Employer Auto Enrolment Pension and SIPP - Tax Reclaim?
Discussion
Hi all,
I've got a bit of a strange employment situation at the moment, whereby I'm employed by a foreign company with no UK presence. I'm asking here as our HR team abroad have literally zero knowledge on this topic and are proving less than helpful. I am a higher rate tax payer for reference.
I did agree with them a pension contribution amount (%) when contracting and their solution to this was to opt in to the employer auto enrolment pension scheme, however this is not favourable for me for the following reasons:
It appears this scheme doesn't allow salary sacrifice (is this correct?)
It appears to put a limit on both mine and my employers contributions upto the ~£50k threshold, meaning my contributions and therefore tax savings are low.
It looks like the pension company (NEST) in this case, will be reclaiming the HMRC relief on my behalf for any contributions so that is a benefit I guess.
If the above is correct, I will of course keep this in place due to the (free) contributions from my employer, but this is no where near sufficient for my contributions and I will need to start something up on my own. For this reason, I am considering a SIPP but have zero knowledge of this.
My questions are:
Is a SIPP the best option for me here?
If I opt for a SIPP and make contributions monthly from my NET pay, how do I go about reclaiming the 40% tax for this?
Any suggestions for a provider, or an alternative?
Many thanks
Jack
I've got a bit of a strange employment situation at the moment, whereby I'm employed by a foreign company with no UK presence. I'm asking here as our HR team abroad have literally zero knowledge on this topic and are proving less than helpful. I am a higher rate tax payer for reference.
I did agree with them a pension contribution amount (%) when contracting and their solution to this was to opt in to the employer auto enrolment pension scheme, however this is not favourable for me for the following reasons:
It appears this scheme doesn't allow salary sacrifice (is this correct?)
It appears to put a limit on both mine and my employers contributions upto the ~£50k threshold, meaning my contributions and therefore tax savings are low.
It looks like the pension company (NEST) in this case, will be reclaiming the HMRC relief on my behalf for any contributions so that is a benefit I guess.
If the above is correct, I will of course keep this in place due to the (free) contributions from my employer, but this is no where near sufficient for my contributions and I will need to start something up on my own. For this reason, I am considering a SIPP but have zero knowledge of this.
My questions are:
Is a SIPP the best option for me here?
If I opt for a SIPP and make contributions monthly from my NET pay, how do I go about reclaiming the 40% tax for this?
Any suggestions for a provider, or an alternative?
Many thanks
Jack
No idea where your £50k has come from as the total annual maximum you can contribute in one year is £40k.
If you and your employer are paying that in there is not much more you can do going forward.
But you could look back at previous years and you can contribute more to make up for the past three years shortfalls.
If you and your employer are paying that in there is not much more you can do going forward.
But you could look back at previous years and you can contribute more to make up for the past three years shortfalls.
Apologies - I wasnt clear in my initial post.
From the way it has been explained to me, the auto enrolment pensions that are offered will only let you max out contributions upto the £50k earnings threshold, which mean when i've opted to contribute 5% of my earnings, the actual amount if 5% of qualifying earnings (under £50k) so therefore much lower than what i should actually contribute and therefore the tax relief gained will be in the 20% bracket, not the 40% bracket.
if this is the case, there is no point in my upping my contribution within this wrapper, hence exploring a SIPP to top up my contributions
From the way it has been explained to me, the auto enrolment pensions that are offered will only let you max out contributions upto the £50k earnings threshold, which mean when i've opted to contribute 5% of my earnings, the actual amount if 5% of qualifying earnings (under £50k) so therefore much lower than what i should actually contribute and therefore the tax relief gained will be in the 20% bracket, not the 40% bracket.
if this is the case, there is no point in my upping my contribution within this wrapper, hence exploring a SIPP to top up my contributions
JackCT said:
From the way it has been explained to me, the auto enrolment pensions that are offered will only let you max out contributions upto the £50k earnings threshold, which mean when i've opted to contribute 5% of my earnings, the actual amount if 5% of qualifying earnings (under £50k) so therefore much lower than what i should actually contribute and therefore the tax relief gained will be in the 20% bracket, not the 40% bracket.
? If you're a 40% tax payer, and make any pension contribution, then you receive 40% relief (possibly 20% and you have to claim the other 20%) until your pension contribution exceeds the amount you're paying 40% on or your pension contribution allowance (£40K unless your pay is high enough you encounter the allowance taper)You’re correct that the Auto Enrollment pension caps out relatively low - if you agreed that the employer will give you a % amount toward your pension you’re probably better off setting up a SIPP and asking them to simply transfer their contribution into it.
You can then make your own contributions, and claim the additional rate relief from HMRC (easiest to ring them and they’ll adjust tax code).
You can then make your own contributions, and claim the additional rate relief from HMRC (easiest to ring them and they’ll adjust tax code).
JackCT said:
From the way it has been explained to me, the auto enrolment pensions that are offered will only let you max out contributions upto the £50k earnings threshold
That's not strictly accurate. NEST themselves do not have a limit. It is because your employer has chosen to opt for the "qualifying earnings" method of calculating contributions so that they only pay the legal minimums.If that is the case they may not want to contribute any more on your behalf. If it is not just get them to change to paying full contributions.
xeny said:
JackCT said:
From the way it has been explained to me, the auto enrolment pensions that are offered will only let you max out contributions upto the £50k earnings threshold, which mean when i've opted to contribute 5% of my earnings, the actual amount if 5% of qualifying earnings (under £50k) so therefore much lower than what i should actually contribute and therefore the tax relief gained will be in the 20% bracket, not the 40% bracket.
? If you're a 40% tax payer, and make any pension contribution, then you receive 40% relief (possibly 20% and you have to claim the other 20%) until your pension contribution exceeds the amount you're paying 40% on or your pension contribution allowance (£40K unless your pay is high enough you encounter the allowance taper)In which case, how do I go about reclaiming the extra 20%? is that something organised by NEST, or do I need to file a return or similar?
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