Unused annual allowance for DB scheme member Calc.

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  • scoot65
    scoot65 Posts: 470 Forumite
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    edited 24 February 2018 at 10:17AM
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    Many thanks for all the helpful replies, very much appreciated! Particularly hyubh's very detailed post.

    I definitely think a telephone call to the pensions administrator is in order and I'll do that on Monday, just to confirm any figures I calculate are correct.
  • LXdaddy
    LXdaddy Posts: 693 Forumite
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    LULULU1 wrote: »
    Can someone help me understand the SIPP contribution bit. Is it as simple as If a person is 50 and earns 35k per year can they contribute 35k into their SIPP Pension Pot.

    Thanks

    If you only have Defined Contribution pensions then the Annual Allowance used calculation is much simpler - it is the amount contributed.

    Up to age 75 you can contribute up to the lower of £40,000 or your earned income. But you can contribute at least £3,600.

    So the "simple" answer to your question is "yes, (if they have no other pensions"
  • scoot65
    scoot65 Posts: 470 Forumite
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    edited 3 March 2018 at 4:50PM
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    UPDATE.....

    As suggested by other posters, I contacted my LGPS pensions administrator and requested information regarding my annual allowance / unused annual allowance figures.

    I have received a letter containing the following information. The letter also stated that they were not in position to calculate the 2017/18 figures.

    As at 31/03/17 my pension is calculated at £12,057 and lump sum is calculated at £21,921

    The letter went on to say that ....

    "my Pension Input Amount for 2016/17 was £16,493. This is beneath the annual allowance threshold of £40,000 allowing you to carry forward an amount of £23,506 into 2017/18"

    "You are also entitled to carry a further two years' worth of unused allowances in to 2017/18. These additional amounts are £32,511 (from 2015/16) and £26,818 (from 2014/15)" ...end of letter

    If I'm reading this correctly, I have £23,506 I can put into a SSIP this financial year as well as carried over amounts from 2015/16 and 2014/15 £32,511 and £26,818 respectively.

    I'm surprised that I can carry forward previous years' unused allowances as it was my understanding that only Higher Rate tax payers have this privilege.

    My 2017/18 current gross salary is £30,153

    Any thoughts on the figures given to me?

    Edit.. I've re-read the letter and I wonder how my carry over allowance for 2015/16 is £32,511 when I don't even earn that amount?????
  • Linton
    Linton Posts: 17,171 Forumite
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    There are two different limits calculated in two different ways. The calculation described refers to the £40K limit. If you earn less than £40K your gross pension contributions are limited by your earnings. You subtract your contribution to the DB scheme and any other pension contributions you make (gross). Multiply what is left by 0.8 amd that is the maximum net payment you can make to a SIPP. The 20% is added to your pension by HMRC.

    The £40K limit does have carry forward, the earnings limit doesnt.
  • TcpnT
    TcpnT Posts: 277 Forumite
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    Your total contributions for each year are limited to your earned income. What the available carry over amounts for the last three years mean is that for 17/18 you can, if you wish, make contributions up to the full value of your earned income because even though you don't know yet your PIP amount for 17/18 you know you have plenty of 14/15 carry over available to to cover the excess over the 40K annual allowance. Disregarding any significant changes in salary etc you will also be able to do this for the next two years. After that you will have to be more careful as you will likely no longer have any carry forward available. The problem is that you don't know your DB PIP amount until after the end of the tax years and it is then too late to fine tune your SIPP contribution to hit the annual allowance exactly. I suppose the best you can do is make an informed etimate of you PIP before the end of the tax year and then adjust your SIPP contributions to be safely below the AA. If you turn out to have ended up significantly below it you can always use the difference as carry forward in the next tax year.
  • enthusiasticsaver
    enthusiasticsaver Posts: 15,594 Ambassador
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    I am in the LGPS and I calculated just my contribution (shown on payslip) and deducted that from my annual salary and invested up to 80% of that in my SIPP. It is my understanding it is only the employee contribution which counts. Obviously this assumes you earn less than £40k.
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  • Linton
    Linton Posts: 17,171 Forumite
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    enthusiasticsaver wrote: »
    I am in the LGPS and I calculated just my contribution (shown on payslip) and deducted that from my annual salary and invested up to 80% of that in my SIPP. It is my understanding it is only the employee contribution which counts. Obviously this assumes you earn less than £40k.

    Yes it is only your contribution that count for the earnings limit, but it is possible that the £40K allowance which includes the total amount of DB benefit gained rather than your contribution could be the tighter constraint.
  • zagfles
    zagfles Posts: 20,323 Forumite
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    enthusiasticsaver wrote: »
    I am in the LGPS and I calculated just my contribution (shown on payslip) and deducted that from my annual salary and invested up to 80% of that in my SIPP. It is my understanding it is only the employee contribution which counts. Obviously this assumes you earn less than £40k.
    If you've got a good pension scheme like the LGPS then you need to worry about the annual allowance at earnings of about £30k+, not £40k. Because the pension input will be getting close to £40k with a salary of £30k.

    If you earn well under £30k then you can usually forget about the annual allowance and just worry about the earned income limit.
  • hyubh
    hyubh Posts: 3,531 Forumite
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    zagfles wrote: »
    If you've got a good pension scheme like the LGPS then you need to worry about the annual allowance at earnings of about £30k+, not £40k. Because the pension input will be getting close to £40k with a salary of £30k.

    If an LGPS member earns £30K, then the pension input amount for their CARE scheme membership will be £9786.
  • zagfles
    zagfles Posts: 20,323 Forumite
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    hyubh wrote: »
    If an LGPS member earns £30K, then the pension input amount for their CARE scheme membership will be £9786.
    Yes, so someone on £30k would get very close the annual allowance if they put 100% of earnings into their pension. It'd vary a bit if there's a discrepancy between the inflation figure used for increasing accrued LGPS pension, and the inflation figure HMRC use for AA purposes. So even £30k is not "safe".

    This myth that the annual allowance doesn't apply unless you earn over £40k need quashing.
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