Pension adding more than £2880 non earner

Liononthehill

Hi I am trying to find a SIPP that will allow me to pay more than £2880 in annually and pay a tax charge.I can’t use an ISA due to UC savings limits. This is the only way I can save for my retirement. Thanks 

masonic

SIPP providers will invariably claim tax relief automatically on contributions. They may not be able to accept a contribution without doing this. Interactive Investor has this to say in their FAQ:

Suggests you could complete a tax return to avoid retaining tax relief you aren't entitled to. I've not known any SIPP provider ask for evidence of income. They'll accept what contributions you make up to the annual allowance.

But without earnings, and with very limited savings, where would the money come from? Can't imagine UC leaves much after the essentials.

Liononthehill

My husband works my so my income is not just UC. I can afford to pay in my weekly carers allowance of £81.90 a week. If I wasn’t a carer I would be able to work and have a pension that way so this makes sense for me.

Liononthehill

I read that thanks just not sure if that only applies if you work and pay more in than earnings.

masonic

I can't think why having zero earnings would be treated any differently than having any other amount of earnings that is lower than your contributions.

If in doubt, check with HMRC.

Would be more tax efficient for husband to make extra contributions, but I can understand why that might not be ideal as it would leave you dependent on his pension.

TheSpectator

Not sure why anyone in OP's situation would want to pay more than £2880 and pay the tax charge on the excess - kind of defeats the purpose losing money.

Investing the excess in a S&S ISA similar fund would be more sensible.

masonic

TheSpectator said:

Not sure why anyone in OP's situation would want to pay more than £2880 and pay the tax charge on the excess - kind of defeats the purpose losing money.

Investing the excess in a S&S ISA similar fund would be more sensible.

As stated, using an ISA or any other option where the money is accessible would result in loss of benefits.

TheSpectator

masonic said:

TheSpectator said:

Not sure why anyone in OP's situation would want to pay more than £2880 and pay the tax charge on the excess - kind of defeats the purpose losing money.

Investing the excess in a S&S ISA similar fund would be more sensible.

As stated, using an ISA or any other option where the money is accessible would result in loss of benefits.

Ah, missed that bit despite it being in OP....my bad.

Still not a good strategy to end up paying a tax charge by exceeding pension limit and pension company may return payments anyway.

Grumpy_chap

Liononthehill said:

My husband works my so my income is not just UC. I can afford to pay in my weekly carers allowance of £81.90 a week. If I wasn’t a carer I would be able to work and have a pension that way so this makes sense for me.

Do you receive means tested UC (joint claim with your husband), or is your only component Carers Allowance?  The latter is not means tested so I understand would not be affected if you have savings.  You may wish to double check on the benefits area of the forum.

Your pension contributions are limited to £2,880 as a non-earner (grossed up to £3.6k).

Albermarle

JamesRobinson48 said:

Grumpy_chap said:

Do you receive means tested UC (joint claim with your husband), or is your only component Carers Allowance?  The latter is not means tested so I understand would not be affected if you have savings.  You may wish to double check on the benefits area of the forum.

Your pension contributions are limited to £2,880 as a non-earner (grossed up to £3.6k).

I don't believe that's accurate. Text from HMRC:

Member contributions

There’s no limit on the amount that an individual can contribute to a registered pension scheme. If you’re a UK resident aged under 75 you may receive tax relief on your contributions to registered pension schemes.

Tax relief is limited to relief on contributions up to the higher of:

• 100% of your UK taxable earnings
• £3,600

https://www.gov.uk/government/publications/rates-and-allowances-pension-schemes/pension-schemes-rates


In line with the above, while tax relief is restricted that does not mean excess contributions are prohibited.

That said, I assume it would be uncommon for someone willingly to incur a tax charge on contributing money into a pension scheme, taking on board the risk that pension drawdowns in later life might also incur income tax. Before contemplating such a bold step, I think I would be sure first to consider maxing out on voluntary NI contributions in order to maximise my eventual State Pension. 

AIUI, if you inform HMRC that you have contributed more than your limit and received excess tax relief, then they say that you should contact your pension provider for a refund of the excess contributions. So in this case you would be back to square one. 

zagfles

masonic said:

SIPP providers will invariably claim tax relief automatically on contributions. They may not be able to accept a contribution without doing this. Interactive Investor has this to say in their FAQ:

Suggests you could complete a tax return to avoid retaining tax relief you aren't entitled to. I've not known any SIPP provider ask for evidence of income. They'll accept what contributions you make up to the annual allowance.

But without earnings, and with very limited savings, where would the money come from? Can't imagine UC leaves much after the essentials.

Have you got a link to the above because it's incredibly badly worded, it's mixing up the tax relief limit and the annual allowance. OP is nowhere near the annual allowance, they're only talking about putting in £4k or so! The AA is irrelavent