Paying into SIPP when workplace pension is DB

nell_wen

Hi pension experts,

I (48, single, no dependents) have been starting to get my plans in place for a hopefully early retirement. Up to now my savings have been into S&S ISA/LISA and premium bonds (emergency fund). Having read lots of the advice on this forum I now understand that additional pension saving would be a better shout. My plan will be to use my new SIPP plus ISA money until as close as I can get to my civil service scheme pension age to avoid as much of the actuarial reduction as possible.

Given my workplace pension is DB I understand it’s not quite as straightforward as just totting up the contributions to work out how much I can put into a SIPP. I have found this page on the scheme website https://www.civilservicepensionscheme.org.uk/memberhub/your-pension/yearly-pension-updates/pension-saving-statement/annual-allowance/ I did put in a query to MyCSP to get a calculation from them, but that was over 3 months ago and now that Capita have taken over the administration from the start of this week (which has been somewhat chaotic!), I’m not holding my breath on getting a response before the financial year end.

Based on my numbers, my pension input amount this year for my civil service pension is (rounded) £30k. My salary is £58k. Am I right in thinking that the higher tax rate portion of my salary is mopped up through my workplace pension contributions, so I could pay up to £22.4k into a SIPP?

Thanks for any thoughts and advice!

hyubh

nell_wen said:

Based on my numbers, my pension input amount this year for my civil service pension is (rounded) £30k. My salary is £58k.

That sounds rather high. Not saying it's wrong, but how have you calculated that? In simple terms it's the increase in annual pension in real terms x 16, plus any standard lump sum if you have Classic service.

Albermarle

There are two figures to look at separately. 

The maximum gross amount you can put in a SIPP and get tax relief is £58K, minus your current contribution to the CS pension.

The maximum you can add to a pension in one tax year ( including employer contributions) is the £60K annual allowance, and in your case this is minus the pension input amount .
However you can bring forward unused allowances for previous years.

Not a CS pensions expert but I think that is right.

Isthisforreal99

Albermarle said:

There are two figures to look at separately. 

The maximum gross amount you can put in a SIPP and get tax relief is £58K, minus your current contribution to the CS pension.

The maximum you can add to a pension in one tax year ( including employer contributions) is the £60K annual allowance, and in your case this is minus the pension input amount .
However you can bring forward unused allowances for previous years.

Not a CS pensions expert but I think that is right.

The actual amount an individual pays for their Civil Service pension has no bearing on the Pension Input Amount for annual allowance purposes. The PIA is based on the annual increase in pension and lump sum - although £30k seems large if there has been a promotion then it could easily be this, OP can you confirm?

Also OP, you say your salary is £58k but is that before or after your Alpha contributions? What is your taxabke pay.

Albermarle

Isthisforreal99 said:

Albermarle said:

There are two figures to look at separately. 

The maximum gross amount you can put in a SIPP and get tax relief is £58K, minus your current contribution to the CS pension.

The maximum you can add to a pension in one tax year ( including employer contributions) is the £60K annual allowance, and in your case this is minus the pension input amount .
However you can bring forward unused allowances for previous years.

Not a CS pensions expert but I think that is right.

The actual amount an individual pays for their Civil Service pension has no bearing on the Pension Input Amount for annual allowance purposes. The PIA is based on the annual increase in pension and lump sum - although £30k seems large if there has been a promotion then it could easily be this, OP can you confirm?

Also OP, you say your salary is £58k but is that before or after your Alpha contributions? What is your taxabke pay.

I did not say it did.

nell_wen

Thanks all. I think @hyubh and @Isthisforreal99 are right that my pension input amount calculation is too high. I think I have been double counting the inflation increase.

I am in nuvos and alpha schemes, so it should be simpler with no lump sum to consider.

£58k is my taxable pay.

I'm happy enough if I undershoot what I could put into a SIPP, I just don’t want to get it wrong the other way! I was hopeful of getting the proper calculation from the pension scheme when I put in my query in August, and I got an onscreen message that I would have a reply by February, but I’m not sure how MyCSP could actually say when Capita will reply, or even if my query is still on the system…

I think I’ll just open a SIPP and put in a safe amount this year, and hopefully get a proper calculation for next year.

Thanks again!

Isthisforreal99

nell_wen said:

Thanks all. I think @hyubh and @Isthisforreal99 are right that my pension input amount calculation is too high. I think I have been double counting the inflation increase.

I am in nuvos and alpha schemes, so it should be simpler with no lump sum to consider.

£58k is my taxable pay.

I'm happy enough if I undershoot what I could put into a SIPP, I just don’t want to get it wrong the other way! I was hopeful of getting the proper calculation from the pension scheme when I put in my query in August, and I got an onscreen message that I would have a reply by February, but I’m not sure how MyCSP could actually say when Capita will reply, or even if my query is still on the system…

I think I’ll just open a SIPP and put in a safe amount this year, and hopefully get a proper calculation for next year.

Thanks again!

I doubt they will give you anything in year anyway.

ali_bear

Sounds like you could pay in as much as you can afford in practical terms. If you are looking for a starting point why not pay in enough, say 10k gross, to bring you under the higher rate tax band? 

Yorkie1

If you want to invest in stocks and shares still, then had you thought about AVCs through the civil service? There will be a default fund based on when they think you will reach normal pension age for alpha (currently 67 for many people) but you can choose other funds. Your contribution is taken off before tax, and no need to start calculating PIA etc.

nell_wen

Yorkie1 said:

If you want to invest in stocks and shares still, then had you thought about AVCs through the civil service? There will be a default fund based on when they think you will reach normal pension age for alpha (currently 67 for many people) but you can choose other funds. Your contribution is taken off before tax, and no need to start calculating PIA etc.

I did think about that option, and it would definitely be more straightforward in terms of working out the numbers. However at the moment I’m thinking I’d prefer to keep my work pension as simple as possible and have a separate SIPP. I will have another read of the info on the AVC option though as I’ve not properly looked at it.

Dazed_and_C0nfused

nell_wen said:

Yorkie1 said:

If you want to invest in stocks and shares still, then had you thought about AVCs through the civil service? There will be a default fund based on when they think you will reach normal pension age for alpha (currently 67 for many people) but you can choose other funds. Your contribution is taken off before tax, and no need to start calculating PIA etc.

I did think about that option, and it would definitely be more straightforward in terms of working out the numbers. However at the moment I’m thinking I’d prefer to keep my work pension as simple as possible and have a separate SIPP. I will have another read of the info on the AVC option though as I’ve not properly looked at it.

They are separate though.

Your Alpha(?) pension is a defined benefit scheme.

The AVC's would create a defined contribution pot, similar to a SIPP.