Pension Annual Allowance

Sarahspangles

evie2468 said:

Sarahspangles said:

There are two completely separate limits - your relevant UK earnings and your Annual Allowance of £60,000.

What is confusing you is assuming they are the same thing. You need to check your proposed contribution against both.

For the AA, the relevant figure for your DB pension is something called the Pension Input Amount and - plot twist - it’s not the amount you pay in. If you read up on that in the guidance provided by your own scheme, it may become clearer. The reason for mentioning it up front is that the lead time for getting your PIA figure may affect the timing of your contribution.

Carry forward of AA is possible, if you exceed the limit of £60,000. But there is no carry forward of relevant UK earnings, so that then becomes your limit.

Thanks.  You're correct they are 2 separate things, this I get. What I don't understand is that 2 people from govt pensions can tell me 2 different things. One: yes I can carry forward if I have put in 100% of my  annual allowance which is gross pay minus pension ( see my calc, I understand how db is calculated and is not just what I've paid in).  2 : No you can't because you haven't exceeded the annual allowance of 60000, 

I think it’s the advisors who are confused! You can carry forward unused Annual Allowance from prior years if you exceed the current year’s AA of £60k. But your available AA is not gross pay minus pension contribution. It is 60k less PIA and other contributions e.g. employer/SIPP contributions.

Unless you have relevant UK earnings in the current tax year to cover the amount you want to contribute the AA is not relevant. There is no carry forward of UK earnings not contributed.

evie2468

Albermarle said:

evie2468 said:

Sarahspangles said:

There are two completely separate limits - your relevant UK earnings and your Annual Allowance of £60,000.

What is confusing you is assuming they are the same thing. You need to check your proposed contribution against both.

For the AA, the relevant figure for your DB pension is something called the Pension Input Amount and - plot twist - it’s not the amount you pay in. If you read up on that in the guidance provided by your own scheme, it may become clearer. The reason for mentioning it up front is that the lead time for getting your PIA figure may affect the timing of your contribution.

Carry forward of AA is possible, if you exceed the limit of £60,000. But there is no carry forward of relevant UK earnings, so that then becomes your limit.

Thanks.  You're correct they are 2 separate things, this I get. What I don't understand is that 2 people from govt pensions can tell me 2 different things. One: yes I can carry forward if I have put in 100% of my  annual allowance which is gross pay minus pension ( see my calc, I understand how db is calculated and is not just what I've paid in).  2 : No you can't because you haven't exceeded the annual allowance of 60000, 

You are overestimating the quality and the training of the Govt advisors/HMRC call centre staff.
We also often  see posts where pension providers, ISA providers etc give incorrect/misleading advice as well.
Plus even Which magazine.

Oh dear.  I was hoping it would be yes you can carry forward,  but looks like no you can't.  😔

Secret2ndAccount

You can not carry forward tax relief. Your tax relief limit is this tax year's pay.
You can carry forward annual allowance, but you must first use up this year's 60k before you can start to dip into prior years. So if someone told you that AA can be carried forward (in general) that is correct.  If someone told you you can't use carry forward because you don't earn enough that is also likely correct.
As stated by Zagfles, it would be unusual, though not impossible, for someone earning 28k to be adding more than 60k to their pension.

evie2468

Secret2ndAccount . So if someone told you that AA can be carried forward (in general) that is correct.  If someone told you you can't use carry forward because you don't earn enough that is also likely correct.

Someone from govt helpline explained that I could carry forward from previous years if I put in 100% of my allowance.  This would be around 16,000.  Because I was putting in 100% of my allowance figure I could carry forward.  I did explain that this was not what I had been told by a different advisor but they insisted it was correct.  I also explained that I would not be over the 60000 limit, and my earnings were around 28000 but again was told I could carry forward.   So what I was told turns out to be incorrect.

hugheskevi

evie2468 said:

Secret2ndAccount . So if someone told you that AA can be carried forward (in general) that is correct.  If someone told you you can't use carry forward because you don't earn enough that is also likely correct.

Someone from govt helpline explained that I could carry forward from previous years if I put in 100% of my allowance.  This would be around 16,000.  Because I was putting in 100% of my allowance figure I could carry forward.  I did explain that this was not what I had been told by a different advisor but they insisted it was correct.  I also explained that I would not be over the 60000 limit, and my earnings were around 28000 but again was told I could carry forward.   So what I was told turns out to be incorrect.

People seem to place great faith in what they get told on a telephone call.

Considering large organisations, how much do you think a call centre operative is paid, what professional qualifications do you think they have (in both pensions and tax), and how much training do think a new recruit undetakes prior to answering calls? In short, how much more knowledgable do you think they are than the average person who has never even thought about a pension, let alone the finer points around pensions and tax relief? You would hope organisations have well designed training and escalation procedures in place to ensure all verbal questions are dealt with by a suitably knowledgable individual, but that would be a brave assumption.

Add to the above they will have no prior warning of the type of question coming their way or any chance to consider it, and in any verbal exchange there is an increased risk of misunderstanding, ambiguity, lack of all relevant details, etc.

