Acronyms ahoy! NHS PIA, AP, AA queries

Wow_this_is_complex

I’ve learned so much from lurking on this forum for a while now, but I have some questions that I can’t seem to find answers to and I would really appreciate your thoughts. I’ve pasted my details here:

• My standard NHS pension contributions for this year will be around £3162.
• I purchased some AP in the NHS scheme via salary sacrifice. My contributions for the current tax year are £16600.
• I also opened a small personal pension and the total going into that this year is £5171 after tax relief applied.

My pensionable salary is £34392 for this year – I’m using up some savings to fund the above contributions.

I estimate my PIA as £39645 for this year. I know I can request the exact PIA, but not til after the end of the tax year 25/26.

I have 2 things I want to achieve and I think I may need to choose between them:

• to maximise the tax efficiency of my pension contributions.
• to simplify decision making for the future by locking in as much DB pension as I can.

These are the options I'm considering:

1. I think that I can contribute up to a further £7567 net (£9459 after tax relief added) to my private pension. Is that correct?
2. An alternative could be to purchase £1000 of AP as a one-off lump sum for £14880. This would take my PIA to 55645. When added to my personal pension contribution of £5171 that gives a total of £60816. I know that is above the annual allowance but what would the implications of going above £60000 actually be? I have seen from other posts that this can be very complex, so I might just purchase it and not try to claim tax. Would there be a penalty for going above the £60000 AA?
3. Another alternative is if I purchase £750 of AP as a one-off lump sum for £11600 then that takes my PIA to £51645 and total pension contributions to £56816. In that scenario, I think I could contribute £2547 net (£3184 after tax relief added) to my private pension. I would probably not try to get tax relief on the lump sum AP purchase in that case.

This process has been such a learning curve for me – it’s a whole new language and a new way of thinking about my future financial well-being. I didn’t think at first that I would be able to understand pensions. My worry now is that I make a mistake and end up having to pay unexpected tax charges in coming years. Specialist medical accountant fees are £500+VAT. I would like to sort this out myself if possible and I would be very grateful for your input to help me understand this better.

Best wishes, Wow_this_is_complex

hugheskevi

Wow_this_is_complex said:
I purchased some AP in the NHS scheme via salary sacrifice. My contributions for the current tax year are £16600.

Are you sure it is salary sacrifice? And not through the usual net pay process?

I think that I can contribute up to a further £7567 net (£9459 after tax relief added) to my private pension. Is that correct?

It would appear that you have earning that qualify for tax relief to support that contribution, ie, it would all benefit from basic rate relief.

An alternative could be to purchase £1000 of AP as a one-off lump sum for £14880. This would take my PIA to 55645. When added to my personal pension contribution of £5171 that gives a total of £60816. I know that is above the annual allowance but what would the implications of going above £60000 actually be? I have seen from other posts that this can be very complex, so I might just purchase it and not try to claim tax. Would there be a penalty for going above the £60000 AA?

So a lot of that contribution would not get tax relief at all. I expect a lump sum contribution would not benefit from tax relief through either net pay or relief-at-source arrangements, and you would need to reclaim the relief from HMRC. In that case, I don't think you would get any relief on income under your Personal Allowance, as it would not benefit from the automatic relief-at-source uplift, nor the net pay provision for low earners.

You almost certainly have lots of carry-forward available from past years, so going over £60,000 would be irrelevant. Note that whether or not you claim tax relief is irrelevant, as that does not affect the pension input that determines the Annual Allowance position.

Another alternative is if I purchase £750 of AP as a one-off lump sum for £11600 then that takes my PIA to £51645 and total pension contributions to £56816. In that scenario, I think I could contribute £2547 net (£3184 after tax relief added) to my private pension. I would probably not try to get tax relief on the lump sum AP purchase in that case.

The same comment as above applies to this.

Is there a particular need to contribute more than your qualifying earnings into a pension, to the extent that you wouldn't even benefit from tax relief? Can't you sustain higher contributions over the coming years, putting money into an ISA in the meantime to maximise efficiency?

Dazed_and_C0nfused

Wow_this_is_complex said:

I’ve learned so much from lurking on this forum for a while now, but I have some questions that I can’t seem to find answers to and I would really appreciate your thoughts. I’ve pasted my details here:

• My standard NHS pension contributions for this year will be around £3162.
• I purchased some AP in the NHS scheme via salary sacrifice. My contributions for the current tax year are £16600.
• I also opened a small personal pension and the total going into that this year is £5171 after tax relief applied.

My pensionable salary is £34392 for this year – I’m using up some savings to fund the above contributions.

I estimate my PIA as £39645 for this year. I know I can request the exact PIA, but not til after the end of the tax year 25/26.

I have 2 things I want to achieve and I think I may need to choose between them:

• to maximise the tax efficiency of my pension contributions.
• to simplify decision making for the future by locking in as much DB pension as I can.

These are the options I'm considering:

1. I think that I can contribute up to a further £7567 net (£9459 after tax relief added) to my private pension. Is that correct?
2. An alternative could be to purchase £1000 of AP as a one-off lump sum for £14880. This would take my PIA to 55645. When added to my personal pension contribution of £5171 that gives a total of £60816. I know that is above the annual allowance but what would the implications of going above £60000 actually be? I have seen from other posts that this can be very complex, so I might just purchase it and not try to claim tax. Would there be a penalty for going above the £60000 AA?
3. Another alternative is if I purchase £750 of AP as a one-off lump sum for £11600 then that takes my PIA to £51645 and total pension contributions to £56816. In that scenario, I think I could contribute £2547 net (£3184 after tax relief added) to my private pension. I would probably not try to get tax relief on the lump sum AP purchase in that case.

This process has been such a learning curve for me – it’s a whole new language and a new way of thinking about my future financial well-being. I didn’t think at first that I would be able to understand pensions. My worry now is that I make a mistake and end up having to pay unexpected tax charges in coming years. Specialist medical accountant fees are £500+VAT. I would like to sort this out myself if possible and I would be very grateful for your input to help me understand this better.

Best wishes, Wow_this_is_complex

I wasn't aware the NHS used/allowed salary sacrifice.

It would probably help if you could confirm what you expect your P60 for the year to 5 April 2026 will show your earnings as. The normal and AP contributions will likely make that significantly different to your "salary".

And do you have any other taxable income at all (ignoring a few £ of untaxed interest)?

You may find life simpler to keep the tax relief and AA elements sperate.  If you have lots of carry forward available AA is probably not an issue.