Part year DB PIA question
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matt_splatt
Posts: 9 Forumite
Hi all,
I'm a member of a company DB scheme that stopped accepting further contributions at the end of August 2018.
I'm trying to calculate my Pension Input Amount for 2018/19
I have calculated my PIA in the normal way (starting value, plus CPI at 3%, x16 compared to ending value x 16). The result is a negative number. This is because I only accrued five extra months service during the input period. which added less than 3%. My plan is to pay into my SIPP up to my annual allowance limit before the end of the tax year. I have no AA carry over.
So the question is: can I apply the full 3% for CPI for the whole year, even though I only contributed to the DB scheme for 5/12ths of the year. Or can I only apply 5/12th of 3%?
Second question - which might invalidate the first - if my DB PIA is, say -£5k and my annual allowance is down to £10k, how much can I add to my SIPP? £10k? £15k?
TIA
Matt
I'm a member of a company DB scheme that stopped accepting further contributions at the end of August 2018.
I'm trying to calculate my Pension Input Amount for 2018/19
I have calculated my PIA in the normal way (starting value, plus CPI at 3%, x16 compared to ending value x 16). The result is a negative number. This is because I only accrued five extra months service during the input period. which added less than 3%. My plan is to pay into my SIPP up to my annual allowance limit before the end of the tax year. I have no AA carry over.
So the question is: can I apply the full 3% for CPI for the whole year, even though I only contributed to the DB scheme for 5/12ths of the year. Or can I only apply 5/12th of 3%?
Second question - which might invalidate the first - if my DB PIA is, say -£5k and my annual allowance is down to £10k, how much can I add to my SIPP? £10k? £15k?
TIA
Matt
0
Comments
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Lots of views, but no comments. Have search and not found the answer - can anybody help, please?0
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If you have an annual allowance of £10k and no carry forward available, you can contribute £10k gross into the SIPP. If you have a positive DB PIA you will have to take that off the £10k gross that you had hoped to pay into the SIPP.
If you didn't accrue any DB pension benefits in the year - i.e. the value of your benefits didn't grow during the year (or somehow went down) - you won't have a positive PI amount to subtract from the £10k gross that you had hoped to pay into the SIPP, so you can contribute that full £10k. However, if you think your PIA is less than zero you can't just increase your SIPP contributions and do more than the £10k allowance.
If you're unsure on how to calculate your DB PIA and are not crystal clear that it is definitely not more than zero, it would be somewhat reckless to put as much as £10k gross into the SIPP because that runs the risk of your error coming back to bite you in the balls later.
If you're looking for some sort of a reference to the fact that getting a negative position on a DB PI amount doesn't allow you to make contributions to a money purchase pension in the same year with impunity, see example 8 from HMRC tax manual here
https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm053320#IDAWLNMB...Note that the fact that in the defined benefits arrangement her closing value was lower than the adjusted opening value does not create a ‘negative value’ against which the money purchase contribution pension input amount can be offset to give an overall pension input amount of nil.0 -
That’s brilliant - thank you!0
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