SIPP question able to open it for partners and children only?

isayhello · 3 December 2017 at 3:58PM

Hi,

I've just begun to look at some pension paperwork this weekend and if I am correct I've seen that you can open 1 SIPP a year for an individual, so I can open 1 for me and another for someone else?

The websites I looked at only mentioned partners and kids but am I able to open a SIPP for a parent as well? my mother has no income so if I'm able to put in 2880 then with the tax relief she would get the 3600?

Just want to check I understand this properly.

Thanks

dunstonh · 3 December 2017 at 6:03PM

and if I am correct I've seen that you can open 1 SIPP a year for an individual,

You can have as many pensions as you like. The 1 a year rule ended in 2001.

so I can open 1 for me and another for someone else?

Only the individual or their legal guardian can open a pension for another person (workplace schemes aside). However, most pensions will accept third-party payments from connected parties.

The websites I looked at only mentioned partners and kids but am I able to open a SIPP for a parent as well?

No. However, the parent can open the pension and you can make a third party payment to it.

isayhello · 4 December 2017 at 3:13AM

Thanks @dunstonh

You can have as many pensions as you like. The 1 a year rule ended in 2001.

I'll double check this, I'm sure I saw somewhere that you're only able to open or contribute to 1 SIPP per tax year. Newbie question follow up then, if that restriction isn't there, what stops a non taxpayer opening up 10 SIPP's which someone else can contribute to and they can earn the £720 tax relief on.

Slight follow up on the working out as well, if £2880 is contributed, isn't 20% of this figure the tax relief value - £576. Why is it £3600 which is then reduced to £2880, that may be a simple thing to understand but I just found it a little confusing.

Thanks

stoozie1 · 4 December 2017 at 6:37AM

The 2880/3600 limit is for the individual whose pension it is not who is paying into it for them. The only exception is employer contributions.

Linton · 4 December 2017 at 9:42AM

isayhello wrote: »

Thanks @dunstonh

I'll double check this, I'm sure I saw somewhere that you're only able to open or contribute to 1 SIPP per tax year. Newbie question follow up then, if that restriction isn't there, what stops a non taxpayer opening up 10 SIPP's which someone else can contribute to and they can earn the £720 tax relief on.

Slight follow up on the working out as well, if £2880 is contributed, isn't 20% of this figure the tax relief value - £576. Why is it £3600 which is then reduced to £2880, that may be a simple thing to understand but I just found it a little confusing.

Thanks

1) You can contribute to as many SIPPs or other pensions as you like as long as the total is within the allowances. The 1/year restriction is on ISAs.

2) If a non tax payer contributes more than £3600 (including tax relief) HMRC should detect this with the result that you dont get more than £720.

3) Pension contributions should be expressed in gross terms - it avoids a lot of confusion. So the non tax payer limit is £3600, 20%=£720 of which is paid by HMRC as "tax relief".

NotSkint · 4 December 2017 at 10:49AM

Linton wrote: »

2) If a non tax payer contributes more than £3600 (including tax relief) HMRC should detect this with the result that you dont get more than £720.

Just to clarify;
A non tax payer can contribute more than £3600 if they earn more.
They can still contribute up to their gross income and get tax relief even though none was paid. The earnings do need to be income, as defined by HMRC, but it is a useful boost when one can afford to pay into a pension from either savings or partners spare income.

Triumph13 · 4 December 2017 at 10:54AM

isayhello wrote: »

Slight follow up on the working out as well, if £2880 is contributed, isn't 20% of this figure the tax relief value - £576. Why is it £3600 which is then reduced to £2880, that may be a simple thing to understand but I just found it a little confusing.

Just to echo Linton's point, you pay £2,880 to the pension, HMRC pays £720 direct to the pension and together they make your gross £3,600. Note that your mother will only get this tax relief if she is under 75 years of age.

dunstonh · 4 December 2017 at 12:05PM

I'll double check this, I'm sure I saw somewhere that you're only able to open or contribute to 1 SIPP per tax year. Newbie question follow up then, if that restriction isn't there, what stops a non taxpayer opening up 10 SIPP's which someone else can contribute to and they can earn the £720 tax relief on.

Pensions are controlled by an annual contribution allowance. Not a product count per year. Contribution eligibility is monitored by HMRC under the NI number.

Slight follow up on the working out as well, if £2880 is contributed, isn't 20% of this figure the tax relief value - £576. Why is it £3600 which is then reduced to £2880, that may be a simple thing to understand but I just found it a little confusing.

Pension contributions are always treated as gross. You make a £3600 contribution, of which 20% is paid for by tax relief. It isnt £2880 and grossed up. It is £3600 and reduced down to pay a net contribution.

isayhello · 5 December 2017 at 11:48PM

Thanks for all your replies, very useful. I now understand the key point is that the limit is on the allowance rather than the number of products held.

The SIPP would be for my mother who is 61, so for 14 years, I could make these contributions for her, unfortunately because she isn't earning, the limit would have to be 3600 per year but over 14 years, this could be a good sum.

Thanks

SIPP question able to open it for partners and children only?

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