What is the maximum I can contribute?

[posted]

I'm on the NEST scheme and so I can vary my contribution.
Long story short, I've got some savings I was going to pile into a SIPP but I thought better do it via workplace as I gain the 8% NIC saving and the AMC fee is lower at 0.3%. The only stink is the 1.8% contribution charge. So overall 26.2% tax relief you could say, vs the SIPP 20%

So, potentially I would be happy to PSE my entire salary for a few months.

Now I know the HMRC rules on Pension contribution is max 100% or of salary or £60k.

What are RM's rules on who much I could contribute? I read somewhere that PSE commitments can't take you below National Living Wage
Do I just need to make sure that my remaining gross doesn't take me under 38 hours x £12.21 (NLW)?
and that figure needs to be before charitable deductions or after?

[RobertT]

I think I've read before that RM technically allow around 85% of pay to be put into your pension, because you've got to allow for other deductions too. But that would mean forgoing PSE on all your contributions, as to benefit from that you can't let your pay fall below the National Minimum Wage.

So hours worked x NMW is a good way of working it out.

Things can always change and may do in the forthcoming budget and beyond(?). But a pension is currently the most tax efficient savings vehicle around and doing that via RM gives a little extra boost because of PSE.
So in my opinion, the best way is to max out your RM pension first while sticking within PSE. With anything over going into your SIPP.

In that scenario you could then make up your total contributions to 100% of earnings(max of £60k) using your SIPP. Bearing in mind employer payments need to be included aswell.

It might also be worth mentioning that if you've already accessed the taxable element of a DC pension, you will have triggered the Money Purchase Annual Allowance which reduces your overall contribution limit into DC schemes to £10k.


* It is possible to pay in more than you earn, but the overpayment is added to your income and taxed accordingly.

[posted]

I think I've read before that RM technically allow around 85% of pay to be put into your pension, because you've got to allow for other deductions too. But that would mean forgoing PSE on all your contributions, as to benefit from that you can't let your pay fall below the National Minimum Wage.

So hours worked x NMW is a good way of working it out.

Things can always change and may do in the forthcoming budget and beyond(?). But a pension is currently the most tax efficient savings vehicle around and doing that via RM gives a little extra boost because of PSE.
So in my opinion, the best way is to max out your RM pension first while sticking within PSE. With anything over going into your SIPP.

In that scenario you could then make up your total contributions to 100% of earnings(max of £60k) using your SIPP. Bearing in mind employer payments need to be included aswell.

It might also be worth mentioning that if you've already accessed the taxable element of a DC pension, you will have triggered the Money Purchase Annual Allowance which reduces your overall contribution limit into DC schemes to £10k.


* It is possible to pay in more than you earn, but the overpayment is added to your income and taxed accordingly.

Thank you.
The amount I had in mind was about £30k so I won't be anywhere near the £60k limit. I've also not accessed my Pension.
Happy to do it over the course of 2 years via workplace and SIPP, until I've depleted my savings (to substitute the drop in net wages).
85% would be good if they let me.

I've just had a look at the CWU handbook on NEST and in the PSE section it states

You will pay this way automatically and take part in PSE as long as:
• Your pay after PSE (post-PSE pay) is over the PSE minimum amount (which is currently £13,200 a year, around £253 a week if you are paid weekly or £1,100 a month if you are paid monthly).
• The PSE adjustment and any other salary exchange arrangements that you may have, for example childcare vouchers, do not reduce your post-PSE pay below the National Minimum Wage or the PSE minimum amount.

what was the £13,200 based on at the time and how do I work out the current limit?
To be honest, with the NLW for 38 hours being £24k, it sounds like I won't be able to contribute as much as I would like as I would trigger that 2nd rule

I'll make a decision after 26th Nov!

[RobertT]

If I remember correctly, when PSE was introduced in 2015 the participation limit was £10,000. The idea being that if your pay dropped below that, some state benefits could be affected.

As those benefits are often based on the amount of NIC's you pay, and as the starting rate for paying NIC's has increased, I assume the participation limit for PSE has increased too?

The current starting rate for paying NIC's is £242 per week, so maybe they're adding a bit on to make sure?

That's my understanding of how it works anyway, although I could be wrong.