Pension contribution limit

lkoky

Hi there,

First of all, I dont know much about the tax ssytem regarding the pension. so here goes my question.

I just joined a new company this April. My company offers a Group Personal Pension scheme which run by Clerical Medical. My company will match twice the contribution by an employee up to 10% of his/her salary.

And I saw somewhere on the IR web site about the max amount one can contribute to pension is limits to 3600 GBP including
1. tax relief
2. my contribution
3. employer contribution.

I mean 3600 hardly seen like a sensible number given my annual salary is 27000. Or am I misunderstand the meaning of this 3600?

thanks.

Twopints

The £3600 limit only applies to personal stakeholder pensions.

The limit for other company pension schemes, including group stakeholder pensions is based on your age, i.e. up to age 35 you can contribute a maximum of 17.5% of your gross pay. Age 36-45 the %age goes up to 20%.

So, if you are under 35, the limit for you is 17.5 % of 27,000 = £4725

More info here: Pension Contribution %

isasmurf

The £3,600 limit applies to Personal pensions - including Group Personal Pensions and Stakeholder pensions. Basically anyone can put in £3,600 (gross, £2,808 net) regardless of their earnings with some exceptions. The exceptions include those earning more than £30,000 and in an Occupational Pension.

These same pensions also have the % of earnings based on your age that twopints mentions, but if these percentages take you below £3,600 then you can still contribute up to £3,600

Those in an Occupational Scheme can contribute 15% of pensionable earnings.

Twopints

Thanks Isasmurf, my bad.

The £3600 limit is for personal pensions as are the % limits I mentioned.

Isasmurf correctly pointed out that the limit for Occupational pensions (that was the term I couldn't recall) is 15% of salary.

Sorry for any confusion my original post caused.

lkoky

Sorry if this appeared to be a dumd question.

Is that mean I am only allow to have 3600 in total (including contribution from employer & tax relief) pay into my pension this tax year?

or only 3600 will enjoy the benifit of tax relief, anything on top of that not?

I still dont quite undestand how this pension contribution actually apply in a real world situation (well as least for me) after visited various sites.

Thanks again for the info, really appreciate that.

dunstonh

Personal pensions (Stakeholder, personal, SIPP, individual or group) have age related contribution limits.

To age 25 = 17.5%
36-45 = 20%
51-55 = 25%
56-60 = 35%
61-74 = 40%

It is the higher of £3600 or the above percentage of your earnings in your case. (as mentioned in post 2)

So, if you are aged 37, you can pay 20% of your earnings in or £3600, whichever is higher. On £27000 this means you can pay in £5400 gross.

With personal pensions (of any variation), the contribution doesnt matter if it is paid by you or the employer. The total gross contribution cannot exceed those limits.

As from next April, the rules change and 100% of your salary can be used to contribute into a pension and obtain tax relief. Further contributions above that are allowable but will not obtain tax relief. Its possible some of the sites you have visited are talking about next years proposed changes and not the current year.

As for earnings, you can include benefits in kind, which may help boost the amount further. In addition, if you have a spouse/partner, you can include them in your retirement planning. With couples, you should try and equal out retirement planning. Exception would be if one employer offers particulary good terms.

isasmurf

If you didn't use last years allowance you can use that as well. This is known as 'carry-back', but you must do it before 31st January 2006, and you must tell the pension scheme the contributions are carried-back contributions. This is the final year you can 'carry-back'.

deepee_2

isasmurf wrote:

If you didn't use last years allowance you can use that as well. This is known as 'carry-back', but you must do it before 31st January 2006, and you must tell the pension scheme the contributions are carried-back contributions. This is the final year you can 'carry-back'.

Can you do Carry Back for year 2004/05 if you have claimed back all the Tax paid for that year for VCT.