Carry forward pension contributions

random321

Hi all. I just wanted to check my understanding on how carry forward works.

We are in a fortunate position this year that my wife will be able to contribute more than the annual allowance to her pension this tax year.

Her earnings will be enough to cover what she wants to put in via salary sacrifice and will need to use carry forward from one or a combination of the previous 3 tax years.

My understanding is there is no need to tell HMRC about this, but I wanted to check when using carry forward can you contribute up to 100% of earnings for each of those tax years or would it be down to minimum wage for those tax years? Thanks

tacpot12

This page has all the answers you need: Carry forward of pension annual allowance - Royal London for advisers

Make sure you read it very carefully. Note the rule that if she is making the payments herself, she cannot paying more than she has earned this tax year.  This means that the best time to make the payment is likely to be in the period between her last salary payment in the tax year and the end of the tax year, allowing time for the payment to be received and credited into her pension. 

HappyHarry

Minimum wage does not come into play for previous years, because your wife will already have been
paid for those years and carrying forward the allowance from previous will not affect her pay in those periods.

random321

HappyHarry said:

Minimum wage does not come into play for previous years, because your wife will already have been
paid for those years and carrying forward the allowance from previous will not affect her pay in those periods.

Thanks for that, that's what I assumed but just wanted to check! 

And thanks @tacpot12 I will give that a read.

Dazed_and_C0nfused

random321 said:

Hi all. I just wanted to check my understanding on how carry forward works.

We are in a fortunate position this year that my wife will be able to contribute more than the annual allowance to her pension this tax year.

Her earnings will be enough to cover what she wants to put in via salary sacrifice and will need to use carry forward from one or a combination of the previous 3 tax years.

My understanding is there is no need to tell HMRC about this, but I wanted to check when using carry forward can you contribute up to 100% of earnings for each of those tax years or would it be down to minimum wage for those tax years? Thanks

She can't make any contributions for those years now.

Carry forward of unused annual allowance just allows additional contributions to be made in the current tax year once this years annual allowance has been used up.

Also, using salary sacrifice means she isn't contributing to the pension and won't receive any pension tax relief.  She will be agreeing to a reduced salary in return for additional employer contributions.  And as she no longer has that salary she won't be paying tax or NI on it 😉

DRS1

I wanted to check when using carry forward can you contribute up to 100% of earnings for each of those tax years or would it be down to minimum wage for those tax years? 

I am not sure I understand this.  The earnings (and NMW) are only relevant for this year (when she is making the contribution which goes over the annual allowance)  If her salary sacrifice this year would take her below the NMW then she would have to restrict it and pay the rest as personal contributions using the relief at source contributions.

The figure that is relevant for the past years is how much of that year's annual allowance is still available.  Her earnings and NMW aren't relevant to that question.  So if in a year when the annual allowance was £60k, she and her employer had contributed £50k then £10k is available to be carried forward.  It would not matter if her earnings in that year were £100k she could still only carry forward £10k.