help with pension contributions - be gentle

Dazed_and_C0nfused

jimboger1 said:

Marcon said:

jimboger1 said:

Marcon said:

jimboger1 said:

only looking for some help - please be gentle as I am pretty clueless about these things

I having been piling money into my pension for the last few years including big bonuses and I THINK I'm still within my allowance but not sure  - see below - this includes employer contributions and tax relief

• 2024 - 2025 - £74,280
• 2023 - 2024 - £95,073
• 2022 - 2023 - £8,753
• 2021 - 2022 - £74,045
• 2020 - 2021 - £7,589
• 2019 - 2020 - £9,406
• 2018 - 2019 - £6,963
• 2017 - 2018 - £6,679
• 2016 - 2017 - £5,829
• 2015 - 2016 - £3,400

according to an online calculator, I have £17,200 allowance that I can still use for 24/24
so I have a couple of questions - 

1. is this figure correct
2.  I intend to retire in December 2025, and for 2025/2026, I intend to put in £4k per month from April '25 to December '25 (£36K), then around £55k bonus also in December '25 - CAN I DO THIS? 
   
3. I know the above will be over the limit, but can I use the 26/27 allowance when I'm not working ?
4. if I can't do (2) / (3) above, what would be the best approach

many thanks

Jim

To use 'carry forward', you need to be earning enough in the tax year you make the contributions to cover ALL the contributions you make that year. What were you earning in (say) 23/24 - hopefully at least £95,073? 

1. Need to know your salary for the current tax year
2. Not unless you have both the taxable earnings and the 'carry forward' to do so - and it seems unlikely from the very little info you've given
3. You can pay in £2,880 and it will be topped up to £3,600 - otherwise no tax relief available if you have no earnings in 26/27
4. Contribute as much as you can while you're earning

1. current salary is £80k with a 60k bonus at December '24
2. what other info do you need?
3. where do you get these numbers?
4 I intend to but worried what happens if I go over the allowance?

Jim

1. So absolute max of £140K contribution  in 24/25 including tax relief on personal contributions/any employer contributions
2. Salary history for the previous 3 tax years
3. That's the legislative position
4. You pay tax on the amount by which you exceed the allowance.

1. I thought max was £60k per year

I thought you knew some people can make use of unused annual allowance carried forward from a previous year(s)?

zagfles

Sarahspangles said:

jimboger1 said:

hi Sarah, I can post links as I'm new to the forum - I just googled pension carry forward calculator, and used the first couple I found and they all gave me the same figure 

I put it into the spreadsheet I used for my own checks. I get the remaining AA available to carry forward from 2022/23, which you could still use this year, to a further £14,305. It’s not far out but maybe someone else will check. You need to take full advantage of whatever it is, as you’ve used up all the Annual Allowance for the three years prior to 2025/26 so will be restricted to £60k.

You definitely can’t use carry back from 2026/27 to cover a breach in 2025/26.

That agrees with the HL calculator Unused Pension Carry Forward & Annual Allowance Calculator | HL

My manual calc also agrees:

2021/22 is the first year that required carry forwards, and the figures show there's easily enough c/f available from 18/19 and 19/20, so 20/21 is not needed and therefore still available for future years. 

2023/24 is next year that requires c/f and needs 35073 of which 32411 can come form 20/21, and 2662 from 22/23. 

This leaves 28585 from 22/23 still available for 24/25 and/or 25/26. 14280 already used this tax year, so 14305 still available either for further conts this tax year or could be used next tax year. 

Sarahspangles

zagfles said:

Sarahspangles said:

jimboger1 said:

hi Sarah, I can post links as I'm new to the forum - I just googled pension carry forward calculator, and used the first couple I found and they all gave me the same figure 

I put it into the spreadsheet I used for my own checks. I get the remaining AA available to carry forward from 2022/23, which you could still use this year, to a further £14,305. It’s not far out but maybe someone else will check. You need to take full advantage of whatever it is, as you’ve used up all the Annual Allowance for the three years prior to 2025/26 so will be restricted to £60k.