I would not have a telephone conversation with any pension administrator or HMRC except about the most mundane matters, eg, changing address. For anything remotely technical I would be using written communication (which may well be electronic). These organisations employ people able to answer these questions correctly, but you are unlikely to find many skilled pension technicians answering the phones in a large organisation.

Secret2ndAccount

I still think you are mixing two things up. You don't have your own personal annual allowance number. The Annual allowance is 60k + carry forward. This applies to almost everyone, and it doesn't matter how much you earn**
You can only get tax relief up to the amount you earn. That's not called your annual allowance. That's called your limit for tax relief.
The calculations in your first post are wrong. You don't have a 'MY' annual allowance. Your AA is 60k. You can use carry forward if you want to. It would be unwise to do so.
If you really, really want to pile money into your pension, you are allowed to. So you could pay in say 100k, probably more, using 60k + whatever you didn't use last year and the two years before. However you would receive no tax relief beyond 28k, and would be likely to have to pay some tax when you take the money out. So there are very few reasons why anyone would want to do this. But it is permitted technically.

** people who are already taking their pension (technically those who have 'flexibly accessed' a DC) have a reduced AA of 10k with no carry forward;
** If you earn north of about 260k in one year, then your annual allowance is gradually tapered away. That's the only case where your salary does affect your AA.

Dazed_and_C0nfused

Secret2ndAccount said:

I still think you are mixing two things up. You don't have your own personal annual allowance number. The Annual allowance is 60k + carry forward. This applies to almost everyone, and it doesn't matter how much you earn**
You can only get tax relief up to the amount you earn. That's not called your annual allowance. That's called your limit for tax relief.
The calculations in your first post are wrong. You don't have a 'MY' annual allowance. Your AA is 60k. You can use carry forward if you want to. It would be unwise to do so.
If you really, really want to pile money into your pension, you are allowed to. So you could pay in say 100k, probably more, using 60k + whatever you didn't use last year and the two years before. However you would receive no tax relief beyond 28k, and would be likely to have to pay some tax when you take the money out. So there are very few reasons why anyone would want to do this. But it is permitted technically.

** people who are already taking their pension (technically those who have 'flexibly accessed' a DC) have a reduced AA of 10k with no carry forward;
** If you earn north of about 260k in one year, then your annual allowance is gradually tapered away. That's the only case where your salary does affect your AA.

But finding a provider who would accept a personal contribution that isn't eligible for tax relief might not be easy, even if for some odd reason you thought it was the right thing to do.

Secret2ndAccount

Hargreaves Lansdown and Interactive Investor will accept non-relievable contributions. There is a tick-box during the contribution process.

evie2468

Secret2ndAccount said:

I still think you are mixing two things up. You don't have your own personal annual allowance number. The Annual allowance is 60k + carry forward. This applies to almost everyone, and it doesn't matter how much you earn**
You can only get tax relief up to the amount you earn. That's not called your annual allowance. That's called your limit for tax relief.
The calculations in your first post are wrong. You don't have a 'MY' annual allowance. Your AA is 60k. You can use carry forward if you want to. It would be unwise to do so.
If you really, really want to pile money into your pension, you are allowed to. So you could pay in say 100k, probably more, using 60k + whatever you didn't use last year and the two years before. However you would receive no tax relief beyond 28k, and would be likely to have to pay some tax when you take the money out. So there are very few reasons why anyone would want to do this. But it is permitted technically.

** people who are already taking their pension (technically those who have 'flexibly accessed' a DC) have a reduced AA of 10k with no carry forward;
** If you earn north of about 260k in one year, then your annual allowance is gradually tapered away. That's the only case where your salary does affect your AA.

No, I understand both. I've just most definitely been told 2 completely different things. Armed with the knowledge I have I've been able to question and clarify what the advisor had said and then repeat my understanding so it is confirmed. I understand what had been said. And I understand what my limit of the allowance would be. And I understand the limit, which I will not reach.  The confusion arises over the rules on carry forward; this is where I've been told different things. One obviously incorrect information.  I

Secret2ndAccount

Okay, let me try this a different way. You have asked one question and I will answer it.

evie2468 said:

1)       As I have not earned enough to pay the full £60,000 annual allowance into a sipp I cannot carry forward.

OR

2)      I have used 100% of MY annual allowance and so I can carry forward unused annual allowance amounts from 3 previous years.

Who is correct?  Thanks in advance.

1) This is a good one line summary of how most people would see things. However, if analysed to a pedantic level of detail, it's not correct (see my post above).  
2) Your annual allowance for this year is 60k, and you haven't used it all, so this statement is incorrect.

We are still left guessing as to what it is you would like to achieve, so I'm going to take a guess. I'm guessing you would like to pay a large amount into your pension, and get a large amount tax relief. If this is the case, the only thing you need to know is that you can only get tax relief to the extent of your earnings this tax year. At your salary level, AA and carry forward (and your PIA) are unlikely to be of any concern to you.