Pension adding more than £2880 non earner

masonic

zagfles said:

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

https://www.ii.co.uk/ii-accounts/sipp/making-contributions

It's from the FAQ section at the bottom.

zagfles

masonic said:

zagfles said:

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

https://www.ii.co.uk/ii-accounts/sipp/making-contributions

It's from the FAQ section at the bottom.

The FAQs wording is a bit rubbish, but the AA tab is simply irrelevant for the OP's case, so no need to even look at it. The tax relief limit (ie 100% of earnings/£3600) is not part of and has nothing to do with the AA. Although as with a lot of sites the II FAQs confuse them. 

masonic

zagfles said:

masonic said:

zagfles said:

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

https://www.ii.co.uk/ii-accounts/sipp/making-contributions

It's from the FAQ section at the bottom.

The FAQs wording is a bit rubbish, but the AA tab is simply irrelevant for the OP's case, so no need to even look at it. The tax relief limit (ie 100% of earnings/£3600) is not part of and has nothing to do with the AA. Although as with a lot of sites the II FAQs confuse them. 

So the answer is that you are not allowed to contribute more than than your earnings (or £3,600) into a pension account, even without tax relief (carry forward etc notwithstanding)? ...but you are allowed to exceed AA without tax relief if you earn enough?

zagfles

masonic said:

zagfles said:

masonic said:

zagfles said:

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

https://www.ii.co.uk/ii-accounts/sipp/making-contributions

It's from the FAQ section at the bottom.

The FAQs wording is a bit rubbish, but the AA tab is simply irrelevant for the OP's case, so no need to even look at it. The tax relief limit (ie 100% of earnings/£3600) is not part of and has nothing to do with the AA. Although as with a lot of sites the II FAQs confuse them. 

So the answer is that you are not allowed to contribute more than than your earnings (or £3,600) into a pension account, even without tax relief (carry forward etc notwithstanding)?

Legally you're allowed to contribute as much as you want, but there's a limit on tax relief. However most providers, including II by the looks of it, don't allow non-relievable contributions. 

For large amounts there's also the annual allowance to consider. But not applicable to this OP. 

MK62

When you make a one-off contribution on the II platform, they ask whether the contribution is Net (so attracts tax relief) or Gross (which doesn't)........which would seem to indicate that they will accept non-relievable contributions.

RedImp_2

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. 

You wouldn’t incur a tax charge would you? Just not getting tax relief 

Grumpy_chap

Albermarle said:

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. 

You are allowed to exceed the contributions limit for which tax relief is available.

When that happens, HMRC do not require you to contact the pension advisor for a return of the excess contribution.  AIUI, the pension advisor would not be able to make such a return.

What happened when my wife (currently not working) made an admin error so exceeded the £2,880 (£3.6k) contribution last tax year (2023 - 24) is that she had to declare that via her tax return and make a payment of additional tax in that year's assessment.  The money in the pension including the excess tax relief added stayed in the pension.
I would expect that HMRC have a simplified declaration for the case where the relievable contribution is exceeded but tax return is not otherwise required.

LHW99

I'm not sure if the OP has said how old, but if under 40, how does a LISA fit with benefits, as it isn't accessible till 60?

zagfles

Grumpy_chap said:

Albermarle said:

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. 

You are allowed to exceed the contributions limit for which tax relief is available.

When that happens, HMRC do not require you to contact the pension advisor for a return of the excess contribution.  AIUI, the pension advisor would not be able to make such a return.

What happened when my wife (currently not working) made an admin error so exceeded the £2,880 (£3.6k) contribution last tax year (2023 - 24) is that she had to declare that via her tax return and make a payment of additional tax in that year's assessment.  The money in the pension including the excess tax relief added stayed in the pension.
I would expect that HMRC have a simplified declaration for the case where the relievable contribution is exceeded but tax return is not otherwise required.

You can get a refund of excess contributions. See PTM045000 - Contributions: refunds of contributions - HMRC internal manual - GOV.UK

When you contribute to a RAS scheme eg a SIPP you make a declaration that any RAS Contributions are within the tax relief limits. See PTM044220 - Contributions: tax relief for members: methods: relief at source - HMRC internal manual - GOV.UK So if you break that declaration you need to tell the provider. 

How did she declare it on her tax return? If she used the pension savings tax charges section and declared she exceeded the annual allowance, this is totally wrong. She didn't exceed the annual allowance. She exceeded the tax relief limit. AIUI there isn't a way to undo excess tax relief via the tax return. 

Eco_Miser

LHW99 said:

I'm not sure if the OP has said how old, but if under 40, how does a LISA fit with benefits, as it isn't accessible till 60?

But it is accessible, at any time,  but with a penalty before 60.