Should I contribute more to my SIPP?

Dazed_and_C0nfused

Albermarle said:

You can not take the interest into account.
So it is £53,700 minus £6000 ( assuming payments are made before tax) = £47,700 X 0.8 = £38,160 you can add to your SIPP. 

I remain to be convinced the £6,000 is relevant here (for tax relief purposes).

I think the op probably has a salary of ~£60k and pays £6,000 in contributions to a defined benefit scheme (TPS).  Leaving him with taxable earnings of £53,700.  So wouldn't the maximum personal contribution in theory be £42,960, which would be grossed up to £53,700.

However such a large contrition could then mean considerations would need to be given to the annual allowance as the PIA for the DB scheme could be enough for the £60k to be breached.

QrizB

Albermarle said:

So it is £53,700 minus £6000 ( assuming payments are made before tax) = £47,700 X 0.8 = £38,160 you can add to your SIPP. 

Is the £6000 even relevant? With a DB scheme like TPS, isn't it the Pension Input Amount that's the important number? Or have I got that wrong?

Dazed_and_C0nfused

RobfromCornwall said:

I am grateful for everyone's comments and suggestions.  I apologise that some information was missing.

The assumption that I am 37 is correct.  I inherited a significant sum of money in 2022.  I have held it in cash with the aim of moving house, but a couple of sales have fallen through so I have more cash than I planned for longer.  I aim to try again within 12-18 months, but for reasons beyond my control, it might make sense to wait a little.  In addition to what I inherited, I have always been excellent at saving, adding approx 2k a month in addition to interest earned.  

I live in England.  

I have double checked my figures, and predicted (with some accuracy, I think) where I will be at the end of the financial year if I don't do anything.

Taxable Gross Pay: £53,700
Interest (outside of ISAs): £22,700
SIPP Contributions (gross): £15,500
Employee Pension contributions: £6000

My understanding is that this puts my total earnings (after SIPP contributions) at just shy of £61,000, so an additional gross SIPP contribution of £10,000 would be sensible.

I am a teacher, have been in the TPS for nearly 15 years and envisage I will continue to be so until retirement.  I believe I am on track to receive >£40,000 pa from this from the age of 68.  The SIPP might allow me to retire a little earlier and bridge the gap.

When (hopefully when not if) I move house I will reassess cash savings, but I think it's wise to keep money in cash for a little longer so I can move mortgage-free.  Although I accept there is an argument in favour of foregoing this and pursuing a mortgage, and the suggestion of seeking advice from an IFA is something I haven't discounted.  

No spouse and no dependents (and happy to keep it that way).

If, with this additional information, anyone has any other comments or pointers I would be very grateful.  

Contributions to a SIPP have no impact at all on either your "earnings" or your taxable income.

You will still have taxable income of £76,400.

But with relief at source contributions of £15,500 you have an increased basic rate band of £53,200 so a touch over £10k of the interest would be taxed at 40%.

You have sufficient earnings to allow an additional SIPP contribution of ~£10k and in all likelihood the annual allowance limit won't be an issue either.

Ultimately you could well end up ~£25k in your SIPP for a net outlay of ~£15k. In your particular case the higher rate relief is likely to be realised by a smaller Self Assessment bill rather than an actual refund.

zagfles

QrizB said:

Albermarle said:

So it is £53,700 minus £6000 ( assuming payments are made before tax) = £47,700 X 0.8 = £38,160 you can add to your SIPP. 

Is the £600 even relevant? With a DB scheme like TPS, isn't it the Pension Input Amount that's the important number? Or have I got that wrong?

As mentioned practically every week here, the PIA is relevant for the annual allowance, but only employee conts for the tax relief limit. 

Dazed_and_C0nfused

zagfles said:

QrizB said:

Albermarle said:

So it is £53,700 minus £6000 ( assuming payments are made before tax) = £47,700 X 0.8 = £38,160 you can add to your SIPP. 

Is the £600 even relevant? With a DB scheme like TPS, isn't it the Pension Input Amount that's the important number? Or have I got that wrong?

As mentioned practically every week here, the PIA is relevant for the annual allowance, but only employee conts for the tax relief limit. 

I think the point being made is why has @Albermarle reduced the possible SIPP contribution by £6,000 when that £6,000 appears to be a net pay contribution to a DB scheme?

And has therefore already been taken into account in arriving at the £53,700 taxable earnings figure.

zagfles

Dazed_and_C0nfused said:

zagfles said:

QrizB said:

Albermarle said:

So it is £53,700 minus £6000 ( assuming payments are made before tax) = £47,700 X 0.8 = £38,160 you can add to your SIPP. 

Is the £600 even relevant? With a DB scheme like TPS, isn't it the Pension Input Amount that's the important number? Or have I got that wrong?

As mentioned practically every week here, the PIA is relevant for the annual allowance, but only employee conts for the tax relief limit. 

I think the point being made is why has @Albermarle reduced the possible SIPP contribution by £6,000 when that £6,000 appears to be a net pay contribution to a DB scheme?

And has therefore already been taken into account in arriving at the £53,700 taxable earnings figure.

That was your point and yes it's probably right, OP can confirm. But the PP was going on about the PIA as being the "important number". It is for the AA, but has no relevance whatsoever to the tax relief limit. In any case all a bit moot as OP isn't after maxing pension conts but just putting an extra £10k or so in.