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Limits on Stakeholder pension contribution when retired

Spelunthus
Spelunthus Posts: 169 Forumite
Part of the Furniture 100 Posts Combo Breaker Name Dropper
I am 71, retired, and drawing my Company DB pension, and a state pension.   In 2012 I enroled in a Stakeholder Pension with Co-Op Finance. This is now Royal London, after Co-Op moved out of such business. My contributions increase automatically by 10% per year, and this year I am contributing almost £600 a month.  Please can someone direct me to a source which documents  the limits, either absolute, or limits to maintain tax relief, on such contributions.  Royal London have not informed me that I am hitting any limits.

Comments

  • I am 71, retired, and drawing my Company DB pension, and a state pension.   In 2012 I enroled in a Stakeholder Pension with Co-Op Finance. This is now Royal London, after Co-Op moved out of such business. My contributions increase automatically by 10% per year, and this year I am contributing almost £600 a month.  Please can someone direct me to a source which documents  the limits, either absolute, or limits to maintain tax relief, on such contributions.  Royal London have not informed me that I am hitting any limits.
    Do they know what pensionable earnings you have?

    Anyway based on your post the limit is £3600 (gross).  £2,880 of which is your contribution.

    It's a bit misleading for some people but this spells out the basics.

    https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief
  • Marcon
    Marcon Posts: 12,975 Forumite
    Eighth Anniversary 10,000 Posts Name Dropper Combo Breaker
    edited 12 November 2023 pm30 10:53PM
    I am 71, retired, and drawing my Company DB pension, and a state pension.   In 2012 I enroled in a Stakeholder Pension with Co-Op Finance. This is now Royal London, after Co-Op moved out of such business. My contributions increase automatically by 10% per year, and this year I am contributing almost £600 a month.  Please can someone direct me to a source which documents  the limits, either absolute, or limits to maintain tax relief, on such contributions.  Royal London have not informed me that I am hitting any limits.
    £3,600 gross per annum up to age 75 if you have no earned income, so you're well in excess of that.

    It's not for Royal London to 'inform you' - you need to tell them. If you look at the documentation issued at the time you took out your plan (or possibly look online unless you have wonderful filing sytems!), it's likely there will be a warning that you can't pay in more than tax-relievable amounts, so you need to contact RL and get this sorted out. A bit messy, but not a criminal offence, so nothing to worry too much about.
    Googling on your question might have been both quicker and easier, if you're only after simple facts rather than opinions!  
  • xylophone
    xylophone Posts: 45,426 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    You started the stakeholder at age 60?

    Did you have relevant earnings in that tax year?

    And since?

    While a person may pay any amount into a pension, tax relief on such contributions is limited and is available only up to age 75.

    https://www.royallondon.com/existing-customers/your-products/manage-your-pension/making-pension-contributions/

    Tax relief can be confusing, but it's worth understanding tax relief so you can make the most of it. You'll receive tax relief on all regular contributions you make to your plan up to a maximum of £3,600 a year or 100% of your earnings, whichever is greater.

    That is £3,600 gross/100% gross earnings over all pension arrangements you may have. 

    Thus, if contributing to a stakeholder, and having no relevant earnings,  you would be limited to a net contribution of up to £2880 and the provider would claim tax relief of up to £720 and add it to your pot.

    Claiming the tax relief is automatic and so if you have contributed more than £2880 in years when you had no relevant earnings. you will have received more tax relief than you should have done.

    It's not a burning at the stake matter but you should advise RL  - HMRC will sort out the tax position in due course.
  • Relevant earnings are usually salary from employment, but it's just possible that you might have other qualifying relevant earnings from other sources, see:

    https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm044100#earnings

    As has been said, you can contribute the net value of up to 100% of the sum of all relevant gross earnings or £3600 gross (£2880 net) if greater, in any tax year. HMRC then contribute the tax relief.

    Unfortunately I made the mistake of contributing too much to my pension because I solely looked at the online HMRC pension Annual Allowance calculator. I'd have thought it would be far more useful if their calculator took account of tax relief on relevant earnings as well. I think what people want to know is the maximum pension contribution limit (for all reasons) that HMRC will allow.  I'm sure fewer people would over contribute and this would prevent a lot of correction work for all parties.
    Polar Pigs live in pigloos.....
  • Thanks to all replies. I called RL and dropped the monthly payment to £240 - which is the annual maximum for tax relief.   I'll deal with the tax implications of the overpay later.  
  • xylophone
    xylophone Posts: 45,426 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    edited 16 November 2023 pm30 4:01PM
    I called RL and dropped the monthly payment to £240 - which is the annual maximum for tax relief. 

    Have you been contributing £600 a month since April?  If so, you may already have received too much TR and should cease contributing during this tax year?

  • I would be concerned that if you knowingly continued contributions above the MPAA, you'd be subject to an unauthorised payment charge (ie fine & repayment of tax relief) rather than just the annual allowance tax charge (repayment of tax relief).
    Signature on holiday for two weeks
  • The OP hasn't said he is drawing on his stakeholder pension and I didn't think drawing on a DB pension could trigger the MPAA. 
    Polar Pigs live in pigloos.....
  • xylophone
    xylophone Posts: 45,426 Forumite
    Part of the Furniture 10,000 Posts Name Dropper

    The OP hasn't said he is drawing on his stakeholder pension and I didn't think drawing on a DB pension could trigger the MPAA. 

    Drawing a DB pension does not trigger MPAA.

    Drawing anything over the 25% PCLS from a DC pension does trigger the MPAA.

    There may be confusion between the MPAA and the "basic amount", ie the amount that a person aged under 75  and with no relevant earnings may contribute to a pension scheme such as a stakeholder and receive tax relief.

    See https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm044100
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