net contribution for 60k pension contributions

Bimbly

gibbo888 said:
Thanks for that that is one of the things that I am stuck on. I am finding conflicting advice wrt this. Some say down to minimim wage some say you to your total earnings max 60k. 

The amount you are allowed to put into a pension - the Annual Allowance - is the lower of your earned income (salary) or £60k.

If you are contributing via salary sacrifice, you cannot sacrifice below the minimum wage. If this results in you contributing less than £60k and you want to put the whole £60k in, you could contribute the rest using another method (say, into a different SIPP or via a personal contribution into your employer's scheme if it allows), assuming you have the income to support it.

If you earned £100k, you could use salary sacrifice to contribute £60k as you would still be receiving above the minimum wage in your pay packet.

Pat38493

It is basically 2 different rules that both apply:

- You cannot have tax relief on more than 60K of total pension contributions (including any employer or company contributions) in any one tax year.  However with this limit you are also allowed to roll over any unused allowance from the previous 3 tax years.

- The earnings limit means you cannot put more gross amount into the pension than you actually earned.  For this there is no rollover allowed 

If you are able to contribute through salary sacrifice, the added complexity is that you are not being paid that money as it’s not part of your salary anymore.  As such the company is legally obliged to pay you at least minimum wage, so they will only let you go to that level.