£60K pension increase and running down ISAs

[Brit71]

I earn a bit over £60K and I have around £200K in my ISAs. 51 years old so pension will be available in 4 or 6 years (changeover so unclear)

This year with salary sacrifice I will pay a smidgen under £40K into my pension and next year it will be a little over £43K. Minimum wage rules mean I can't put in any more.

How can I take advantage of the 60K uplift.

There will be some slight savings still that were going to the ISA. I was planning to put these into the pension to take me to the Personal Allowance level, perhaps with top up from ISAs - about £5K or so.

But looking at pension rules it SEEMS that I can put in 17K gross to take it to the full 60K (as I earn just over £60K). I'm prepared to take the ISA down to around 100K , so this will take 6 to 7 years, plenty of time to change course.

Getting pension credit on essentially untaxed income below the Personal Allowance seems odd, so I just wanted to check if I haven't missed anything.

[Brit71]

It's a tax credit not pension credit. Important difference.

Anyway looking into this it did appear to be true that it is up to the account you've earned up to the annual limit. £40K this year and £60K the next.

So it looks like I will be able too move the ISAs into the SIPP.

[daverobev]

Yes you can make personal contributions up to whatever the limit is and receive the credit - but bear in mind the amount you put in AND what the govt chips in both count towards that limit.

So if you put in 4k personal contrib and the govt puts in 1k that counts as 5k.

https://www.onlinemoneyadvisor.co.uk/pensions/sipps/sipp-contributions/

Based on the current SIPP annual allowance you can contribute a maximum of 100% of your income OR up to £40,000 (the gross figure), whichever is lowest. For example, if you earn £30,000, your allowance would be £30,000, capped by your income. If you earn £60,000, it would be £40,000, capped by the maximum allowance.

(SIPP - any pension scheme doesn't matter if it's a SIPP or not)

lthough you can’t backdate SIPP contributions as such, you can use the pension carry forward rule to take advantage of any unused allowances in the previous three tax years.

For example, if you paid £25,000 into your SIPP each year for the last three years, you would have £15,000 of unused allowance per year that you could carry forward, as long as you aren’t subject to tapering. Adding this to your current years’ allowance of £40,000 means you could potentially contribute up to £85,000. However, you would need to be earning at least £85,000 in that year to do so.

In order to be able to use pension carry forward you need to have used up your allowance in the current year, have underused your allowance in at least one of the last three years, and have been a member of your scheme from the year you want to carry forward. Any increased contributions you make in the current year are based on your income in that year, not the previous years.

Ah as it's capped by your income I guess it doesn't help.

[Brit71]

Yes you can make personal contributions up to whatever the limit is and receive the credit - but bear in mind the amount you put in AND what the govt chips in both count towards that limit.

So if you put in 4k personal contrib and the govt puts in 1k that counts as 5k.

https://www.onlinemoneyadvisor.co.uk/pensions/sipps/sipp-contributions/

Based on the current SIPP annual allowance you can contribute a maximum of 100% of your income OR up to £40,000 (the gross figure), whichever is lowest. For example, if you earn £30,000, your allowance would be £30,000, capped by your income. If you earn £60,000, it would be £40,000, capped by the maximum allowance.

(SIPP - any pension scheme doesn't matter if it's a SIPP or not)

lthough you can’t backdate SIPP contributions as such, you can use the pension carry forward rule to take advantage of any unused allowances in the previous three tax years.

For example, if you paid £25,000 into your SIPP each year for the last three years, you would have £15,000 of unused allowance per year that you could carry forward, as long as you aren’t subject to tapering. Adding this to your current years’ allowance of £40,000 means you could potentially contribute up to £85,000. However, you would need to be earning at least £85,000 in that year to do so.

In order to be able to use pension carry forward you need to have used up your allowance in the current year, have underused your allowance in at least one of the last three years, and have been a member of your scheme from the year you want to carry forward. Any increased contributions you make in the current year are based on your income in that year, not the previous years.

Ah as it's capped by your income I guess it doesn't help.

Thank you Dave.  I'm in the fortunate position that I've fully paid back the past four years and I'll be about £19 short this year.  So the limit will be £60,000.

The point about the government credit counting is a good one and I was aware of it, but it wasn't clear in my post.  It would have been an expensive mistake so it's good that you checked my understanding there!

So in roundish numbers I'd be contributing £43K through salary sacrifice, £13,600 through transferring from my ISA to the pension and the government would chip in £3,400.