Employer contribution when on Small salary, already maxed pension contributions

nomorekids

I earn a small salary approximately £13000 and already contributed £10000 (net) into my SIPP, maxed out for the last year of working as I'm thinking of retiring.

My employer wants to contribute £4000 (net) into my SIPP and I've completed the forms for this to happen.

However although I'm not expecting to receive tax relief on the extra £4000, I am not expecting to trigger any form of charge or reduction in the £2500 tax relief either.

I've been reading all sorts of HRMC pages for people going over the pension contribution limits but all seem to use examples with pension contributions exceeding £60000.

Can anyone clarify what is likely to happen to me, I don't earn £17000 and only have a couple of hundred pounds left of pension contribution without exceeding my earnings?

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/6654418/employer-contribution-when-on-small-salary-already-maxed-pension-contributions

Do you mean

1). You have contributed £12,500 (inclusive of pension tax relief).

2). You will get an employer contribution of £4,000? There is no "net" figure with employer contributions as no tax relief is due on them.

3). Your P60 (or P45) for 2025/26 will show you have earned £13,000

nomorekids

https://forums.moneysavingexpert.com/discussion/comment/81875330#Comment_81875330

yes to all 3, hoping someone on here can help with what will happen

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81875332#Comment_81875332

Then nothing is going to happen. You seem to be mixing up the tax relief limits and annual allowance.

nomorekids

https://forums.moneysavingexpert.com/discussion/comment/81875335#Comment_81875335

I don't earn £60k, I earn £13000 so my understanding is my annual allowance and tax relief limit the same ie £13000 but that both employee and employer contributions added together £16500 can not exceed this, please can you clarify what I've misunderstood? Very pleased to be reassured but struggling to find out information for low income earnings, maxing out pension contributions with an additional employer lump sum.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81875357#Comment_81875357

Where have you read that the annual allowance is £13,000 🤔

Can you provide a link?

Grumpy_chap

Personal contributions (gross) to a pension are limited to the lower of:

• Earned income
• Annual Allowance

Annual Allowance is £60k but can be increased if there is carry-forward from previous years.

There is also a route to make a small amount of pension contribution if there is no earned income, however this does not apply in the OP's case.

The OP has earned income of £13k and made personal pension contributions of £10k which is grossed up to £12.5k.

Employer contributions to a pension scheme are not constrained by the earned income limit but the total contributions (employer plus personal) do need to remain under the AA limit.

The employer will make a pension contribution of £4k. This is made prior to income tax / NI and therefore is the gross amount. The employer's contribution will not be further grossed up.

The total of the OP's contribution (£12.5k gross) does not exceed earned income AND the total of personal plus employer contribution (£4k gross) (£16.5k total gross) is well below the AA so the OP is within all limits.

Out of interest, OP, is this your own Ltd Co.?

nomorekids

https://forums.moneysavingexpert.com/discussion/comment/81875375#Comment_81875375

thank you so much @Grumpy_chap, totally got into a pickle, no not limited company, just PAYE with no company pension scheme and job coming to a natural end, hence thinking of retiring. I was indeed mixing up limits @Dazed_and_C0nfused thank you to you also.