Need some pension help please after triggering MPAA

happyhero

My wife recently withdrew her 25% tax free lump sum and £6000 from her drawdown SIPP within Hargreaves Lansdown, the taxable part and so triggered the MPAA. We knew this would happen and are happy with the limit it will create of £10,000/year that she can contribute. She is 63 in August and works for the National Trust doing part time hours of 22.5 hours per week bringing in a salary of about £11,000 to £12,000. This £6000 she withdrew is a small part of the £35,000 value of this drawdown SIPP she has.

After she had been with the National Trust a few months they started a pension for her with Legal & General, this started paying into this new pension at the end of December 2023. She is paying in £32.76 and the employer is paying in £41.48 each month which is 4% on both so not a lot. But as she has a very poor pension contribution history we try to contribute lump sums into her SIPP with Hargreaves Lansdown every year to boost her private pension. These contributions sometimes take us to around the £10,000/year mark which will be important to keep an eye on now.

I know her Legal & General pension contribution even with the employers bit wont amount to much but we would like to know if these contributions count when it comes to this £10,000 limit as I know there are instances where it wouldn’t, i.e. can they be ignored for the purposes of the £10,000 limit?

I can’t seem to figure out what sort of pension this work pension is, i.e. if it would be classed as a DC pension for instance.

Can you help with this please, here are some details that may make it clear to you.

Its called a “Legal & General WorkSave Pension Plan”. The money will be invested in the “L&G PMC 2025 – 2030 Target Date Fund 3”. Does any of that help, if not what can I look for in the paperwork?

I’m used to pensions being either DB or DC as I left BT a few years back and had a DB pension with them, so what kind of pension does my wife have, can you tell from the above?

Any help appreciated.

NoMore

Just like the AA, so for the MPAA, all contributions to pensions count so yes employer contributions count.

Your wife has a DC pension and so the total amount of hers and employers will count against the MPAA

Sarahspangles

The NT scheme is salary sacrifice and they match employee contributions up to 10%, so that might be a better option for your wife than a lump sum into her SIPP.  If/when she retires she can always transfer it from L&G to her current SIPP.

xylophone

• “Legal & General WorkSave Pension Plan”. Is a group personal pension so a DC pension.
  
  https://www.legalandgeneral.com/landg-assets/employer/files/workplace-pensions/_resources/files/members-booklet6.pdf
  
  https://www.nationaltrustjobs.org.uk/files/4514/6883/9694/pension_plan_booklet.pdf
  
  

https://www.moneyhelper.org.uk/en/pensions-and-retirement/tax-and-pensions/money-purchase-annual-allowance-mpaa

Can you clarify how tax relief is given (RAS or net pay)?

When the MPAA is triggered, it applies as a total  annual limit across all DC plans to which a person might contribute so NOT per DC plan.


Has she obtained a state pension forecast?

https://www.gov.uk/check-state-pension

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moedeeb

My wife also works for NT and has SIP and L and G workplace pension. MPAA includes all contributions to all pensions.

Dazed_and_C0nfused

Sarahspangles said:

The NT scheme is salary sacrifice and they match employee contributions up to 10%, so that might be a better option for your wife than a lump sum into her SIPP.  If/when she retires she can always transfer it from L&G to her current SIPP.

Getting matched contributions is always nice but if the op's wife is ever contributing in a tax year where her only taxable income is £11k from the National Trust, and she has got the maximum matched contributions she can, then she should consider if extra contributions would be better going into a SIPP as these would have tax relief added.

There would be no tax or NI saving with extra salary sacrifice contributions.

Albermarle

Sarahspangles said:

The NT scheme is salary sacrifice and they match employee contributions up to 10%, so that might be a better option for your wife than a lump sum into her SIPP.  If/when she retires she can always transfer it from L&G to her current SIPP.

Not in this case as she does not earn enough to benefit from SS.

happyhero

Apologies I have not been back here sooner, something got in the way for a few days but I'm here now and I'm very grateful to you all for the help. 

If its ok I'd like to ask one furher question, sort of related as you have said the employer contributions count. We usually contribute as large a sum as we can to the SIPP to boost my wifes pension and we have to mention this on our tax credits forms every year. This effectively has the benefit of reducing my wifes income in their calculations, ie if my wife earns £11k and we put 9k into the SIPP gross then they have instructed us to put down 2k as her income as there is no seperate box for it. We have done this for several years and they are happy with it, its their method anyway. This boosts our tax credits ie its an encouragement to put money into a private pension.

So if this is the case would her NT L&G pension contributions also needed to be added in the Tax Credits form, ie do we treat it like same as her SIPP contributions?

Here is the wording from the 2 entries on the Tax Credits guidance on the Gov.UK site under "What to take off your Gross pay" :-

"Any pension contributions made to a registered scheme not paid through an employer"

"Any pension contributions made to a registered scheme paid through an employer out of your net income, for example after tax and national insurance has been paid"

Reading the 2nd entry I think we do, am I right?

