Annual Allowance question

ncfc1902

I currently contribute 8% to my workplace pension via salary sacrifice and am looking to invest up to my annual allowance in to my SIPP. As I earn less than 40K I get tax relief on up to 100% of my salary. Would this mean my gross salary before or after my workplace pension contribution? Thanks.

Troxy

Example to illustrate

Salary before sacrifice £30k
Company pension payment (salary sac.) £5k
salary after sac. £25k
it is possible to put in £25k gross into SIPP which is £20k net.
The SIPP provider will manage the basic rate tax relief from govt. to make it up to £25k.

It could however be more efficient to increase your salary sacrifice to just above NMW and use SIPP for the rest. This saves on NI

phynix_uk

I agree with Troxy on all elements.

Utilising salary sacrifice will mean you essentially reduce your salary meaning you'll avoid paying national insurance saving you a further 12%. Your SIPP is going to be -12% on day one compared to your workplace pension plus it's quite likely to be more expensive. Skip the SIPP, you can always transfer to a SIPP when you leave your employment or retire. 

ncfc1902

Thanks both, that's very helpful. The only reason I'm considering investing in to the SIPP is I have money from an inheritance and I can't put a cash lump sum in to my workplace pension.