You definitely can’t use carry back from 2026/27 to cover a breach in 2025/26.

That agrees with the HL calculator Unused Pension Carry Forward & Annual Allowance Calculator | HL

My manual calc also agrees:

2021/22 is the first year that required carry forwards, and the figures show there's easily enough c/f available from 18/19 and 19/20, so 20/21 is not needed and therefore still available for future years. 

2023/24 is next year that requires c/f and needs 35073 of which 32411 can come form 20/21, and 2662 from 22/23. 

This leaves 28585 from 22/23 still available for 24/25 and/or 25/26. 14280 already used this tax year, so 14305 still available either for further conts this tax year or could be used next tax year. 

Thanks! I am genuinely chuffed my maths was right.

@jimboger1 Maxing out your pension contributions for tax relief is fine but you also need a plan to get the money out again, ideally without unnecessarily paying higher rate tax. From our experience, as a couple receiving pension lump sums and inheritance, you then need a plan so you don’t unnecessarily pay tax on savings interest/dividends etc. Your ISA allowance it’s valuable here, that’s another one where you use it or lose it each year.

The other rookie mistake I spot some high earners make is not considering their partner’s position if they are in a couple. It’s too late when someone is paying higher rate tax to realise their wife has several years of £12,570 personal allowance going to waste.

zagfles

Marcon said:

jimboger1 said:

Marcon said:

jimboger1 said:

only looking for some help - please be gentle as I am pretty clueless about these things

I having been piling money into my pension for the last few years including big bonuses and I THINK I'm still within my allowance but not sure  - see below - this includes employer contributions and tax relief

• 2024 - 2025 - £74,280
• 2023 - 2024 - £95,073
• 2022 - 2023 - £8,753
• 2021 - 2022 - £74,045
• 2020 - 2021 - £7,589
• 2019 - 2020 - £9,406
• 2018 - 2019 - £6,963
• 2017 - 2018 - £6,679
• 2016 - 2017 - £5,829
• 2015 - 2016 - £3,400

according to an online calculator, I have £17,200 allowance that I can still use for 24/24
so I have a couple of questions - 

1. is this figure correct
2.  I intend to retire in December 2025, and for 2025/2026, I intend to put in £4k per month from April '25 to December '25 (£36K), then around £55k bonus also in December '25 - CAN I DO THIS? 
   
3. I know the above will be over the limit, but can I use the 26/27 allowance when I'm not working ?
4. if I can't do (2) / (3) above, what would be the best approach

many thanks

Jim

To use 'carry forward', you need to be earning enough in the tax year you make the contributions to cover ALL the contributions you make that year. What were you earning in (say) 23/24 - hopefully at least £95,073? 

1. Need to know your salary for the current tax year
2. Not unless you have both the taxable earnings and the 'carry forward' to do so - and it seems unlikely from the very little info you've given
3. You can pay in £2,880 and it will be topped up to £3,600 - otherwise no tax relief available if you have no earnings in 26/27
4. Contribute as much as you can while you're earning

1. current salary is £80k with a 60k bonus at December '24
2. what other info do you need?
3. where do you get these numbers?
4 I intend to but worried what happens if I go over the allowance?

Jim

1. So absolute max of £140K contribution  in 24/25 including tax relief on personal contributions/any employer contributions
2. Salary history for the previous 3 tax years
3. That's the legislative position
4. You pay tax on the amount by which you exceed the allowance.

1. The tax relief limit DOES NOT include employer conts. 
2. The only requirement for salary history in previous years was if the AA taper applies - threshold income over £200k, see Tapered annual allowance - How does it work? - HL 
4. It depends whether you exceed the AA or tax relief limit. They are dealt with differently

OP - as usual on these sorts of threads people confuse two completely separate limits, the annual allowance which your post concerns, and the tax relief limit. They are entirely separate concepts. The tax relief limit limits the amount of tax relief you can get on your contributions (not employers), for instance if your taxable earnings were £30k you can only get tax relief on £30k gross into a SIPP etc. If your taxable earnings were 0 you can only get tax relief on £3600 gross.

