Overpaying salary cap into SIPP

aroominyork

Earlier this financial year OH paid £40k net into her SIPP. Her salary is £55k with 3% employer/5% employee pension contribution. She intended to pay in another £1800 net before the end of the financial year to maximise use of the salary cap since 41800/0.8 + 55000*5% = 55000. She has £36,400 of carry forward annual allowance from 2019/20.

She is likely to reduce her hours from January, probably to 0.8 FTE, so will have overpaid on the salary cap. How does she declare/adjust this please?

Marcon

See https://www.moneyhelper.org.uk/en/pensions-and-retirement/tax-and-pensions/the-annual-allowance

or

https://www.gov.uk/tax-on-your-private-pension/annual-allowance (probably more helpful!)

NedS

I believe the simplest solution would be to contact the SIPP provider, explain that she has exceeded her earnings cap and paid in more than her earnings for the year, and request the excess contributions to be refunded.

Marcon

NedS said:

I believe the simplest solution would be to contact the SIPP provider, explain that she has exceeded her earnings cap and paid in more than her earnings for the year, and request the excess contributions to be refunded.

Not sure that's an option.

https://www.aegon.co.uk/support/faq/pension-technical/annual-allowance-faq.html says: It isn’t possible for a member to request a refund of contributions just to avoid an annual allowance charge. If a contribution is refunded or unapplied for this reason, the contribution is likely to be an unauthorised payment. 

NedS

Marcon said:

NedS said:

I believe the simplest solution would be to contact the SIPP provider, explain that she has exceeded her earnings cap and paid in more than her earnings for the year, and request the excess contributions to be refunded.

Not sure that's an option.

https://www.aegon.co.uk/support/faq/pension-technical/annual-allowance-faq.html says: It isn’t possible for a member to request a refund of contributions just to avoid an annual allowance charge. If a contribution is refunded or unapplied for this reason, the contribution is likely to be an unauthorised payment. 

Fair enough, although it is not the AA that has been exceeded, but the salary cap so tax relief would have been claimed for contributions that are non-relievable.

aroominyork

These posts sum up why I posted. Most online guidance is about AA rather than salary cap. 

Secret2ndAccount

NedS is right. Talk to your pension provider. Tell them how much you've overpaid, and ask for it back.
If you want to read the legislation, google "Refund of excess contributions lump sum"

zagfles

Marcon said:

NedS said:

I believe the simplest solution would be to contact the SIPP provider, explain that she has exceeded her earnings cap and paid in more than her earnings for the year, and request the excess contributions to be refunded.

Not sure that's an option.

https://www.aegon.co.uk/support/faq/pension-technical/annual-allowance-faq.html says: It isn’t possible for a member to request a refund of contributions just to avoid an annual allowance charge. If a contribution is refunded or unapplied for this reason, the contribution is likely to be an unauthorised payment. 

Completely irrelavant, the OP's OH hasn't exceeded the AA, but the tax relief limit. A refund is allowed in these circumstances, but have to wait till after the end of the tax year, as until then you can't be sure if/how much the limit has been exceeded

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm045000#Refundecls

aroominyork

zagfles said:

Marcon said:

NedS said:

I believe the simplest solution would be to contact the SIPP provider, explain that she has exceeded her earnings cap and paid in more than her earnings for the year, and request the excess contributions to be refunded.

Not sure that's an option.

https://www.aegon.co.uk/support/faq/pension-technical/annual-allowance-faq.html says: It isn’t possible for a member to request a refund of contributions just to avoid an annual allowance charge. If a contribution is refunded or unapplied for this reason, the contribution is likely to be an unauthorised payment. 

Completely irrelavant, the OP's OH hasn't exceeded the AA, but the tax relief limit. A refund is allowed in these circumstances, but have to wait till after the end of the tax year, as until then you can't be sure if/how much the limit has been exceeded

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm045000#Refundecls

Thank you, zag. Your access to internal HMRC manuals is useful.