Maximum SIPP Contributions

Stegor

Hi,
My wife currently has an LGPS pension which she pays 5.5% in to, she also has a SIPP which she currently pays £200 a month in to. She earns around 10k a year so below the income tax threshold. My question is what is the maximum amount she could pay in to her SIPP? I understand if she wasn't working at all it would be £2880 in total each year but not sure where she stands as she is earning but not paying tax. Also we're not sure how we value the payment by her employer in to the LGPS pension as they don't actually pay in, the value of her pension at 65 is adjusted each year. 
Thanks for taking the time to read.

NoMore

The maximum she can contribute to a SIPP is her gross earnings, so if she earns 10k, then she can pay 8k in and the SIPP will claim basic tax relief to bring it up to 10k. Yes she gets tax relief despite not paying tax on that money, its still relevant taxable income.

Separately, she can only pay in max 60k (Annual Allowance) from all sources. For the LGPS, you would have to ask for the Pension Input Amount (PIA) to figure out how much of the AA it uses, but as she only earns 10k and the AA is 60k, I doubt very much this will have a bearing on your contribution plans as its unlikely you will be anywhere near 60k.

Albermarle

The maximum she can contribute to a SIPP is her gross earnings, so if she earns 10k, then she can pay 8k in and the SIPP will claim basic tax relief to bring it up to 10k. Yes she gets tax relief despite not paying tax on that money, its still relevant taxable income.

Would not she also have to take into account that she has already paid some contribution into her LGPS pension? In which case she could not contribute the full £8K to her Sipp, but a bit less?

NoMore

Albermarle said:

The maximum she can contribute to a SIPP is her gross earnings, so if she earns 10k, then she can pay 8k in and the SIPP will claim basic tax relief to bring it up to 10k. Yes she gets tax relief despite not paying tax on that money, its still relevant taxable income.

Would not she also have to take into account that she has already paid some contribution into her LGPS pension? In which case she could not contribute the full £8K to her Sipp, but a bit less?

Depends how the contributions have been made, Salary Sacrifice for example would already have reduced their gross earnings. If they were relief at source contributions then yes they would have to count those.

ColdIron

And with a net pay arrangement which I believe is common for those in local government

zagfles

Whether net pay or sal sac the answer is to use taxable income, rather than gross income, that'll give the correct answer in both cases. So eg gross pay £10k, taxable pay after LGPS conts £9450, £9450 is max SIPP cont to get tax relief. That's the gross amount, the amount to actually pay in is 80% of this ie £7560 in this case and the SIPP will claim the 20% tax relief. 

If she gets any tax reliefs eg for uniforms, professional subs, WAH etc, these probably need to deducted from taxable pay. 

Stegor

Thanks for the replies, we can now look at paying more into her SIPP going forward, thanks again