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Calculate lump sum pension contributions

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  • Can someone confirm my calculations that I can put 30k into my pension using carry forward not sure if I'm doing this right thanks
    Basic rate tax payers
    Year end 23
    Earnings 38017
    Pension 7585

    22
    Earnings 32642
    Pension 4584

    21
    Earnings 29521
    Pension 4229
    My workplace pension is also through Aegon and I pay 26% through salary sacrifice which was the maximum I could. I can also make a direct payment from my bank account up to whatever my limit is for the current tax year. You need to get sort code/account number and reference from Aegon for how to do this. You also have to tell them whenever you are sending an extra contribution.
  • flopsy1973
    flopsy1973 Posts: 697 Forumite
    Part of the Furniture 500 Posts Name Dropper
    anyone able to help with this 
  • Mutton_Geoff
    Mutton_Geoff Posts: 4,020 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Photogenic
    Can someone confirm my calculations that I can put 30k into my pension using carry forward not sure if I'm doing this right thanks
    Basic rate tax payers
    Year end 23
    Earnings 38017
    Pension 7585

    22
    Earnings 32642
    Pension 4584

    21
    Earnings 29521
    Pension 4229
    How was the pension contribution made? Gross, net, sal sac? In any case you wouldn't need carry forward to put in £30k with £7585 unless that was net but you still have loads of headroom.
    Signature on holiday for two weeks
  • Can I pay just up to basic salary or or my total earnings last year ? 

    Total earnings.

    Do I deduct my or employers contribution. ? 

    No, but if you are paying by salary sacrifice then you have made no contribution: it all comes from your employer, and they reduce your salary to match.

    The answer is that your personal  contributions can not exceed your total earnings. As I said, if you are using Sal Sac, then you have made no personal contribs.

    I know you’ve given us lots of info, but it still isn’t quite a complete picture. What % are you contributing via Sal Sac, and what % does your employer contribute?

    Here’s what I think has happened:

    You would have earned about £42,500.   You sacrificed ~4,500, leaving you with 38,000. Your employer put the ~4,500 into your pension, plus their contribution of ~3,000 for a total of 7589. These numbers are approximate because you haven’t told us what % your employer contributes vs what you contribute.

    Your remaining 38,017, less tax and NI gives you 29,511 take home. This works out about right

    If your earnings are 38,017 you can personally pay 38,017 into a pension. Here are some more rules:

    If you decide to pay it into a SIPP, you only pay in 30,400 (80%) and the taxman automatically gives you back an extra 7,600 for a total contribution of 38,000

    If you pay into your employer’s scheme, as a lump sum, it’s possible it works the same way as the SIPP -  pay them 30,400 and they claim back the 7,600 for you. It’s also possible they go back and recalculate your pay for the year as if you had never earned the 38,000. That would be bad because it would take your pensionable earnings down to almost zero. Once your pensionable earnings drop below 12,570, you won’t save any tax. So you need to ask your employer how this would work.

    It’s going to be hard to put more in by Sal Sac. Sal Sac is the cheapest and best way to contribute because you save National Insurance too. However, you can’t Sal Sac below the minimum wage, even for one payslip. So there’s no way to pay in an extra 38k in one month. Maybe for next year increase your monthly Sal Sac.

    So the SIPP might turn out to be your best option.

    One more important rule. Each year, you can only pay in a total of 40k. That’s you + your employer + the taxman, total into all pensions. It’s legal to put in more, but there are tax penalties that make it not worth doing. This is the only part where carry forward comes in. You could exceed 40k for one year, if you underpaid enough in the previous 3 years. You look to be okay because you are talking about paying in 38k + your employer is putting in 8k. So a total of 46k, but you only put in 5k last year so you have a ton of carry forward available. Next year, the annual allowance is proposed to increase to 60k, so it looks likely this will never trouble you.

     

  • Mutton_Geoff
    Mutton_Geoff Posts: 4,020 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Photogenic
    Carry forward is used from oldest date forward so for the sums talked about here, last year's contribution not necessarily relevant.

    https://www.gov.uk/guidance/check-if-you-have-unused-annual-allowances-on-your-pension-savings
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  • NlghtOwl
    NlghtOwl Posts: 98 Forumite
    Second Anniversary 10 Posts
    edited 25 March 2023 at 1:54PM
    It seems that these calculations are complicated, especially with valuing DB pensions, and salary sacrifice taken into account and moving from full time to part time within the last year.  (Just a basic rate tax payer)
    I have topped up my SIPP recently, which is separate to my DB workplace pension.  Having done some of the calcs I now wonder if I am close to Annual Allowance based on potential DB valuations. 

    My question is, if these calcs are as complicated as this thread suggests, how or when would HMRC work it out?
  • flopsy1973
    flopsy1973 Posts: 697 Forumite
    Part of the Furniture 500 Posts Name Dropper
    Thanks contribution through salsac me 18% company 12%
    I spoke to Aegon and they told me I would need to use carry forward from previous years to put in 20k which does not follow from the calculation above ?  
    So I could potentially put more in then what is the max I could contribute 
    This is not being done through employer I am directly adding it to my company scheme though 
    Thanks
  • Well, that doesn't add up. If you are paying 18% and employer 12% how is there <8k in your pension? That would imply a salary of about 25k. That would mean you can put in 20k, and receive a 5k top-up. But in that case you wouldn't need to use carry forward.
    If you've earned 38k, then 18% is 6840, and 12% is 4,560, so there should be more than 11k in your pension.
    Something doesn't add up.
    Seems very safe to pay in extra 20k, and get 5k from the taxman. However, I repeat my original view: If all your contribs so far were by salary sacrifice, then you can pay 80% of your entire earnings for the year into your pension (and get the other 20% added).
    Why not pay in the 20k this year, then increase your Sal Sac for next year? That way you get the NI savings as well as the tax savings. Just keep your earnings above minimum wage.
  • flopsy1973
    flopsy1973 Posts: 697 Forumite
    Part of the Furniture 500 Posts Name Dropper
     The percentages I got from HR so not sure I had salary increase midway in year. So could I put more in with the carry forward want to put as much as possible. 
    I am going to up the salsac next year attached pic of payslip with figures. Appreciate your help 
  • flopsy1973
    flopsy1973 Posts: 697 Forumite
    Part of the Furniture 500 Posts Name Dropper
    Hi time is against me here now so is it only 20k I can pay in regardless of earnings and carry forward for last 3 years
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