Confused about the pension tax relief allowance

qsk

I have come to an age to think more about pension and retirement. I am thinking of topping up my pension to make the most of tax relief. I understand there is an allowance of £60000 this year and £40000 last year. But it seems that there are extra conditions to use this allowance. 

1) My work place offers salary sacrifice for pensions. But it seems that you cannot pay over the minimum wage. So assuming my salary is £50000, the maximum I can top up through this route is around £30000 (with minimum wage around £20000). Is this true?

2) My understand is that I can also top up outside salary sacrifice. But it seems that you cannot top up over your annual salary. Assume my salary (for this year and last year) is £50000, I paid £10000 into my pension last year and £30000 this year (through salary sacrifice), the maximum I can top up now is £20000 rather than £60000 despite of the allowance carry over. Is this true?

Many thanks.

Linton

qsk said:

I have come to an age to think more about pension and retirement. I am thinking of topping up my pension to make the most of tax relief. I understand there is an allowance of £60000 this year and £40000 last year. But it seems that there are extra conditions to use this allowance. 

1) My work place offers salary sacrifice for pensions. But it seems that you cannot pay over the minimum wage. So assuming my salary is £50000, the maximum I can top up through this route is around £30000 (with minimum wage around £20000). Is this true?

2) My understand is that I can also top up outside salary sacrifice. But it seems that you cannot top up over your annual salary. Assume my salary (for this year and last year) is £50000, I paid £10000 into my pension last year and £30000 this year (through salary sacrifice), the maximum I can top up now is £20000 rather than £60000 despite of the allowance carry over. Is this true?

Many thanks.

1) Yes.   But note that minimum wage is determined separately for each payment period rather than as an annual figure.  This could be a factor if your income was very variable.
2) Also correct.  The earnings limit and annual allowance are entirely separate constraints, with different rules.  Salary sacrifice reduces your earnings,

qsk

@Linton, Thank you very much for your advice. Some further questions:
1) Does the "earning" limit include saving interests?
2) Does the "earning" limit include company benefits such as private medical insurance which company pays directly?
3) As sometimes it is difficult to predict the total earning for the whole year, the best time to do top up is at the end of tax year?
Thanks again.

Dazed_and_C0nfused

1.  No
2.  If you are taxed on the benefit yes
3.  Yes, most people will have a small window between their final payslip being produced and the end of the tax year.