pension with No earnings for a number of years

No Earnings for a number of years and wanting to max pension contributions

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If no earnings for  a number of years can you put more then £2880 in to pension this year by using unused relief from earlier years?

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By Paul Crowley
27th Mar 2024 10:40

Talk to your financial consultant. Pension companies are not supposed to accept improper contributions. No details, so also consider the tax relief.
Pension planning is financial advice.

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By carnmores
27th Mar 2024 11:19

you need to clarify exactly how many years

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By David Ex
27th Mar 2024 11:33

Beancounting wrote:

If no earnings for  a number of years can you put more then £2880 in to pension this year by using unused relief from earlier years?

Not sure what you mean. Are there taxable earnings in the current year? As I understand it, the £2,880 aside, you can only get tax relief if you have tax to relieve.

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm044100

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Replying to David Ex:
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By Paul Crowley
27th Mar 2024 12:09

Contributions are usually net of tax, so basic rate tax relief is automatic. Pension seller should be asking questions about entitlement to pay the pension as part of the selling process.

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Replying to Paul Crowley:
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By Beancounting
27th Mar 2024 17:11

The client has spoken to 2 pension advisers. On says that as she has no income in the current year she may contribute £2880 only, and have it topped up by the notional tax amount. However second adviser says she has 3 years unused relief so can do 3 x this figure. The client is feeling bewildered so has asked me. I am unsure so have posted the question on here to gauge the opinion of others. For the avoidance of doubt she has had no paid income since before COVID and is under age 75.

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Replying to Beancounting:
stonks
By WinterDragon
27th Mar 2024 17:21

Gut feeling is the first FA is right as the second would suggest that she could contribute £120,000 having not earned a penny of taxable income in that time - this just doesn't sound right at all.

If a client asked me I'd tell them they need to listen to the FA that they trust and has the appropriate FCA registration and if they insisted on an answer I'd probably give in and tell them my gut feeling but remind them that financial planning is not my area of expertise.

On a side note, if the money was sat in a limited company then I believe contributions ignore the 100% of earnings limit but it has to be wholly and exclusively for the purposes of trade which would be hard to sell if there is no trade. (Happy to be corrected on this if anyone wants to shout at me)

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Replying to Beancounting:
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By Paul Crowley
27th Mar 2024 18:00

The financial advice industry is supposedly regulated.
BUT commissions drive some outrageously bad advice. My gut feel is that the first person is correct. Go with your gut says Ross Kemp on Bridge of lies. Do not recommend that as advice
Not sure what is driving this. That would be my first question to client.
Cribbed this

What is the pension allowance?
What is the pension annual allowance and how does it work ...
The pension annual allowance is the most you can pay into pensions in a single tax year, and still receive tax relief. Currently this is either £40,000 or 100 per cent of your qualifying earnings (whichever is lower). The annual allowance is rising to £60,000 on 6 April 2023.16 Feb 2024

Lower being relevant earnings

Best to challenge the other fellow and get him to commit to paper his opinion after providing the required details
Was the person 'trading' through a company?

Do not become the financial advisor.

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Replying to Beancounting:
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By leeanthonyblackshaw
27th Mar 2024 18:58

A common issue is many IFAs state their view without reference to the tax legislation or specific definitions of what they are referring to eg annual allowance and annual limit (which are different things).

Take a look at FA 2004, s228 & s228A...but then see s190.

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Replying to Beancounting:
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By David Ex
27th Mar 2024 18:59

Beancounting wrote:

On says that as she has no income in the current year she may contribute £2880 only, and have it topped up by the notional tax amount. However second adviser says she has 3 years unused relief so can do 3 x this figure.

They can both be right. The first refers to the client’s Net Relevant Earnings, from which contributions can be paid. The second refers to the maximum amount of relief which the client can claim in respect of contributions made. If there are no NRE the capacity make contributions and therefore to use the relief (possibly including brought forward unused amounts) is zero (st the £2,880).

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By Not Anonymous
27th Mar 2024 20:49

Beancounting wrote:

If no earnings for  a number of years can you put more then £2880 in to pension this year by using unused relief from earlier years?

If there are no earnings in the tax year the contribution is being paid in then unused annual allowance is irrelevant, the maximum relief at source contribution which can be made is £2,880 (net).

This will have 25% added by the pension company to make a gross contribution of £3,600.

Whether any tax has been paid in the current tax year is irrelevant as well.

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