This is NOTHING TO DO with the AA, it's a limit on tax relief, so concepts like carry forwards, which are features of the AA, are not relevant. So for instance if you retire and earn nothing, then you are limited to tax relief on £3600 gross (ie £2880 net into a SIPP), regardless of how much carry forwards you have available. 

Marcon

jimboger1 said:

Marcon said:

jimboger1 said:

Marcon said:

jimboger1 said:

only looking for some help - please be gentle as I am pretty clueless about these things

I having been piling money into my pension for the last few years including big bonuses and I THINK I'm still within my allowance but not sure  - see below - this includes employer contributions and tax relief

• 2024 - 2025 - £74,280
• 2023 - 2024 - £95,073
• 2022 - 2023 - £8,753
• 2021 - 2022 - £74,045
• 2020 - 2021 - £7,589
• 2019 - 2020 - £9,406
• 2018 - 2019 - £6,963
• 2017 - 2018 - £6,679
• 2016 - 2017 - £5,829
• 2015 - 2016 - £3,400

according to an online calculator, I have £17,200 allowance that I can still use for 24/24
so I have a couple of questions - 

1. is this figure correct
2.  I intend to retire in December 2025, and for 2025/2026, I intend to put in £4k per month from April '25 to December '25 (£36K), then around £55k bonus also in December '25 - CAN I DO THIS? 
   
3. I know the above will be over the limit, but can I use the 26/27 allowance when I'm not working ?
4. if I can't do (2) / (3) above, what would be the best approach

many thanks

Jim

To use 'carry forward', you need to be earning enough in the tax year you make the contributions to cover ALL the contributions you make that year. What were you earning in (say) 23/24 - hopefully at least £95,073? 

1. Need to know your salary for the current tax year
2. Not unless you have both the taxable earnings and the 'carry forward' to do so - and it seems unlikely from the very little info you've given
3. You can pay in £2,880 and it will be topped up to £3,600 - otherwise no tax relief available if you have no earnings in 26/27
4. Contribute as much as you can while you're earning

1. current salary is £80k with a 60k bonus at December '24
2. what other info do you need?
3. where do you get these numbers?
4 I intend to but worried what happens if I go over the allowance?

Jim

1. So absolute max of £140K contribution  in 24/25 including tax relief on personal contributions/any employer contributions
2. Salary history for the previous 3 tax years
3. That's the legislative position
4. You pay tax on the amount by which you exceed the allowance.

1. I thought max was £60k per year

You've been happily paying in more than that, presumably using carry forward (hopefully with the earnings in the tax year of contribution to support what you've done).

DRS1

Marcon said:

jimboger1 said:

Marcon said:

jimboger1 said:

Marcon said:

jimboger1 said:

only looking for some help - please be gentle as I am pretty clueless about these things

I having been piling money into my pension for the last few years including big bonuses and I THINK I'm still within my allowance but not sure  - see below - this includes employer contributions and tax relief

• 2024 - 2025 - £74,280
• 2023 - 2024 - £95,073
• 2022 - 2023 - £8,753
• 2021 - 2022 - £74,045
• 2020 - 2021 - £7,589
• 2019 - 2020 - £9,406
• 2018 - 2019 - £6,963
• 2017 - 2018 - £6,679
• 2016 - 2017 - £5,829
• 2015 - 2016 - £3,400

according to an online calculator, I have £17,200 allowance that I can still use for 24/24
so I have a couple of questions - 

1. is this figure correct
2.  I intend to retire in December 2025, and for 2025/2026, I intend to put in £4k per month from April '25 to December '25 (£36K), then around £55k bonus also in December '25 - CAN I DO THIS? 
   
3. I know the above will be over the limit, but can I use the 26/27 allowance when I'm not working ?
4. if I can't do (2) / (3) above, what would be the best approach

many thanks

Jim

To use 'carry forward', you need to be earning enough in the tax year you make the contributions to cover ALL the contributions you make that year. What were you earning in (say) 23/24 - hopefully at least £95,073? 

