First SIPP with 100K lump sum allowed?

micklesthwaite

Could anyone clarify a question on SIPP contributions please?

I would like to open my first SIPP and pay in a lump sum of about 100K

I have my Nest contributions directly from salary which were approximately 2K last year. This is the only pension scheme I have been contributing to and it started 8 years ago.

Given tha, am I able to put in up to my salary minus the 2K this year plus use carry forward from pervious years to invest the 100K in total.?

Thanks
Dave

QrizB

Do you expect to earn at least £125000 before tax during the 2026-27 tax year?

I note that last year you said your salary was just under £50k; has this increased significantly since then?

Albermarle

The carry forward rule is much misunderstood and there are regular threads on here on the subject.

You can not add more to a pension in one tax year, than your gross salary.

So if your say earn £42K , take away your regular contributions of £2K- then you can add £32K and the provider will add £8K basic rate tax relief.

The carry forward rule applies only to your Annual Allowance, which is different.

micklesthwaite

https://forums.moneysavingexpert.com/discussion/comment/82006321#Comment_82006321

Thanks for the reply,

No, still under 50K for this year.

micklesthwaite

Thanks Albermarle,

"The carry forward rule applies only to your Annual Allowance, which is different."

Could you explain what this means please?

QrizB

"No, still under 50K for this year."

That's going to limit the amount of tax relief you can get on SIPP (or other pension) contributions, then. £100k isn't going to be a good idea.

If your salary (as shown on your P60 at genendnof the year) is exactly £50k you can contribute exactly £40k to pensions and receive £10k of tax relief, for a gross pension contribution of £50k.

Your £2k of workplace pension contributions might count towards this number, depending on exactly how they're being made.

micklesthwaite

Okay I think I understand where the tax break is now.

If someone earns 80K in 25/26 and the same amount in 26/27, and they only put in 20K in 25/26 then:-

They could put in 60K plus 20K in 26/27 (i.e., up to their salary). And if their salary had increased to 90K in 26/27 they could then put 60K plus 30K.

Do I understand this correctly?

Thanks for the advice.

QrizB

"Do I understand this correctly?"

I think you've got the fundamentals, yes 🙂

Marcon

https://forums.moneysavingexpert.com/discussion/comment/82006966#Comment_82006966

Not sure OP has - or at least, only in respect of personal contributions and tax relief on those:

They could put in 60K plus 20K in 26/27 (i.e., up to their salary). And if their salary had increased to 90K in 26/27 they could then put 60K plus 30K.

OP, you are also limited by the Annual Allowance (£60K), and that includes any employer contributions (ie the total paid in the tax year of personal contributions + tax relief, + employer contributions).

micklesthwaite

Oh what an enourmous disappointment. At least I now know anyway.

Thanks for your help, much appreciated.

zagfles

https://forums.moneysavingexpert.com/discussion/comment/82006978#Comment_82006978

OP seems to understand better than you 😉In the scenario he describes he'll have enough carry forwards to do as he said.