Pension Contributions - no relevant Earnings
Abrahaj
Member
For a retired person who is living on rental income and has done since 2015, whilst they can make a pension contribution of £3,600 for current tax year, can they carry forward the £3,600 per year from the last 3 years as they have made no pension contributions (they do have a pension pot with us already). If they can, I presume they would not get tax relief as they don’t have current year earnings to support it. What would the Annual Allowance implications be?
Comments
Hi, as the client does not have any pensionable income for the current tax year, they are limited to a maximum gross contribution of £3,600 regardless of unused allowance(s) from previous years. Hope this helps.
They have a £40,000 annual allowance but no relevant earnings.
They can carry forward up to three years of unused annual allowance, but they have no relevant earnings.
They can make a £2,880 net contribution and get relief at source of £720 each tax year. They can't carry this forward.
Technically there is no limit to the amount of money you can put into a pension. However, on personal contributions you will get no tax relief on any amounts above the higher of £3,600 or your net relevant earnings. And if you put in more than your available annual allowance, you'll have a tax charge on the excess. And if your pension fund exceeds the lifetime allowance when tested, you'll have a tax charge on the excess.
Plus most pension providers, but not all, specifically state that personal contributions that are not eligible for tax relief are not allowed to be paid to the scheme.
You didn't mention how old they were. If the client is over 75 there is also no tax relief available to any contributions.