Starting a SIPP & carry forward rules?

LeadFarmer

My 19yr old son earns £12k/year but isn't yet in a pension.

If he opens a SIPP now with say just £100, will the carry forward rules enable him to top it up by £11,900 after 6th April, as well as add another £12k for the 2026-2027 year?

Albermarle

https://forums.moneysavingexpert.com/discussion/6662274/starting-a-sipp-carry-forward-rules

Like many others you have misunderstood the carry forward rule. It only applies to the Annual Allowance and not the ability to get tax relief.

If he wants to benefit from tax relief this tax year, he needs to add his salary x 0.8 to a Sipp tomorrow.

Secret2ndAccount

There are two limits. If he earns 12k he can only get tax relief up to 12k. He would pay 9600 into a SIPP. The provider would go to HMRC and claim tax relief (even though he hasn't paid any tax) of 2400, resulting in a total of 12k in his SIPP. That's his practical limit.

Technically/legally he would be able to pay in 24k (or 100k) next year, but he couldn't claim any tax relief beyond 12k (his earnings in next tax year). So there's no point doing it - he might as well put the money in an ISA.

Carry forward only refers to the second limit which is a maximum that can go into anyone's pension. That would be 60k this year, and 60k next year. For this limit, there is carry forward, so his absolute limit for next year would be 120k less whatever he puts in this year. Irrelevant in your case. It's the tax relief limit that is going to be your concern and that doesn't get carry forward

LeadFarmer

Sorry yes, I forgot to factor in the tax relief. So he can pay in £9,600 for full tax relief, not £12k.

So by starting one now with just a few hundred ££ as a one off investment, do the carry forward rules allow him to retrospectively top it up to £9,600 sometime later in the year?

Secret2ndAccount

For each tax year, the total contribution (earning + tax relief) must be no more than the earnings. Doesn't matter when the contributions go in - could be before or after the earnings. It's the end of year numbers on April 5th

Secret2ndAccount

Stop thinking he can use carry foward. Unless the numbers get 5 times bigger than we are talking here, he can't use carry forward.

Focus on individual years, April 6 to April 5. The window for making contributions ends on April 5th. Though if the tax relief turns up later, it's deemed to have arrived in the year when the contribution was made

Marcon

https://forums.moneysavingexpert.com/discussion/6662274/starting-a-sipp-carry-forward-rules

No to topping up retrospectively. As for 2026/27, he can't add a personal contribution equalling his whole salary if he's going to be contributing to his employer's pension scheme, as your previous post suggests:

https://forums.moneysavingexpert.com/discussion/6661884/paying-more-into-employers-pension-scheme

His contributions to a SIPP would need to be reduced by however much he personally pays into his employer's scheme - but why does a 19 year old need two pensions when just having one should do the trick perfectly well? What does he want?

LeadFarmer

Maybe i'm referring to the phrase 'carrying forward' incorrectly?

I was referring to whether some time next year he could retrospectively top up a SIPP that was opened this year?

With a salary of £12k…..If he started a SIPP today with £500, could he then put an additional £9,100 into it later next year and have it count for this year? Then put a further £9.600 in to benefit from next years tax relief?

Marcon

I was referring to whether some time next year he could retrospectively top up a SIPP that was opened this year?

With a salary of £12k…..If he started a SIPP today with £500, could he then put an additional £9,100 into it later next year and have it count for this year? Then put a further £9.600 in to benefit from next years tax relief?

'No' to all the above.

Secret2ndAccount

There is no retrospectively. On April 6th, the opportunity to contribute to this year's SIPP total ends. Any subsequent contributions count for next year.

Triumph13

As others have said, there are TWO limits (annual allowance and relevant income) and you have to meet BOTH. Carry forward only apples to annual allowance. There is NO carry froward for relevant income - you can only contribute what you earned in that year.