Pension 3 year carry forward rule

scoobydoo8

Hi,

I am trying to work out if I am entitled to 3 years of pension contributions carried forward from the past 3 years.

I have an old workplace pension that I haven't contributed to in years and I haven't put in anything to any other pension in the last 3 years either, so does that mean I could put 3 years worth of contributions in this year? I don't have any earned income so I could in theory put in 3 * £2880 into a SIPP this year? Or not...?

Doctor_Who

scoobydoo8 said:

Hi,

I am trying to work out if I am entitled to 3 years of pension contributions carried forward from the past 3 years.

I have an old workplace pension that I haven't contributed to in years and I haven't put in anything to any other pension in the last 3 years either, so does that mean I could put 3 years worth of contributions in this year? I don't have any earned income so I could in theory put in 3 * £2880 into a SIPP this year? Or not...?

With no earned income you are limited to a pension contribution of £2880 net (£3600 gross) per year. Carry forward is not relevant.

scoobydoo8

Doctor_Who said:

scoobydoo8 said:

Hi,

I am trying to work out if I am entitled to 3 years of pension contributions carried forward from the past 3 years.

I have an old workplace pension that I haven't contributed to in years and I haven't put in anything to any other pension in the last 3 years either, so does that mean I could put 3 years worth of contributions in this year? I don't have any earned income so I could in theory put in 3 * £2880 into a SIPP this year? Or not...?

With no earned income you are limited to a pension contribution of £2880 net (£3600 gross) per year. Carry forward is not relevant.

I've just found this https://moneytothemasses.com/saving-for-your-future/pensions/can-i-carry-forward-unused-annual-pension-allowances and it says

Can everyone carry forward unused pension contributions?

You can carry forward unused tax relief on pension contributions provided:

• You are a member of a qualifying pension scheme.
• You have used up your annual allowance for the current tax year.
• You have had qualifying income in each of the last 3 years, or if not, the carry forward relief will be restricted to £3,600 in any tax year.
• You haven't triggered the Money Purchase Annual Allowance (see later in this article).
  
  

That seems to read that I can do 3 years or am I misunderstanding it?

Dazed_and_C0nfused

scoobydoo8 said:

Doctor_Who said:

scoobydoo8 said:

Hi,

I am trying to work out if I am entitled to 3 years of pension contributions carried forward from the past 3 years.

I have an old workplace pension that I haven't contributed to in years and I haven't put in anything to any other pension in the last 3 years either, so does that mean I could put 3 years worth of contributions in this year? I don't have any earned income so I could in theory put in 3 * £2880 into a SIPP this year? Or not...?

With no earned income you are limited to a pension contribution of £2880 net (£3600 gross) per year. Carry forward is not relevant.

I've just found this https://moneytothemasses.com/saving-for-your-future/pensions/can-i-carry-forward-unused-annual-pension-allowances and it says

Can everyone carry forward unused pension contributions?

You can carry forward unused tax relief on pension contributions provided:

• You are a member of a qualifying pension scheme.
• You have used up your annual allowance for the current tax year.
• You have had qualifying income in each of the last 3 years, or if not, the carry forward relief will be restricted to £3,600 in any tax year.
• You haven't triggered the Money Purchase Annual Allowance (see later in this article).
  
  

That seems to read that I can do 3 years or am I misunderstanding it?

You cannot use carry forward.

To be able to use carry forward you first have to have used this year's annual allowance.

As the annual allowance is £60k and you can only contribute £3,600 (gross) carry forward simply isn't relevant to your situation.

scoobydoo8

Dazed_and_C0nfused said:

scoobydoo8 said:

Doctor_Who said:

scoobydoo8 said:

Hi,

I am trying to work out if I am entitled to 3 years of pension contributions carried forward from the past 3 years.

I have an old workplace pension that I haven't contributed to in years and I haven't put in anything to any other pension in the last 3 years either, so does that mean I could put 3 years worth of contributions in this year? I don't have any earned income so I could in theory put in 3 * £2880 into a SIPP this year? Or not...?

With no earned income you are limited to a pension contribution of £2880 net (£3600 gross) per year. Carry forward is not relevant.

I've just found this https://moneytothemasses.com/saving-for-your-future/pensions/can-i-carry-forward-unused-annual-pension-allowances and it says

Can everyone carry forward unused pension contributions?

You can carry forward unused tax relief on pension contributions provided:

• You are a member of a qualifying pension scheme.
• You have used up your annual allowance for the current tax year.
• You have had qualifying income in each of the last 3 years, or if not, the carry forward relief will be restricted to £3,600 in any tax year.
• You haven't triggered the Money Purchase Annual Allowance (see later in this article).
  
  

That seems to read that I can do 3 years or am I misunderstanding it?

You cannot use carry forward.

To be able to use carry forward you first have to have used this year's annual allowance.

As the annual allowance is £60k and you can only contribute £3,600 (gross) carry forward simply isn't relevant to your situation.

OK, so it's the general max annual allowance that's used not your own personal max annual allowance. It appears that the carry forward rule only benefits high earners...

dunstonh

• You have had qualifying income in each of the last 3 years, or if not, the carry forward relief will be restricted to £3,600 in any tax year.

That one is wrong too.

OK, so it's the general max annual allowance that's used not your own personal max annual allowance. It appears that the carry forward rule only benefits high earners... 

Higher earners (although £60k is not really a high earner nowadays), employee contributions (such as redundancy payments), company directors.

Its purpose is really aimed at people who can have incomes that fluctuate where they may get paid a lot one year and nothing the next.   

SVaz

A lot of us are self employed with fluctuating income,  it does seem VERY unfair that someone earning much less is not able to use carry forward. 
It should be on a person’s individual earnings, not some random amount that only affects high earners, and yes, £60k is a high income, especially away from the Southern bubble. 

Pat38493

SVaz said:

A lot of us are self employed with fluctuating income,  it does seem VERY unfair that someone earning much less is not able to use carry forward. 
It should be on a person’s individual earnings, not some random amount that only affects high earners, and yes, £60k is a high income, especially away from the Southern bubble. 

Maybe I'm not following here but the limitation that is blocking you is a separate allowance that says you cannot put more into your pension, than 100% of whatever you earned in that tax year.  That is a completely separate rule to the 60K annual allowance.  

If you are suggesting that this should be abolished and only the annual allowance should be the limit I think that would then have a bunch of other consequences which would allow rich people to further avoid tax which would then have to be mitigated.

SVaz

I’m saying that if you earn £5k or £50k, you should be able to have that as your carry over allowance.  Limited to £60k so it won’t benefit higher earners. 

Pat38493

SVaz said:

I’m saying that if you earn £5k or £50k, you should be able to have that as your carry over allowance.  Limited to £60k so it won’t benefit higher earners. 

I guess what you are saying is that the earnings limit on pension contributions should also have a carry over, which it does not have in the current system.  I guess that would be a question for your MP as that is the current law that it doesn't have carryover.

NoMore

There's actually nothing legally stopping you from contributing up to your AA plus carry forward every year, even if you have no earnings. However its not advisable as you won't get tax relief on the amount above your earnings so its not worth it for most people as you are opening yourself to being taxed twice on this money, on the way in and on the way out.

Also as its normally a monumentally bad idea to do this, most pension providers are not set up to do this, so even if you can legally do it, you may find it hard to convince a Pension provider to let you do it.