SIPP Issue - Paid more than I should into it

Pathfinder000

Turned out I am too late.  It has already been processed.  They said it wasn't possible to refund.  

So I guess HMRC will send me a letter at some point.

masonic

This is InvestEngine? Most providers would refund the contribution and repay HMRC for you, which is permitted. I guess they are running a shoestring operation and would rather HMRC recovers the tax relief directly from you and you end up with a contribution that didn't get the benefit of relief.

Something to bear in mind as I was considering using InvestEngine for my SIPP at some point. This is probably an indicator of their overall service proposition.

Pathfinder000

masonic said:

This is InvestEngine? Most providers would refund the contribution and repay HMRC for you, which is permitted. I guess they are running a shoestring operation and would rather HMRC recovers the tax relief directly from you and you end up with a contribution that didn't get the benefit of relief.

Something to bear in mind as I was considering using InvestEngine for my SIPP at some point. This is probably an indicator of their overall service proposition.

The fact they only do ETF's and only a smallish number of ETF's at that, would be another indicator of what you are getting into.  In some ways it would be nice if they'd offer say the more popular dividend ETF's like JEPQ, JEPI and funds like SMIF and TFIF.  As it stands you are left with things like JEGP and QYLP, that do a similar job.  But if all you want are the usual suspects that get universally preached about, ie, VUAG and VWRP or FWRG and SPXL, then you'll be fine.  They do also have a reasonable number of bond ETF's and a handful of commodity ETF's.  But if you are focused on income as an investor, they don't have much in the way of high yield ETF's.

For the most part I have had no issues with them apart from this and i've had an S&S ISA with them for a bit.  Another side issue is you can't transfer money from the ISA to the SIPP without withdrawing it, then putting it back in.  So maybe they split the SIPP from the main company in some way.  On T212 you can move money across any of the account types, without any issue, but they don't currently offer a SIPP.

As to this current mistake, it is my mistake and I will have to deal with it.  Won't make it again, that is for sure.  Maybe I lose the tax relief on it, but it's not a crazy amount of relief, like if someone accidentally went over by many thousands.  Mine comes to about £190 in relief, which is something, but it's not a crazy amount.  You live to learn.

Pathfinder000

So I was reading through some stuff the other day and realised I might not have an issue with the SIPP overpayment, but I do have a question related to it.  So I pulled these bullet points related to Carry Forward from Aviva's page on SIPP's.

• You must’ve reached your annual allowance in the tax year you want to carry forward in.
• You must’ve been a member of a UK-registered pension scheme in each of the tax years that you want to carry forward.
• You can only go back three years and can only use an allowance once.
• If you’ve a tapered annual allowance, then you measure your unused annual allowance against the tapered allowance. This only affects high earners with a net income over £200,000.

My question is related to number two.  Can you use Carry Forward through a different pension provider to the UK registered pension scheme you are already in?  I have small amounts in NEST and a different provider whose name eludes me, left overs from past jobs and I never put the minimum £2,880 in for the three years prior to the last financial year.  So can Carry Forward be used in this usage case?

DRS1

I have a feeling your problem may be with bullet point 1 - the annual allowance there is £60k.  If you  are just contributing £3600 (including the tax relief) then you are nowhere near the £60k and can't carry anything forward.

Pathfinder000

Ahh ok, didn't realise you had to hit the maximum allowance to use the feature.  Oh well, it was worth the question.  Thanks.

intalex

DRS1 said:

I have a feeling your problem may be with bullet point 1 - the annual allowance there is £60k.  If you  are just contributing £3600 (including the tax relief) then you are nowhere near the £60k and can't carry anything forward.

Interesting, so it's an indirect way of disallowing a carry-forward of the £3600 annual "allowance" for those without earned income?

masonic

intalex said:

DRS1 said:

I have a feeling your problem may be with bullet point 1 - the annual allowance there is £60k.  If you  are just contributing £3600 (including the tax relief) then you are nowhere near the £60k and can't carry anything forward.

Interesting, so it's an indirect way of disallowing a carry-forward of the £3600 annual "allowance" for those without earned income?

It is not disallowed, if someone suddenly starts earning lots of money, then they can carry forward from years they did not earn.

But nobody can get tax relief on contributions of more than 100% of their relevant earnings (or £2,880, whichever is greater) in a given tax year.

intalex

masonic said:

intalex said:

DRS1 said:

I have a feeling your problem may be with bullet point 1 - the annual allowance there is £60k.  If you  are just contributing £3600 (including the tax relief) then you are nowhere near the £60k and can't carry anything forward.

Interesting, so it's an indirect way of disallowing a carry-forward of the £3600 annual "allowance" for those without earned income?

It is not disallowed, if someone suddenly starts earning lots of money, then they can carry forward from years they did not earn.

But nobody can get tax relief on contributions of more than 100% of their relevant earnings (or £2,880, whichever is greater) in a given tax year.

I mean if someone is retired and only has unearned income, then their annual "allowance" is £3,600 gross, but if they fail to use up this "allowance" in any tax year, then that unused "allowance" is not carried forward, which means the £3,600 gross is only an "allowance" rather than an allowance like the £60k for earned income.

masonic

intalex said:

masonic said:

intalex said:

DRS1 said:

I have a feeling your problem may be with bullet point 1 - the annual allowance there is £60k.  If you  are just contributing £3600 (including the tax relief) then you are nowhere near the £60k and can't carry anything forward.

Interesting, so it's an indirect way of disallowing a carry-forward of the £3600 annual "allowance" for those without earned income?

It is not disallowed, if someone suddenly starts earning lots of money, then they can carry forward from years they did not earn.

But nobody can get tax relief on contributions of more than 100% of their relevant earnings (or £2,880, whichever is greater) in a given tax year.

I mean if someone is retired and only has unearned income, then their annual "allowance" is £3,600 gross, but if they fail to use up this "allowance" in any tax year, then that unused "allowance" is not carried forward, which means the £3,600 gross is only an "allowance" rather than an allowance like the £60k for earned income.

There are two separate limits governing pension contributions. There is the annual allowance, which can be carried forward, and there are relevant UK earnings, which cannot.

So while anyone can carry forward allowance, it is no use to do so when you don't have the relevant UK earnings to use the allowance.

There is a £3,600 gross freebie given to non-earners, but it works the same way as actual earnings - use it in the same tax year or lose it. Someone who earns £60k and pays nothing into a pension, then retires with no earnings, has no advantage in the next tax year over someone who earned nothing and paid nothing into a pension.