Pension Input Amount for 2024/25

Sayr

Another related question from me now that I have actual figures from my employer. 

My public sector DB pension provider has just calculated my 'Pension Input Amount' for 2024/25, which is around £32k (this includes monthly AVC contributions to them as well). My gross salary for 2024/25 will be £57k.

Given these numbers, what can I do and what can't I do, and what options are open to me for further investments for this financial year?  How much can I put into a separate SIPP pension for example so I don't invest over any limits?

Thanks. 

jdl920p

Based on the figures provided you can contribute £25,000 to a SIPP (£57k minus £32k input amount).  If it is a SIPP with 'relief at source' (most are) then you would pay in £20k cash and the SIPP provider with top up with £5k tax relief

But be careful - does £57k gross take into account your pension contributions?  e.g., do you make contributions by salary sacrifice, and is the £57k figure after this?  Your most payslip should be able to tell you this (look at YTD gross figure)

Sarahspangles

Sayr said:

Another related question from me now that I have actual figures from my employer. 

My public sector DB pension provider has just calculated my 'Pension Input Amount' for 2024/25, which is around £32k (this includes monthly AVC contributions to them as well). My gross salary for 2024/25 will be £57k.

Given these numbers, what can I do and what can't I do, and what options are open to me for further investments for this financial year?  How much can I put into a separate SIPP pension for example so I don't invest over any limits?

Thanks. 

Two limits, calculated differently.

You can contribute up to your relevant UK earnings less your pension conts to date. Depending on your scheme, this may be the taxable income on your pay slip. Remember that if your SIPP claims the tax relief you contribute 80% and the HMRC relief is the other 20%

The Annual Allowance is a completely separate limit. You can contribute £60k less your PIA. If that exceeds the first calculation you may still be able to contribute by using carry forward from previous years so long as you have headroom and were contributing to a pension in those years.

NoMore

jdl920p said:

Based on the figures provided you can contribute £25,000 to a SIPP (£57k minus £32k input amount).  If it is a SIPP with 'relief at source' (most are) then you would pay in £20k cash and the SIPP provider with top up with £5k tax relief

But be careful - does £57k gross take into account your pension contributions?  e.g., do you make contributions by salary sacrifice, and is the £57k figure after this?  Your most payslip should be able to tell you this (look at YTD gross figure)

Why do you take away the PIA from his gross salary, what limit is that checking against?

If it was the AA then (assuming no carry forward) then he has 28k AA left (the 60K AA - PIA)

If its the tax relief limit then that's just the max of his relevant UK income, which is 57k. However you are right about checking what his actual gross salary is.

So to satisfy both limits (again assuming no carry forward), he could put 28k in (22.4k before basic tax relief).

In reality I would be surprised if he had no AA carry forward and is likely to be able to put the full 57k in (45.6k before Tax relief).

jdl920p

NoMore said:

Why do you take away the PIA from his gross salary, what limit is that checking against?

Because I mistakenly equated Input Amount for a DB pension with Contributions for a DC pension, i.e £32k input amount is treated the same as if you had contributed £32k - I can see now I was incorrect

Sayr

Thanks everyone. So if there are two separate limits, does this mean I can contribute extra money into my SIPP for 2024/25 based on the following:

1) My gross annual earnings (£57k) minus my personal DB pension contributions (£5k), minus my employer's DB pension contribution (£10k) and then minus my AVC contributions (£20k) = £22k x 0.8 (tax relief) = £17.6k

PLUS

2) £60k (Annual Allowance) minus £32k (my calculated Pensions Input Amount) = £28k x 0.8 (tax relief) = £22.4k

So allowing me to contribute a combined total of £17.6k + £22.4k = £40k into my SIPP for 2024/25 based on my numbers. 

Thanks

DRS1

Sayr said:

Thanks everyone. So if there are two separate limits, does this mean I can contribute extra money into my SIPP for 2024/25 based on the following:

1) My gross annual earnings (£57k) minus my personal DB pension contributions (£5k), minus my employer's DB pension contribution (£10k) and then minus my AVC contributions (£20k) = £22k x 0.8 (tax relief) = £17.6k

PLUS

2) £60k (Annual Allowance) minus £32k (my calculated Pensions Input Amount) = £28k x 0.8 (tax relief) = £22.4k

So allowing me to contribute a combined total of £17.6k + £22.4k = £40k into my SIPP for 2024/25 based on my numbers. 

