Maximum PSE Payments

Post by **RobertT** » 19 Mar 2018, 09:36

Hawkey99 wrote:Surely if you pay the 2nd £100 into a SIPP you would have already have paid 20% tax on it taking it down to £80 and then the SIPP tax relief taking it back to £100.

Therefore is there really any difference in putting it into an AVC or a SIPP.

You’re right when you say you’ll pay 20% tax via payroll and then get it back when you put it in your SIPP. But you will also be paying NIC’s on the second £100, so you will be earning £100 gross but having £32 taken off.
If you want a gross payment of £100 to go into your SIPP, you’ll have to put in that £68 net amount plus another £12 of your own money.

If you put the second £100 in your AVC you would lose the benefit of PSE on the whole £200.
So as far as making your money work best for you on the way in, it would be more advantageous to pay in as much as you can within the PSE limits and put the rest in your SIPP.

That’s my understanding anyway, unless someone else wants to comment?

mark.cup · Post by **mark.cup** » 19 Mar 2018, 13:05

RobertT wrote:
Hawkey99 wrote:Surely if you pay the 2nd £100 into a SIPP you would have already have paid 20% tax on it taking it down to £80 and then the SIPP tax relief taking it back to £100.

Therefore is there really any difference in putting it into an AVC or a SIPP.
You’re right when you say you’ll pay 20% tax via payroll and then get it back when you put it in your SIPP. But you will also be paying NIC’s on the second £100, so you will be earning £100 gross but having £32 taken off.
If you want a gross payment of £100 to go into your SIPP, you’ll have to put in that £68 net amount plus another £12 of your own money.

If you put the second £100 in your AVC you would lose the benefit of PSE on the whole £200.
So as far as making your money work best for you on the way in, it would be more advantageous to pay in as much as you can within the PSE limits and put the rest in your SIPP.

That’s my understanding anyway, unless someone else wants to comment?

Yes there is a difference as dropping out of PSE means your £200 pound costs you £12 more from from your take home pay due to national insurance

But if you stay within PSE and divert any other money to a SIPP you are getting the best of both worlds

I'm not sure if that makes sense but I know what I mean

mrcurve · Post by **mrcurve** » 20 Mar 2018, 23:19

New Minimum wage from 1st April, its going up to £7.83

mark.cup · Post by **mark.cup** » 21 Mar 2018, 07:17

mrcurve wrote:New Minimum wage from 1st April, its going up to £7.83

Yes and if the pay deal doesn't get accepted adjustments will be needed or some of us will drop out of PSE!

Rang up for a form 10 days ago seems everytime a 2nd call is needed

Post by **Aquarius** » 21 Mar 2018, 17:08

mark.cup wrote:
mrcurve wrote:New Minimum wage from 1st April, its going up to £7.83

Yes and if the pay deal doesn't get accepted adjustments will be needed or some of us will drop out of PSE!

Rang up for a form 10 days ago seems everytime a 2nd call is needed

Do what i do - get 1 form then print off several copies so no more hassle and waiting

mark.cup · Post by **mark.cup** » 21 Mar 2018, 17:51

dandydon wrote:
mark.cup wrote:
mrcurve wrote:New Minimum wage from 1st April, its going up to £7.83

Yes and if the pay deal doesn't get accepted adjustments will be needed or some of us will drop out of PSE!

Rang up for a form 10 days ago seems everytime a 2nd call is needed
Do what i do - get 1 form then print off several copies so no more hassle and waiting

Good idea I think I will do just that

foxyjarvis · Post by **foxyjarvis** » 21 Mar 2018, 18:48

Are there 53 weeks in this tax year?

Post by **RobertT** » 22 Mar 2018, 04:30

foxyjarvis wrote:Are there 53 weeks in this tax year?

The current tax year ends on Thursday 5th April, so as that weeks wages are paid on the first day of a new tax year(Friday the 6th), then I assume it's just 52 weeks this year.

foxyjarvis · Post by **foxyjarvis** » 22 Mar 2018, 17:40

I made a lump sum AVC payment and I was sent a tax certificate which I forwarded on to the tax office a couple of weeks ago. I've had no refund in my wages yet and have just heard on the HMRC automated phone
line there is a 5 week backlog. Will they backdate it?

