Self assessment £40k pension allowance

[Craigybaby69]

Hi, if this year I’ve paid in £42k but have plenty of 3 year carry over available, do I just answer no to the question about having to pay the pension charge? I’ve tried putting yes, but can’t see any additional questions to explain there shouldn’t be a charge because of the carry forward from the 3 previous years…. Thanks

[Happy Jim]

I’ve been over the annual £40k a couple of times, but under the rolling 3 year £120k limit…….no tweaks/kicks/penalties here.

Jim

[supersport]

Just say no. Seems you have to account for it yourself.

[Craigybaby69]

When I said paid in £42k, I meant accrued £42k (combo of contributions and investment returns)
I’ll tick the No box…many thanks

[B9]

Craigybaby69 said:

When I said paid in £42k, I meant accrued £42k (combo of contributions and investment returns)
I’ll tick the No box…many thanks

Once it's in the pension, it can grow by 200k in a year and you don't need to do anything. It's about what you put in

[LeoSayer]

B9 said:

Once it's in the pension, it can grow by 200k in a year and you don't need to do anything. It's about what you put in

Quite true. Same applies if market movement makes the value drop.

It's what you pay in plus tax relief (if applicable) to the pension pot.

[Craigybaby69]

It’s an nhs pension, so defined benefit…therefore not just amount paid in as per gov website

“What counts towards the annual allowance
Your annual allowance applies to all of your private pensions, if you have more than one. This includes:

the total amount paid in to a defined contribution scheme in a tax year by you or anyone else (for example, your employer)

any increase in a defined benefit scheme in a tax year”

[LeoSayer]

OK so not investment returns then.

Get a pension input statement from the pension administrator and tell them you need it for annual allowance calculation.

[ucb]

Craigybaby69 said:

It’s an nhs pension, so defined benefit…therefore not just amount paid in as per gov website

“What counts towards the annual allowance
Your annual allowance applies to all of your private pensions, if you have more than one. This includes:

the total amount paid in to a defined contribution scheme in a tax year by you or anyone else (for example, your employer)

any increase in a defined benefit scheme in a tax year”

NHS pension contribution rates and what you pay in are almost totally unrelated to the Pension Input Amount which is what counts towards your AA.
You need to call NHSBSA and request an AA statement and you should do it annually

[Craigybaby69]

Thanks so far…I’ve got the statement showing last 4 years…this is the first year it’s over £40k, previous 3 years total about £90k so there’s plenty of carry forward available…
Can you educate me please, if contributions were circa £12k in 21-22, but “pension input growth” £42k…. What is the £30k difference if it’s not investment returns?

[Mr Pointy]

Craigybaby69 said:

Thanks so far…I’ve got the statement showing last 4 years…this is the first year it’s over £40k, previous 3 years total about £90k so there’s plenty of carry forward available…
Can you educate me please, if contributions were circa £12k in 21-22, but “pension input growth” £42k…. What is the £30k difference if it’s not investment returns?

Is this a Defined Benefit or a Defined Contribution pension?

[Craigybaby69]

NHS Career average earnings, which I believe makes it defined benefit

[Craigybaby69]

55 minute call to HMRC, finally got an answer….ok to answer No to the £40k+ question , despite being £42k, because carry forward brings it below £40k…. Not convinced she was right but my conscience is clear!

[LeoSayer]

Craigybaby69 said:

Thanks so far…I’ve got the statement showing last 4 years…this is the first year it’s over £40k, previous 3 years total about £90k so there’s plenty of carry forward available…
Can you educate me please, if contributions were circa £12k in 21-22, but “pension input growth” £42k…. What is the £30k difference if it’s not investment returns?

Your contributions to a DB scheme are irrelevant when it comes to AA calculation.

As I recall the formula is something like:
- Increase in deferred annual pension since last year x16 plus
- Increase in lump sum

There is some allowance made for inflation as well.

[ucb]

The NHS scheme is currently 2 different schemes, commonly referred to as the 1995 scheme and 2015 scheme. I have contributions in both. So you need a statement from both schemes as to the total PIA across both schemes.

Your contributions to the pension scheme (which is currently the latter 2015 scheme) are based on a sliding scale percentage of your WTE salary. range is 5-14.5% of total pensionable earnings.

Your pension is then calculated as 1/54 x Total Pensionable Earnings (for the 2015 scheme). This example is shamelessly stolen from a medic who knows what they are talking about:

Suppose your latest TRS says your 2015 pension so far was £13000 on 31.3.2022.
You will get 3.1% CPI of Sept 2021 plus 1.5% bonus added on 1.4.22.
That's 4.6% of £13k i.e. £598, so now a total of £13598.
To this we need to add 5 days of pension to bring the total to the end of the 2021/22 tax year on 5.4.22.
Suppose that you will earn £108000 of pensionable pay in 2022/23.
You will earn pension at 1/54 of pay.
So for 5 days' pay that's 5/365 x £108k/54 = £27.40 to be added to the £13598 making £13625.40.
Multiply by 16 to get the Closing Value for 2021/22 = £218006.40.
Add 3.1% CPI of Sept 2021 to get the Opening Value for 2022/23 i.e. £224764.60.

In 2022/23 you will earn pension at 1/54 of £108k pay i.e. £2000 of new pension to add to the £13598 of 1.4.22 above, so on 31.3.23 you have £15598 of pension. This is the figure that would appear on next year's TRS.

Under the current rules you will get 10.1% CPI of Sept 2022 plus 1.5% bonus added on 1.4.23.
That's 11.6% of the £15598 = £1809.37 extra for a total of £17407.37 on 1.4.23.
Plus another 5 days 5/365 x £108k/54 = £27.40 added on 5.4.23, a total pension of £17434.77.
Multiply by 16 to get the Closing Value for 2022/23 = £278,956.32.
Subtract the Opening Value of £224764.60 to get the 2015 scheme pension input for 2022/23 of £54,191.72

As you can see, your contributions matter not one iota in these calculations and are simply the price of a ticket to the pension scheme

[Craigybaby69]

Wow…thanks…I’ve quickly read that and not gonna pretend it’s sunk in…will need to go through it much slower but that still might not help! But yes, got statements for both schemes which together add up to about £42k…think a financial adviser or pension advisor will be needed for when the carry forward runs out in 2 or 3 years time.

[ucb]

Depends on whether the current CPI has adversely affected you for the past year or your salary has reached a point whereby you're going to get a charge every year (I do now)