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Contribute carry forward to SIPP rather than workplace pension

JuanDB
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Contribute carry forward to SIPP rather than workplace pension

#211768

Postby JuanDB » March 31st, 2019, 10:58 pm

Hi,

Advice sought please.

I have a workplace personal pension with Scottish Widows that I contribute to via salary sacrifice. Whilst the fees are not unreasonable, the choice of funds is limited. Therefore I do not want to add additional funds to this.

Ahead of the end of tax year I’ve been checking unused carry forward from tax year 15/16 and want to fully utilise this. My thought is to open a SIPP this week and contribute to this to the value of 80% of the carry forward from 15/16. The logic being HMRC will top this up with basic rate tax to the carry forward value. As an additional rate tax payer I will then reclaim 25% through my self assessment tax return later this year.

For completeness. My pension contributions for this year exceed my taper allowance so I will be using part of the carry forward to cover contributions in 18/19 and the remainder will be deposited in a SIPP per the above para. I believe this is correct and valid and I understand how to capture this on the SA tax return.

Is anyone aware of any issue with this approach, or confirmation it is ok, that would be most helpful.

Thanks in advance,

Juan.

DrBunsenHoneydew
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Re: Contribute carry forward to SIPP rather than workplace pension

#211835

Postby DrBunsenHoneydew » April 1st, 2019, 2:03 pm

Yes that plan will work fine.

Indeed, paying a large pension input can get your income below the £110,000 threshold test so avoiding the taper tax.
Of course, you would pay more standard Annual Allowance tax that claws back your extra tax relief, but avoiding the taper will leave you better off overall.

JuanDB
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Re: Contribute carry forward to SIPP rather than workplace pension

#211843

Postby JuanDB » April 1st, 2019, 2:53 pm

Thanks for the feedback. It all seems quite straightforward however the process to calculate carry forward, and the mechanism to report it, seem very reliant on self certification. Hence looking for a bit of confirmation as to approach.

Unfortunately I’m referring to the pension taper, not the personal allowance. My maximum contributions in year is £10k, hence looking to optimise use of carry forward.

Thanks,

Juan.

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Re: Contribute carry forward to SIPP rather than workplace pension

#212257

Postby melonfool » April 2nd, 2019, 10:06 pm

You can only use unused previous year's allowance once you have used all of this year's allowance.

Mel

JuanDB
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Re: Contribute carry forward to SIPP rather than workplace pension

#212263

Postby JuanDB » April 2nd, 2019, 11:28 pm

melonfool wrote:You can only use unused previous year's allowance once you have used all of this year's allowance.

Mel


Thanks, I am aware of that requirement. This year I have fully used my 2018/19 allowance and half of the carry forward from 15/16. It’s the balance to use the remainder of carry forward from that year I am planning to pay into a nascent SIPP. Account opened, just need to transfer funds.

Thanks,

Juan.


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