Dazed_and_C0nfused

happyhero said:

Apologies I have not been back here sooner, something got in the way for a few days but I'm here now and I'm very grateful to you all for the help. 

If its ok I'd like to ask one furher question, sort of related as you have said the employer contributions count. We usually contribute as large a sum as we can to the SIPP to boost my wifes pension and we have to mention this on our tax credits forms every year. This effectively has the benefit of reducing my wifes income in their calculations, ie if my wife earns £11k and we put 9k into the SIPP gross then they have instructed us to put down 2k as her income as there is no seperate box for it. We have done this for several years and they are happy with it, its their method anyway. This boosts our tax credits ie its an encouragement to put money into a private pension.

So if this is the case would her NT L&G pension contributions also needed to be added in the Tax Credits form, ie do we treat it like same as her SIPP contributions?

Here is the wording from the 2 entries on the Tax Credits guidance on the Gov.UK site under "What to take off your Gross pay" :-

"Any pension contributions made to a registered scheme not paid through an employer"

"Any pension contributions made to a registered scheme paid through an employer out of your net income, for example after tax and national insurance has been paid"

Reading the 2nd entry I think we do, am I right?

You need to establish the method used.

If it's relief at source, where the pension company adds 25% to her contributions then yes they can be included for tax credits.

But if it's "net pay" they can't be included.  That's because her P60 would already reflect the reduced taxable income.

happyhero

Dazed_and_C0nfused said:

happyhero said:

Apologies I have not been back here sooner, something got in the way for a few days but I'm here now and I'm very grateful to you all for the help. 

If its ok I'd like to ask one furher question, sort of related as you have said the employer contributions count. We usually contribute as large a sum as we can to the SIPP to boost my wifes pension and we have to mention this on our tax credits forms every year. This effectively has the benefit of reducing my wifes income in their calculations, ie if my wife earns £11k and we put 9k into the SIPP gross then they have instructed us to put down 2k as her income as there is no seperate box for it. We have done this for several years and they are happy with it, its their method anyway. This boosts our tax credits ie its an encouragement to put money into a private pension.

So if this is the case would her NT L&G pension contributions also needed to be added in the Tax Credits form, ie do we treat it like same as her SIPP contributions?

Here is the wording from the 2 entries on the Tax Credits guidance on the Gov.UK site under "What to take off your Gross pay" :-

"Any pension contributions made to a registered scheme not paid through an employer"

"Any pension contributions made to a registered scheme paid through an employer out of your net income, for example after tax and national insurance has been paid"

Reading the 2nd entry I think we do, am I right?

You need to establish the method used.

If it's relief at source, where the pension company adds 25% to her contributions then yes they can be included for tax credits.

But if it's "net pay" they can't be included.  That's because her P60 would already reflect the reduced taxable income.

Thank you for your help but I am struggling how to read this and the more I read online the more I seem to confuse myself so how can I tell on my wifes payslip which method she is doing, can you guide me to the answer please, sorry if I'm being a bit thick here?

Dazed_and_C0nfused

happyhero said:

Dazed_and_C0nfused said:

happyhero said:

Apologies I have not been back here sooner, something got in the way for a few days but I'm here now and I'm very grateful to you all for the help. 

If its ok I'd like to ask one furher question, sort of related as you have said the employer contributions count. We usually contribute as large a sum as we can to the SIPP to boost my wifes pension and we have to mention this on our tax credits forms every year. This effectively has the benefit of reducing my wifes income in their calculations, ie if my wife earns £11k and we put 9k into the SIPP gross then they have instructed us to put down 2k as her income as there is no seperate box for it. We have done this for several years and they are happy with it, its their method anyway. This boosts our tax credits ie its an encouragement to put money into a private pension.

So if this is the case would her NT L&G pension contributions also needed to be added in the Tax Credits form, ie do we treat it like same as her SIPP contributions?

Here is the wording from the 2 entries on the Tax Credits guidance on the Gov.UK site under "What to take off your Gross pay" :-

"Any pension contributions made to a registered scheme not paid through an employer"

"Any pension contributions made to a registered scheme paid through an employer out of your net income, for example after tax and national insurance has been paid"

Reading the 2nd entry I think we do, am I right?

You need to establish the method used.

If it's relief at source, where the pension company adds 25% to her contributions then yes they can be included for tax credits.

But if it's "net pay" they can't be included.  That's because her P60 would already reflect the reduced taxable income.

Thank you for your help but I am struggling how to read this and the more I read online the more I seem to confuse myself so how can I tell on my wifes payslip which method she is doing, can you guide me to the answer please, sorry if I'm being a bit thick here?

Net pay would show up as a difference between "salary" and taxable pay.

For example monthly salary of £1,000 with 10% net pay contribution would mean her taxable pay was only £900.  And £100 would be added to her pension with no tax relief being added.

If it was relief at source her taxable pay would be £1,000, not £900, but when the £100 was added to her pension the pension company would add £25 in tax relief giving her a pension fund of £125.