Contributing to SIPP after comopany closure with Civil service pension

[LimitedMan]

Hi,

Many thanks for all previous posts on thread regarding closing company and it now seems the time has come to close company via MVL and take permanent job as civil servant.

Just looking at pension options and the Civil Service alpha scheme looks really good as it is a defined benefit scheme and contribute 5.45% of my salary to get a defined benefit of 2.32% of average salary over the years working.

I had a SIPP that I use to make gross employer contributions to whilst contracting but as mentioned above about to close company and leave SIPP hopefully growing over coming years.

I have been made a very generous offer by civil service that pushes me into bracket where lose some of the child benefit (50k+) and wandered if there was a way could still contribute to SIPP in a tax efficient way. Guess contributions would have to be made from salaried money post tax but is there anyway of clawing some of that back given I am already getting some pension benefit from the civil service alpha defined benefit scheme ?

Hope the question makes sense and any advice greatly appreciated...

Kind Regards,

Limited Man (or soon to be civil service man !)

[northernladuk]

Hope the question makes sense and any advice greatly appreciated...

I am sure it does to your IFA and/or HR

[Cirrus]

If you put after-tax money in your SIPP, your provider will get tax back from the State for you. I'm not sure what the limits are but the likes of Hargreaves Lansdown will have that on their web site.

[Fred Bloggs]

Congratulations. You need to take care you don't exceed the lifetime pension limit of £1 million. With generous occupational pensions, it is easier than you might imagine to fall foul of this. Otherwise, good luck.

[Lance]

If you put after-tax money in your SIPP, your provider will get tax back from the State for you. I'm not sure what the limits are but the likes of Hargreaves Lansdown will have that on their web site.

Correct. Except they will only claim 20% and the OP will be in the 40% tax bracket. I think self-assessment may sort it, but talk directly with the SIPP provider, and/or contact The Pensions Advisory Service

[Lance]

Congratulations. You need to take care you don't exceed the lifetime pension limit of £1 million. With generous occupational pensions, it is easier than you might imagine to fall foul of this. Otherwise, good luck.

With a defined benefits scheme you don't have a 'pot'.
You don't think MPs would dilute their pensions do you? Their pensions would cost millions if bought as an annuity. Civil servants are pretty much the same scheme.

[Cirrus]

With a defined benefits scheme you don't have a 'pot'

You do as far as the £1m is concerned ie you can't have pensions including defined benefits entitlements without someone assessing pots and whether they add up to the current limit.

[Lance]

You do as far as the £1m is concerned ie you can't have pensions including defined benefits entitlements without someone assessing pots and whether they add up to the current limit.

I never knew that.
How would it work if you had a pot that was valued at a million, then annuity rates jumped massively to 1990s level? Unlikely I know. And a purely academic question cos if I had a million I wouldn't put it in a pension.

[Jessica@WhiteFieldTax]

I never knew that.
How would it work if you had a pot that was valued at a million, then annuity rates jumped massively to 1990s level? Unlikely I know. And a purely academic question cos if I had a million I wouldn't put it in a pension.

It's stupidly complicated.

DC pot are valued on withdrawal and you are taxed in excess over allowance.

DB schemes have a surcharge in the year of contribution, and you need a good technical actually or teexhnical pensions bod to get to bottom of it.

[handyandy]

I never knew that.
How would it work if you had a pot that was valued at a million, then annuity rates jumped massively to 1990s level? Unlikely I know. And a purely academic question cos if I had a million I wouldn't put it in a pension.

The rule of thumb is that your DB 'pot' for lifetime allowance purposes is 20 x the annual pension you will receive. As previously mentioned it can be hard to predict that for the future but all DB schemes will tell you what your annual pension would be at the designated retirement date if you froze it now (e.g. left the scheme and made it deferred).

TO give an illustration if you had worked 40 years for an employer in a final salary 1/60ths based scheme and ended up on a final salary of £75k then you would have earned a pension of £50k/year (i.e. 40/60 of £75k). That would mean that HMRC would value your 'pot' as 20 x £50k = £1m which is the current lifetime limit before you get tax penalties. IF you had made other pension savings (SIPP's, Personal Pensions, AVC's) you would then be over your lifetime allowance and end up with a marginal tax rate of 55%!