Making contributions to your SIPP
Paying as much as you can into your SIPP will help to boost your retirement income. Here, we tell you everything you need to know about SIPP contributions limits and rules.
Please remember, SIPPs are aimed at people happy to make their own investment decisions. Investment value can go up or down and you could get back less than you invest. You can normally only access the money from age 55 (57 from 2028). We recommend seeking advice from a suitably qualified financial advisor before making any decisions. Pension and tax rules depend on your circumstances and may change in future.
How much can I pay into a SIPP?
You can contribute 100% of your annual income to your SIPP each tax year, up to the maximum annual allowance of £60,000. This annual allowance includes personal contributions, employer contributions and tax relief.
Your personal contributions receive a top up from tax relief. The amount of tax relief you receive will match your highest rate of income tax.
Employer contributions count towards your £60,000 annual allowance but are not limited by your income.
If you do not have any earnings in a tax year, you can still contribute a maximum of £3,600 (£2,880 in personal contributions and £720 tax relief).
Personal pension contributions: simple examples
Basic rate taxpayer (earning below £50,270)
James pays £8,000 into his SIPP.
His pension provider claims £2,000 tax relief (20% of the total contribution) for him automatically.
This increases his contribution to £10,000.
Higher rate taxpayer (earning above £50,270)
Stuart is a higher rate taxpayer which means he can receive 40% tax relief on his contributions.
He pays £8,000 into his SIPP and his provider claims £2,000 (20%) tax relief for him automatically.
He can claim back another £2,000 (20%) tax relief using his annual self-assessment tax return.
This means his £10,000 contribution has effectively cost him £6,000.
SIPP contributions once you start taking a pension income
When you start taking a taxable income from your SIPP you trigger the Money Purchase Annual Allowance (MPAA). This reduces your maximum annual allowance to the lower of £10,000 or your annual income.
This means you could make a maximum contribution of £8,000 and receive £2,000 tax relief.
The MPAA is not triggered if you only take a tax-free lump sum from your SIPP.
SIPP contributions for high earners
If you have an income of £200,000 or more, you may be subject to a tapered annual allowance. This reduces the amount you can pay into your SIPP that tax year and receive tax relief.
Two figures are important when determining whether you are affected – your threshold income and your adjusted income.
The calculations are complex but your threshold income is your annual income before tax, including salary, bonuses, dividend income, income from property and so on, but minus personal and employer pension contributions. Your adjusted income is your income before tax plus the value of any employer pension contributions.
Your annual allowance reduced by £1 for every £2 that your adjusted income exceeds £260,000.
If it reaches £360,000, you will be subject to the maximum £50,000 reduction in annual allowance. This means your annual allowance would be reduced to £10,000.
If your threshold income is below £200,000, the annual allowance taper will not be triggered.
|Annual Contribution Allowance
|Up to £260,000
‘Adjusted income’ is your income before tax – including dividends, savings interest and rental income – plus your employer pension contributions.
This is different to ‘threshold income’ which is your annual income before tax, minus personal and employer pension contributions.
If your annual ‘threshold income’ is below £260,000, you will not have a reduced annual allowance. If it is over £260,000, you will need to check your ‘adjusted income’.
Using carry forward to boost SIPP contributions
You may be able to increase the amount you can invest if you have not used your full allowance in any of the previous three years. This is known as the carry forward rule.
To carry forward, you MUST have:
- Been a member of a pension scheme in each tax year from which you carry forward.
- Used your full annual allowance in the current tax year.
- Contributed less than the annual allowance in one or more of the last three tax years (including personal and employer contributions).
- Earned at least the amount you want to contribute in this tax year, including any unused allowance you want to carry forward, if you are making personal contributions.
If you are eligible you use up any unused annual allowance from the earliest year first.
How to make SIPP contributions
You can make personal contributions and/or employer contributions to your SIPP.
You can make a personal contribution to your SIPP via:
- Monthly Direct Debit. You can set up regular monthly contributions using your online account.
- Debit card. You can make one-off contributions using your online account.
- Internal transfer from your Trading Account. You can contribute money from your Trading Account using your online account.
- Bank transfer. To make a personal contribution by bank transfer you will need to complete and return an ii SIPP Contribution Form. Making contributions by bank transfer will take longer to reach your account. Please note, it could take up to 10 working days to apply the contribution to your SIPP. However, during busy periods, the time could vary. If you intend to contribute approaching tax year end, you should refer to the tax year end deadlines when they are published, these will be available on our website.
Employer contributions to your SIPP
A SIPP is a personal pension but you can still ask your employer to contribute to it.
To find out more about how to set up employer contributions to your SIPP and the tax relief you could claim, read our guide to employer contributions.
By completing and returning an ii SIPP Contribution Form, you can arrange:
- Single employer contributions to your SIPP. Please note, it could take up to 10 working days to apply the contribution to your SIPP. However, during busy periods, the time could vary. If you intend to contribute approaching tax year end, you should refer to the tax year end deadlines when they are published, these will be available on our website
- Monthly employer contributions to your SIPP
How much tax relief will I get?
The amount of SIPP tax relief you can receive depends on your income tax band.
Your provider will always claim 20% tax relief for you as standard.
It usually takes 6-11 weeks to receive the tax reclaim from HMRC.
SIPP contributions FAQs
You can set up regular investing using your SIPP account.
Regular investing allows you to buy investments monthly with no trading fees. You can invest as little as £25 per month and change or stop your investments at any time.
You can make your regular contributions by setting up Direct Debit payments to your SIPP or by using the available cash in your account.
You can still contribute up to £3,600 a year to your pension if you are not earning. You can pay in up to £2,880 and receive a maximum of £720 tax relief.
You can contribute more than your annual allowance, but you cannot claim tax relief on contributions which exceed your annual allowance.
If you claim tax relief on contributions which exceed your annual allowance, you may be subject to an annual allowance charge. The excess will be added to your taxable income for the tax year. You will need to declare this when completing and submitting your self-assessment tax return to HMRC.
However, your annual allowance could be more than £60,000 if you qualify for "carry forward".
If you have taken a taxable income from your SIPP, you trigger the Money Purchase Annual Allowance (MPAA). This reduces your maximum annual allowance to the lower of £10,000 and your annual income.
The MPAA is not triggered if you only take a tax-free lump sum from your SIPP.
There is no minimum contribution amount for your SIPP.
The most you can add to a SIPP in a tax year is £60,000. You may be able to add more than £60,000 if you qualify for carry forward.
There is no age limit on contributing to a SIPP, although you will only receive tax relief on your contributions up to age 75.
If you do not start taking a regular income, you can continue to contribute up to £60,000 a year to your SIPP until you reach 75, providing you have sufficient earnings.
After you have started income drawdown, your annual allowance for contributions falls to the lower of £10,000 and your annual income. You can choose to start income drawdown at any time after reaching the age of 55 (57 from 2028).
Anyone else can contribute to your pension if they wish to.
Contributions from someone other than your employer are treated as if you made the contribution yourself. This means that you will receive the tax relief at your own rate. These contributions will also count towards your annual allowance.
Any funds that you contribute to your SIPP will be automatically added to the non-drawdown part of your SIPP and we will recalculate the notional split between drawdown and non-drawdown funds each time you make a contribution to your account.