How does HMRC handle exceeding pension contribution limits?

Janin1992

I'm anticipating that my employer will contribute over £60,000 to my pension this year via salary sacrifice, exceeding the annual allowance. Given that I've already utilized my allowance for previous years and my employer is hesitant to change the salary sacrifice arrangement without a significant life event, I'm concerned about the implications. What happens after exceeding the pension contribution allowance? Will HMRC contact me for payment, and do I need to declare this during self-assessment? Additionally, if my pension contributions consistently exceed the annual allowance, will this trigger further inquiries? I'm willing to pay any penalties, but I want to ensure this won't cause future issues.

Veteransaver

The workplace schemes I've always used have always allowed you to vary pension contributions without a life event.
Are you doing all your pension contributions via salary sacrifice, or are there AVCs too?
You should definitely be able to amend AVCs on a monthly basis, I'd pressure your benefits scheme administrator or HR department. 

starving_artist

It is more flexible than it used to be.  See this thread.

bjorn_toby_wilde

To answer your question about HMRC, I inadvertently overcontributed last year. The pension provider notified me and advised HMRC as well. I had to correct via my self assessment and pay back the tax relief.

Grumpy_chap

Janin1992 said:

I'm anticipating that my employer will contribute over £60,000 to my pension this year via salary sacrifice, exceeding the annual allowance. Given that I've already utilized my allowance for previous years and my employer is hesitant to change the salary sacrifice arrangement without a significant life event, I'm concerned about the implications. What happens after exceeding the pension contribution allowance? Will HMRC contact me for payment, and do I need to declare this during self-assessment? Additionally, if my pension contributions consistently exceed the annual allowance, will this trigger further inquiries? I'm willing to pay any penalties, but I want to ensure this won't cause future issues.

The rules that apply to most SS schemes do require the "life event" to allow a change.

Pensions have different rules where the "life event" criteria do not apply and the contribution level can be changed at any frequency.  Sorry, I can't lay my hands on the relevant EIM at present but will try to locate so that you can reference to your Employer.

Regardless of what is permitted by taxation legislation, the Employer might have their own restrictions on how frequently changes can be made so as to manage the associated level of administration.

Out of interest, how did you reach the position that your contributions will exceed the available AA (plus carry forward)?  

EDIT:  I found a recent thread where the links are provided giving the rules that allow pension SS to be changed without a "life event" taking place:
https://forums.moneysavingexpert.com/discussion/comment/80512387

kuratowski

If in the end, you do go over the AA (and it might be worth it, to obtain employer contributions), then consider using scheme pays, assuming you meet the criteria:
PTM056410 - Annual allowance: tax charge: scheme pays: general - HMRC internal manual - GOV.UK (www.gov.uk)

Janin1992

Thank you for your responses. I've reached out to HR to adjust my salary sacrifice level. I recall setting up the salary sacrifice arrangement 3 or 4 years ago and remember there being a condition related to life events. However, since that condition no longer applies, I'm hopeful they can make the change without much hassle.

Janin1992

Grumpy_chap said:

Out of interest, how did you reach the position that your contributions will exceed the available AA (plus carry forward)?  

I had a good investment return 3 years ago and decided to beef up my pension by sacrificing as much salary as possible, while relying on the investment returns for day-to-day expenses. I asked to set up salary sacrifice and pay slightly below 60K into pension each year with a view of using current year annual allowance and also using unused allowances from previous years. By my calculations I no longer have previous years allowances as I was paying around 60K each year for number of years. I was not sure what to do this year but then the allowance was changed to 60K and that solved my problem. In the middle of year I had a salary increase and that pushed my salary sacrifice above 60K.

Grumpy_chap

Janin1992 said:

Thank you for your responses. I've reached out to HR to adjust my salary sacrifice level. I recall setting up the salary sacrifice arrangement 3 or 4 years ago and remember there being a condition related to life events. However, since that condition no longer applies, I'm hopeful they can make the change without much hassle.

Just a detail here.
The condition about "life events" still applies to most SS schemes.  
The condition never applied for SS pension contributions as there was always an exemption.
You need to read down to the links shared above and understand the relevant EIM document.  You may need to educate the company.

Bimbly

When my company said there had to be a reason why I wanted to reduce my contributions, I just said I needed the money and that was that.

You could always say something like urgent house repairs??