If someone pays into a SIPP and pays into a company DC scheme via salary sacrifice is there any interaction other than the requirement to stay below the maximum total contributions in a year?
I'll use an example to hopefully clarify;
ASSUME NO ISSUES WITH TOTAL CONTRIBUTIONS -
Salary £50k
Sal sac pension contribution £20k ( I know there are some employer contribs too..)
Net pay £30k
What is the maximum that can be paid into a SIPP in the same year
(a) £30k
or (b) do they consider the sal sac part and say 'you can only contribute up to your earnings, and you've already contributed £20k sal sac so only £10k left this year to add to SIPP"
I assume it's £30k - otherwise you could bust your limit by contributing more than half salary via sal sac - but some online resources have muddied the water a bit for me... As far as I can see the only sal sac limit is you have to keep yourself above national minimum wage
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Sal sac and SIPP contributions - interaction?
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- Lemon Half
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- Lemon Slice
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Re: Sal sac and SIPP contributions - interaction?
Employer contributions (including salary sacrificed monies) count towards the annual allowance.
Any contributions outside salary sacrifice need to (a) be within the remaining annual allowance and (b) covered by earnings after salary sacrifice.
Using your figures (all figures are gross), and assuming that your employer also contributes £5k on top of the salary sacrifice this gives.
Annual Allowance £60k
Less salary sacrifice+employers contribution = 60k - 20k -5k = £35k of annual allowance remaining
Gross pay after salary sacrifice: £30k
Maximum contributions (with tax relief) = £30k gross (the lower of £30k and £35k)
Actual amount to pay in: £24k (£30k less 20% tax which gets refunded later).
Note that this answer is equally applicable to any defined contribution pension that you fund yourself - when paying in, a SIPP is just another "approved pension scheme".
(i.e. Your question is just as applicable to someone doing salary sacrifice and paying money standalone "stakeholder" pension scheme - just like me)
PochiSoldi
Any contributions outside salary sacrifice need to (a) be within the remaining annual allowance and (b) covered by earnings after salary sacrifice.
Using your figures (all figures are gross), and assuming that your employer also contributes £5k on top of the salary sacrifice this gives.
Annual Allowance £60k
Less salary sacrifice+employers contribution = 60k - 20k -5k = £35k of annual allowance remaining
Gross pay after salary sacrifice: £30k
Maximum contributions (with tax relief) = £30k gross (the lower of £30k and £35k)
Actual amount to pay in: £24k (£30k less 20% tax which gets refunded later).
Note that this answer is equally applicable to any defined contribution pension that you fund yourself - when paying in, a SIPP is just another "approved pension scheme".
(i.e. Your question is just as applicable to someone doing salary sacrifice and paying money standalone "stakeholder" pension scheme - just like me)
PochiSoldi
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- Lemon Half
- Posts: 6385
- Joined: November 4th, 2016, 11:35 am
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Re: Sal sac and SIPP contributions - interaction?
'Any contributions outside salary sacrifice need to (a) be within the remaining annual allowance and (b) covered by earnings after salary sacrifice."
i think that answers it- particularly the outside sal sac bit
i think that answers it- particularly the outside sal sac bit
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- Lemon Half
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Re: Sal sac and SIPP contributions - interaction?
AleisterCrowley wrote:'Any contributions outside salary sacrifice need to (a) be within the remaining annual allowance and (b) covered by earnings after salary sacrifice."
i think that answers it- particularly the outside sal sac bit
thanks !!
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