SIPP upper limit

MetManMark

So I contribute towards both a civil service scheme and also a SIPP. I know that the limit for the SIPP is £60k or my annual salary, whichever is higher. My question is whether I also need to take into consideration my contribution to the civil service scheme in the £60k. Do I need to include this (yes/no)? If I do need to consider this, do I just need to include my contribution or also the contribution that my employer makes?

Thanks

M

Marcon

So I contribute towards both a civil service scheme and also a SIPP. I know that the limit for the SIPP is £60k or my annual salary, whichever is higher.

No - it's the lower of £60K or your earnings in the tax year in which you make the contribution

My question is whether I also need to take into consideration my contribution to the civil service scheme in the £60k. Do I need to include this (yes/no)? If I do need to consider this, do I just need to include my contribution or also the contribution that my employer makes?

You need to include your contributions (gross) and any employer contribution when looking at how much you can contribute. By chance there's another thread on this topic with a helpful link from @hugheskevi

https://forums.moneysavingexpert.com/discussion/6658503/calculating-historic-unused-allowance-with-nhs-pension#latest

hugheskevi

It is important to be technically precise here. There are two completely separate limits to calculate. You should ensure your contributions are within both of the limits.

(1) The limit on the amount of contributions for which you can receive tax relief is the earnings that attract tax relief. You will need to subtract your individual contributions to your Civil Service pension scheme from your earnings that attract tax relief to determine how much you have available to make a (gross) SIPP contribution. You ignore employer pension contributions, and ignore Pension Inputs when doing this.

(2) Then there is the Annual Allowance, for which the standard annual limit is £60,000. If you contribute above your personal limit, you will have a tax charge to pay. Your personal limit is £60,000 (unless you are subject to tapering or the Money Purchase Annual Allowance) plus carry-forward of unused Annual Allowance from the last 3 years. To calculate this, you need to know your Pension Input into the Civil Service pension scheme each year. This is a specific calculation that is detailed at this link and you can obtain the amount of your Pension Inputs into the scheme by requesting a Pension Saving Statement from the scheme. Neither your individual contributions nor the contributions of your employer are used in this calculation; it is only the Pension Input that is used. You add the Pension Input from the Civil Service pension scheme to the gross amount you put into a SIPP to get your total Pension Input for each individual year.

MetManMark

Thanks for your responses. So by means of an example:

Salary = £66k

Gross SIPP contribution = £18k

Employee pension contribution to DB scheme = £5k

Therefore additional money that I can pay into the SIPP = 60-18-5 —> 38k

Is that correct?

M

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81913835#Comment_81913835

Your contribution to a DB scheme isn't relevant for the annual allowance limit, it's the pension input amount (linked to the increase in value of your DB pension) that counts.

And it is your taxable pay which counts for the tax relief limit (assuming you don't have any other pensionable income).

DRS1

https://forums.moneysavingexpert.com/discussion/comment/81913835#Comment_81913835

Not exactly.

Test 1 from @hugheskevi's post would get you 66k - 18k - 5k = 43k

Test 2 needs a figure for your PIA but let's guess at 25k which gives you 60k - 25k - 18k = 17k

But then you need to see if you have carry forward of unused previous years annual allowance and let's imagine the carry forward is in total 90k then for test 2 your 17k becomes 107k

So the most you can contribute is (gross) £43k (the lower of 107k and 43k)

MetManMark

Thanks all. I think that I need to read this all a little more carefully and do some calculations.

Currently I put into a SIPP everything I earn above £50k to stay below the higher rate tax bracket. What I am trying to figure out now is how much can be put into a SIPP if I were to receive additional money (eg through inheritance etc).

Other than maxing out my ISA and pension it isn't obvious what to do with any additional funds (other than giving it directly to children eg Junior ISA).

Thanks

M

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81913876#Comment_81913876

You are already putting plenty more than enough to get below the higher rate threshold.

If your taxable earnings are £61k and you already contribute £18k (gross) to a SIPP you are nowhere near the higher rate threshold.

Unless you have some other information you haven't previously disclosed. Or are Scottish resident for tax purposes.

Sam_666

You shouldnt base your sipp contribution on calculaton to redice tax rate.
It should be based on calculation how much you need to support you self when you stop working.
Many cant predict when they would stop worrking, i.e. unforsceen health issue,etc.