1. Need to know your salary for the current tax year
2. Not unless you have both the taxable earnings and the 'carry forward' to do so - and it seems unlikely from the very little info you've given
3. You can pay in £2,880 and it will be topped up to £3,600 - otherwise no tax relief available if you have no earnings in 26/27
4. Contribute as much as you can while you're earning

1. current salary is £80k with a 60k bonus at December '24
2. what other info do you need?
3. where do you get these numbers?
4 I intend to but worried what happens if I go over the allowance?

Jim

1. So absolute max of £140K contribution  in 24/25 including tax relief on personal contributions/any employer contributions
2. Salary history for the previous 3 tax years
3. That's the legislative position
4. You pay tax on the amount by which you exceed the allowance.

1. I thought max was £60k per year

You've been happily paying in more than that, presumably using carry forward (hopefully with the earnings in the tax year of contribution to support what you've done).

I think maybe he is thinking the Annual Allowance has always been £60k.  OP it was  £40k for tax years 2016/7 to 2022/3.  It only went up to £60k for 2023/4 and later

Grumpy_chap

Sarahspangles said:

The other rookie mistake I spot some high earners make is not considering their partner’s position if they are in a couple. It’s too late when someone is paying higher rate tax to realise their wife has several years of £12,570 personal allowance going to waste.

Except it is difficult to get pension contributions in for the lower earning spouse to ensure they have sufficient funds to draw down and use up that personal allowance in full.

Unless you know a way?

Hope this is not drawing the thread too far off topic.

QrizB

Grumpy_chap said:

Sarahspangles said:
The other rookie mistake I spot some high earners make is not considering their partner’s position if they are in a couple. It’s too late when someone is paying higher rate tax to realise their wife has several years of £12,570 personal allowance going to waste.

Except it is difficult to get pension contributions in for the lower earning spouse to ensure they have sufficient funds to draw down and use up that personal allowance in full.
Unless you know a way?

It's a bigger problem if the spouse is unwaged, but someone over 21 on half-time at minimum wage would be earning (20x11.44x52) almost £12k a year, so paying 100% of relevant earnings into a pension would still build up to a decent sum.

zagfles

Grumpy_chap said:

Sarahspangles said:

The other rookie mistake I spot some high earners make is not considering their partner’s position if they are in a couple. It’s too late when someone is paying higher rate tax to realise their wife has several years of £12,570 personal allowance going to waste.

Except it is difficult to get pension contributions in for the lower earning spouse to ensure they have sufficient funds to draw down and use up that personal allowance in full.

Unless you know a way?

Hope this is not drawing the thread too far off topic.

It depends how early you start and how much they earn. If eg they're on min wage full time ie around £25k you can get about two years' PA in every year. Or 1.5x after the PCLS. 

Sarahspangles

Grumpy_chap said:

Sarahspangles said:

The other rookie mistake I spot some high earners make is not considering their partner’s position if they are in a couple. It’s too late when someone is paying higher rate tax to realise their wife has several years of £12,570 personal allowance going to waste.

Except it is difficult to get pension contributions in for the lower earning spouse to ensure they have sufficient funds to draw down and use up that personal allowance in full.

Unless you know a way?

Hope this is not drawing the thread too far off topic.

It just needs to be more of a consideration in decisions. I can see why people don’t consider pension contributions a high priority when women (usually) take a career break for child rearing, as it’s a point when finances are squeezed. But I know women who have gone part time in their later years on the basis that’s now affordable if they stop contributing. So they miss out on employer contributions and don’t accrue enough pension to use their own allowance, and meanwhile their other half is paying more into their pension and may even pay higher rate tax on that in retirement.

Women also leave the workplace to provide elderly care, at which point they get NI credits. But if they are then bereaved, those end. Families rarely seem to see that as a shared issue, it’s not necessarily possible to take off (say) the years in which you’re 55 to 59 to provide care for an 85 to 89 year old, and after they pass away ro walk back into a job at 60. So there are potentially several years missing NI contributions.