maximum I can pay in to my SIPP

[bucklb]

I've searched any number of sites, including this one, and still not sure of my position. Hoping a straight question will beget a usable answer, please...

I work for the civil service and I'm in their defined benefit scheme (as well as having a SIPP). That always complicates things when I request a tax refund from HMRC, so I assume it will here too


AIUI the limit on annual payments in to pensions (ignoring any carrying forward of allowances and bearing in mind I'm motivated by tax relief) is the lower of:
> £40k (I believe gross, but not 100% sure)
> Earnt income, but I have no idea if this is gross or nett. It doesn't really matter as my nett income is a shade above £40k anyway.

I'm told that my employers pay anually £17k (gross) in to this defined benefit pension and that I pay annually £4k (gross) too. I am working on the assumption that I can still pay up to a further £19k (gross) in to my SIPP and still stay within the £40k threshold. If I'm correct then that would mean I could pay £15k "cash" in to my SIPP, that with tax benefit would amount to £18.75k (gross) - allowing a small amount of wriggle room.
NOTE : I'm assuming that the employer's contribution has to be included in the pension payment figures

Is my understanding sound, or am I barking up the wrong end of the stick?


TIA Bob

[BullDog]

The £40k contribution cap for tax relief is gross. So what can actually be contributed depends on earned income, tax band and employer contributions. Don't forget that if you have unused contribution allowance from the previous three years you can bring that forward as long as you have the earnings to cover the total contribution in the year you contribute. That's a layperson interpretation.

[mc2fool]

AIUI the limit on annual payments in to pensions (ignoring any carrying forward of allowances and bearing in mind I'm motivated by tax relief) is the lower of:
> £40k (I believe gross, but not 100% sure)
> Earnt income, but I have no idea if this is gross or nett. It doesn't really matter as my nett income is a shade above £40k anyway.

It's all gross.

I'm told that my employers pay anually £17k (gross) in to this defined benefit pension and that I pay annually £4k (gross) too. I am working on the assumption that I can still pay up to a further £19k (gross) in to my SIPP and still stay within the £40k threshold. If I'm correct then that would mean I could pay £15k "cash" in to my SIPP, that with tax benefit would amount to £18.75k (gross) - allowing a small amount of wriggle room.
NOTE : I'm assuming that the employer's contribution has to be included in the pension payment figures

For DB schemes it's complicated. Basically you have to ask the scheme for the number.

"For defined benefit pensions, it's based on the capital value of the increase in your pension benefits over the tax year. You can ask your provider for this information." https://www.moneyhelper.org.uk/en/pensions-and-retirement/tax-and-pensions/the-annual-allowance

"For defined benefit (DB) pensions, it is the capitalised value of the increase in the accrued benefits over the tax year." https://techzone.abrdn.com/public/pensions/guide-pension-annual-allowance

Here's what the HMRC internal manual has to say:

"For defined benefits arrangements the pension input amount is based on how much the value of the individual’s accrued pension and, in certain cases, lump sum has gone up over the pension input period. A general ‘rule of thumb’ for defined benefits arrangements is that large pay increases can create large pension input amounts, particularly when combined with long pensionable service. High pensionable pay and high accrual rates also result in higher pension savings. So all other conditions being equal, someone who builds up benefits at a rate of 1/50th per year of service will have a larger pension input than someone with a 1/60th accrual rate.

PTM053300 gives more information on how to work out the pension input amount for a defined benefits arrangement."

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm051100

And if you follow the link through to PTM053300 you'll even find worked examples. Good luck! (Really, best to just ask your scheme for the number!)