Making Contributions

If you do not have any earnings in the tax year, you can still make SIPP contributions of up to £2,880 and receive tax relief of up to £720, giving you a total of £3,600 gross. If you have begun to drawdown income from your SIPP, you can contribute up to £4,000 gross per tax year.

Your employer can contribute to your SIPP, alongside or instead of a workplace pension. Contributions can be made regularly, or as a lump sum. If your employer pays a chunk of your salary directly into your SIPP, you may benefit, as you will not have to pay National Insurance on that sum. Employer contributions count towards your annual allowance but are not limited by your earnings. To arrange contributions from your employer, simply complete an ii SIPP contribution form.

If you contribute more than your allowance, you will not receive any tax relief, and may also be subject to an annual allowance charge, which will be added to the rest of your taxable income for the tax year. The only time you can contribute more than your SIPP contribution limit is if you qualify for "carry forward".

If you have accessed your SIPP and only taken your tax-free lump sum, you are still able to pay in up to 100% of your earnings into your SIPP (subject to a maximum of the current Annual Allowance of £40,000 gross) and receive Tax Relief up to that level. Alternatively, if you are taking taxable income from your pension, you can still contribute up to £4,000 gross per tax year. All SIPP contributions will be tested against your lifetime allowance.

You can receive tax relief on contributions equivalent to 100% of your gross annual salary (capped at £40,000 per year).

In effect this means you can contribute up to £32,000 of your own money, with the remaining £8,000 topped up by the government.

You can continue to receive tax relief on your SIPP contributions until you reach the age of 75. After that, you can still contribute but will no longer receive the benefits of tax relief.

If you do not start withdrawing a regular income, you can continue to contribute up to £40,000 annually to your SIPP until you turn 75.

After you have started income drawdown, your annual allowance for contributions is £4,000. You can choose to start income drawdown at any time after reaching the age of 55.

If you only take your tax-free lump sum and do not start withdrawing a regular income, you can continue to contribute up to 100% of your gross annual salary (capped at £40,000 per year).

After you have started to take a taxable income from your flexi-access drawdown, your annual allowance for contributions is reduced to £4,000 (effectively meaning you can pay £3,200 personally and still receive £800 tax relief from the government). You can choose to take your tax free lump sum or commence income drawdown or both once you reach age 55.

You will not receive tax relief on contributions above the annual allowance. You may also be subject to an annual allowance charge and you will need to declare this when completing and submitting your self-assessment tax return to HMRC.

However, you may be able to contribute more than your allowance if you qualify for 'carry forward'.

“Carry forward” is effectively used where an individual has the ability to utilise any unused SIPP annual allowance’s from the previous three years. If you qualify, you can potentially receive tax relief on contributions over £40,000.

In order to qualify, you must have:

• Been a member of a pension scheme in each year you are carrying forward allowance from.
• Used your full £40,000 allowance in the current year.
• Contributed less than your allowance in at least one of the last three tax years.
• Earned at least as much as the total you are contributing in the current tax year.