the £40k annual allowance. 

I’d planned to make big contributions until 2024 to bring down my taxable
gross for different reasons.

MX5huggy

So you have £3876 from last year to carry over, plus more from the 2 previous years. So you (probably) don’t have an issue this year and can just wait for PIA to be calculated for you. 

Remember AA is separate from tax relief so if you exceed AA (but not when use carry forward) which is likely to also take you over your gross salary but Tax Relief is just on contributions not PIA. 

https://techzone.abrdn.com/public/pensions/guide-pension-annual-allowance

SwiftS

MX5huggy said:

So you have £3876 from last year to carry over, plus more from the 2 previous years. So you (probably) don’t have an issue this year and can just wait for PIA to be calculated for you. 

Remember AA is separate from tax relief so if you exceed AA (but not when use carry forward) which is likely to also take you over your gross salary but Tax Relief is just on contributions not PIA. 

https://techzone.abrdn.com/public/pensions/guide-pension-annual-allowance

Thanks for that! I had read about carry forward but I’d confused myself that I’d only be able to use a small part of the amount available under carry forward (I thought I’d only be able
to use £2500 from earlier years and that I couldn’t exceed my salary ie £40k annual allowance plus £2500 carry forward = my annual salary for 22-23.) I think I had this completely wrong?

So is my understanding now correct that
1. The limit relating to your earnings in a tax year relates to your own personal contributions that tax year (for me this will be potentially £21500 AVCs and 9.6% deduction from salary The total amount of personal contributions will be under my £42500 salary)

2. The Annual allowance plus 3 years carry forward can be more than your annual salary. I think I have about £20,000 available from the three previous tax years to carry forward.

Thanks again! 

Cornish_mum

Hi I had similar concerns about large AVCs with USS so you have my sympathy. My understanding is that TPS is a DB scheme not a DC so you need to know the annual growth in your benefit plus your AVC to determine in you are approaching the annual allowance. I have just looked at the TPS website and it seems they don’t seem to send out annual statements (which I find rather shocking if true).  I would call them if you don’t have this info for the proceeding 3 tax years (to see were you are with carryover). More info here. https://www.teacherspensions.co.uk/members/faqs/working-life/annual-allowance-and-lifetime-allowance.aspx

Best wishes CM