Thanks

No

You can pay whichever is lowest.

And I don't think your sums are quite right - in 1) you should not include the employer's contribution.

NoMore

Sayr said:

Thanks everyone. So if there are two separate limits, does this mean I can contribute extra money into my SIPP for 2024/25 based on the following:

1) My gross annual earnings (£57k) minus my personal DB pension contributions (£5k), minus my employer's DB pension contribution (£10k) and then minus my AVC contributions (£20k) = £22k x 0.8 (tax relief) = £17.6k

PLUS

2) £60k (Annual Allowance) minus £32k (my calculated Pensions Input Amount) = £28k x 0.8 (tax relief) = £22.4k

So allowing me to contribute a combined total of £17.6k + £22.4k = £40k into my SIPP for 2024/25 based on my numbers. 

Thanks

No forget anything you think you know or understand about pension contributions, because its quite obvious you do not understand them at all.

First lets ignore AA and just figure out the max you can contribute and get tax relief.

You say your gross salary is 57k ? And you contribute to your AVC 20k ? Is this contribution via Salary Sacrifice, Relief at Source or Net pay ? If its Salary Sacrifice or Net pay, is the 57k after or before this ? Same for your personal DB contribution of 5k. 

Answer those and we can figure out your max Relief at Source contribution you can make to your SIPP. Note at this point you may be restricted by the AA but as I said we will ignore that for now, until we know the Tax relief number so we can explain it better.

Sayr

Thanks for persevering with me - appreciate your support and patience.

To answer some of the questions to be able to calculate the maximum I can contribute into a separate SIPP and get tax relief:

a) I pay £20k AVCs out of my £57k gross salary and it is salary sacrifice. 

b) From my gross salary of £57k, I pay £5k of this into my standard DB pension through work. 
c) My employer pays an additional £10k on top of my £57k gross salary as their pension contribution.

Does this help in answering how much I can contribute into a separate SIPP and get tax relief?

Thanks

Secret2ndAccount

No. You use the lower of the 2 limits.

We have a problem with terminology here. My understanding is that 'Pension Input Amount' normally refers to a DB pension. It's a bit odd to include AVC payments in a PIA. Normally, the AVC is a separate DC pension, so it wouldn't really have a PIA. However, I'm going to move forward by assuming that 32k is the total of the growth in your DB pension, plus the 20k AVC contribution. This implies that your DB pension has only improved by 12k, despite you paying in 5k and your employer paying in 10k. Not impossible - there are other factors involved, like your salary, and inflation - but not great either.

Stage 1: Annual Allowance (AA):
Total inputs to pension: 32k.  AA: 60k.  Therefore you can contribute a further 28k. However, in the case of AA, you can look back 3 years and make use of unused AA. So your limit is not really 60k - 32k. It's 200k - your total inputs (PIA, you, employer, taxman) for the last four years. So it's entirely possible you have 100k or more of headroom available. If this is the case, the AA is not what's going to limit your pension contribution.

Stage 2: Gross Earnings:
You say you earned 57k. Therefore, you can only get tax relief on contributions up to 57k, and you shouldn't pay in any more than this. You (personally - not your company; not your PIA) have already paid 5k + 20k so you can further contribute:   57k - 20k - 5k = 32k

So it is likely you can contribute 32k (or 0.8 x 32k depending how the tax relief is applied). However, if you've used up your entire AA for the prior 3 years, you can only contribute 28k or 28k x 0.8

In Stage 2 there is no looking back or carrying forward: this year's earnings → this year's contribution.

NoMore

Sayr said:

Thanks for persevering with me - appreciate your support and patience.

To answer some of the questions to be able to calculate the maximum I can contribute into a separate SIPP and get tax relief:

a) I pay £20k AVCs out of my £57k gross salary and it is salary sacrifice. 

b) From my gross salary of £57k, I pay £5k of this into my standard DB pension through work. 
c) My employer pays an additional £10k on top of my £57k gross salary as their pension contribution.

Does this help in answering how much I can contribute into a separate SIPP and get tax relief?

Thanks

So after the Salary Sacrifice of your AVC your relevant taxable income is 37k. Its still unclear how the 5k for DB pension is made is that Relief at Source payment ? Your employer contribution is irrelevant for this.