It is a fact that almost every single UK resident under the age of 75 is eligible to take out a SIPP. This even includes minors and those who are unemployed and covers the transferring of money from another pension to a SIPP.
SIPPs allow you to claim tax relief on your pension until the age of 75. Here are some useful facts and figures about eligibility:
Either you or your civil partner must be a UK resident or else be serving the Crown overseas
If you took out the SIPP as a UK resident but have been a non-resident for up to 5 years, it is still possible to benefit from the tax relief it offers
You will be allowed to pay in at least £2,880 during each UK tax year (beginning April 6) which will boost the pension to £3,600 regardless of whether or not you are a taxpayer
In general, this £2,880 figure is the minimum with much higher amounts allowed to be invested. It is possible to make unlimited contributions but this means tax relief only appears at £3,600 or at a sum of money worth up to 100% of “relevant UK earnings” in instances where this amount is deemed to be a personal contribution. Relevant UK earnings is another name for money earned in the UK that is not investment income, savings or a pension
Higher Rate Of Tax
Once your annual earnings exceed £130,000, your higher rate tax relief becomes restricted. Should your total income (besides earnings) exceed £130,000, you will be allowed to contribute a minimum of £20,000 in a tax year and receive the 50% tax relief afforded to top rate taxpayers.
If your income is more than £130,000 in a tax year, there are two ways in which you could claim the 50% rate of tax relief on contributions above £20,000.
Those who have made an average single contribution in excess of £20,000 over the last three years will find that any contribution this tax year which exceeds the three year average will benefit from the 50% tax relief. This is available on contributions up to £30,000
You may also receive a higher rate of tax relief if you have an established record of regular savings.
Once the £20,000-30,000 limit has been reached, you will still receive the standard 20% tax relief which is protected against capital gains and income tax. There are specific higher earners forms which should be filled out if you feel the above information affects you.
Pension Limits
At present, there is a £255,000 limit on your annual contribution up until the 2015/16 tax year. Once you go beyond this limit, regardless of whether it is you or an employer’s contributions, you will be taxed 40% on the extra amount. It is also possible for the annual allowance to be exceeded by contributions made in two separate tax years which would also equal a tax penalty.
The 2015/16 tax year could be the end of the current £1.8 million lifetime limit (it may be lowered thereafter) which takes into account all pension savings. Once you surpass this limit, the additional contributions will be hit with a 55% charge. Those who protected themselves against the lifetime allowance by registering with HM Revenue & Customs before the 2009/10 tax year will lose any extra protection they have should they make any additional contributions to their pens
