How much can I put into a SIPP whilst receiving a salary and two DB pensions?

gundo

I'm 60 and I started receiving two DB pensions (a Civil Service one and a Local Government one) both from previous employments. 

I'm working reduced hours in my current job (4 days a week) and that comes with a DB/DC pension (USS - Univ's Superannuation Scheme).

I earn £35K a year from my current job but pay AVCs via salary sacrifice which reduces this to £21.5K. I've been told by my employer's pay department that I can't pay more into my AVCs (the AVCs are a DC pot but my main pension is a DB scheme)

The two DB pensions I'm currently receiving pay £16K per year.

Am I able to contribute to a Vanguard SIPP (which I opened a few years ago) and still get tax relief? If so, how much am I allowed to put in my SIPP?

To further complicate matters I may shortly be receiving a salary uplift of £4K a year, increasing my salary to £39K.

Apologies if this has been covered extensively elsewhere (I did look but obviously not hard enough).

zagfles

Is the DB scheme you're paying into a final salary or CARE scheme? Or a mix? 

Did you get a lump sum when you started taking the DB pensions in payment? 

Aretnap

If your salary for this financial year after salary sacrifice is £21.5K, you can pay in 80% of this - £17.2K - which will be boosted up to £21.5K by tax relief.

If your salary increases mid financial year then it's your total earnings from employment for the period April 6th-April 5th that count.

gundo

zagfles said:

Is the DB scheme you're paying into a final salary or CARE scheme? Or a mix? 

Did you get a lump sum when you started taking the DB pensions in payment? 

USS is DB "career average" for up to £70K salary and the AVCs are a DC pot (the same one that you pay into if you're over the salary threshold).

Civil Service scheme has no lump sum. The Local Government scheme gave me a £29K lump sum.

zagfles

Answer above is probably right - assuming the £21.5k is after both AVCs and your contributions to the DB scheme are taken off. The annual allowance is unlikely to be an issue. Recycling may be an issue, see PTM133810 - Unauthorised payments: Deemed or specific situations that are unauthorised payments: recycling of pension commencement lump sums: overview - HMRC internal manual - GOV.UK

NickPoole

Once pensions are in payment does any increase in value contribute to annual allowance limit?

NickPoole

(I suppose if they increase by CPI taht would be offset by the CPI deduction so probably not)

NickPoole

zagfles said:

Answer above is probably right - assuming the £21.5k is after both AVCs and your contributions to the DB scheme are taken off. The annual allowance is unlikely to be an issue. Recycling may be an issue, see PTM133810 - Unauthorised payments: Deemed or specific situations that are unauthorised payments: recycling of pension commencement lump sums: overview - HMRC internal manual - GOV.UK

This is an interesting one for me as somebody who has taken TFC of £6K and then got a lump sum of £39K from partial retirement 4 months later AND increased AVC payment substantially - I still don't think I fall foul of recycling because my AVC all comes from my salary and my overall net pay per month with pensions remains very much the same as it all devised to stay just under 40% threshold. 

Have to keep an eye on the £60K annual allowance though.

NoMore

Money is fungible. It’s not about which account or where specifically the money comes from. It’s about if the lump sum enabled you to increase your contributions. This may be for example you can increase your workplace contributions from salary because you can replace that income with the lump sum. 

I have no idea on your personal circumstances or if you would be considered as recycling but saying it comes from salary does not make a difference to HMRC deciding if it’s recycling or not. 

Linton

NickPoole said:

Once pensions are in payment does any increase in value contribute to annual allowance limit?

No, the annual allowance solely relates to new money coming into one's pensions from outside. What happens within pensions is irrelevent.

gundo

NoMore said:

Money is fungible. It’s not about which account or where specifically the money comes from. It’s about if the lump sum enabled you to increase your contributions. This may be for example you can increase your workplace contributions from salary because you can replace that income with the lump sum. 

I have no idea on your personal circumstances or if you would be considered as recycling but saying it comes from salary does not make a difference to HMRC deciding if it’s recycling or not. 

It won't come from the lump sum (that's in the Cash ISA and the rest is emergency/play fund). But I was planning on diverting the income from one of my DB pensions that's already paying into the SIPP as regular monthly payments. Would that count as recycling (not lump sum but income from a DB pension)?