Post by **nataddick** » 22 Mar 2018, 21:31

Foxy - I have made 3 lump payments into my Flexiplan AVC over the last 3 tax years, all of them paid gross (as there is no alternative with RM - unlike my SIPP) Each time I have received the relevant certificate provided by RM Pensions in confirmation that I have subsequently sent to HMRC.

The first time I did it - no response whatsoever. I rang HMRC and entered their telephone labyrinth and was promised a response that never actually materialised. Having already been registered for the Government Gateway service to get online access to my State Pension forecast, I decided to set up a Personal tax account under the same Gateway service. Once I received confirmation it was set up, I then complained about the absence of a response to my first lump sum AVC and got a quick response online and a reasonable timescale for a resolution.

For the second and third lump sum AVC’s, I entered the details into my Personal tax account first and also sent HMRC the relevant certificates from RM through the post. In both cases, my PAYE Notice of Coding was amended within a fortnight and my subsequent taxable pay reduced accordingly !

For anyone interested in setting up a Personal tax account with HMRC and the services it provides, here is the link

https://www.gov.uk/personal-tax-account" onclick="window.open(this.href);return false;

Caution ! - HMRC Personal tax account is not perfect as it is a relatively newish service but still better than being held in a call queue and eventually being connected to an operator who knows less about pensions and tax that you do ! They are really not that bright - struggle to understand difference between lump sum payments into AVC’s and Annuities.

If you have made lump sum AVC then your tax code should be adjusted to reflect the gross lump sum contribution that you made. There is a timing issue here, as we approach the end of the current tax year but you should get the tax relief back either this year or next depending on when HMRC get around to processing it. Chances are you will get it in the next tax year as HMRC can hold on to your tax relief longer and spread the ‘rebate’ over 12 months !

A laboured explanation I know, but based on my recent experience.

foxyjarvis · Post by **foxyjarvis** » 23 Mar 2018, 14:51

Nataddick, I really appreciate the informative and detailed reply. Thanks.

Dexydog · Post by **Dexydog** » 12 Apr 2018, 17:03

My heads hurting trying to understand this PSE lark.
I started paying into the pension last week, a total of 60%.
I'm part-time 30 hours, last year I earned 25k so roughly 45 hours a week averaged over the year.
I set my AVC's at 60% thinking that keeps me above the LEL.
Last week my deductions were 171.26 at 54% and £19.03 at 6% and both were taken off before tax and NI. Happy days.
This week, I've done 38 hours overtime, and it would seem I have shat out on the PSE as both these figures have been taken off on the right hand column under deductions.
Arrears on the 9 hours O/T from last week of 51.38 and 5.71 have shown in left hand column before deductions.
Fag packet calculations my tax is bang on for the combined total of this and last weeks arrears of pension, despite the right hand column pension deductions, but by my reckoning NI AT 65.69 is about £23 over what it should be had I seemingly not maxed out on PSE.
My question being, if overtime is variable, and when on holiday for 6 weeks I only get the 30 hours, how on earth do I work out the sweet spot for not getting slammed for NI??
Thanks in advance, wages were useless when I rang up and although tried to explain, I wasn't entirely convinced what they said was correct- basically that I need to reduce my 54% AVC's but couldn't say down to what level.

heapsy · Post by **heapsy** » 12 Apr 2018, 17:32

Dexydog wrote:My heads hurting trying to understand this PSE lark.
I started paying into the pension last week, a total of 60%.
I'm part-time 30 hours, last year I earned 25k so roughly 45 hours a week averaged over the year.
I set my AVC's at 60% thinking that keeps me above the LEL.
Last week my deductions were 171.26 at 54% and £19.03 at 6% and both were taken off before tax and NI. Happy days.
This week, I've done 38 hours overtime, and it would seem I have shat out on the PSE as both these figures have been taken off on the right hand column under deductions.
Arrears on the 9 hours O/T from last week of 51.38 and 5.71 have shown in left hand column before deductions.
Fag packet calculations my tax is bang on for the combined total of this and last weeks arrears of pension, despite the right hand column pension deductions, but by my reckoning NI AT 65.69 is about £23 over what it should be had I seemingly not maxed out on PSE.
My question being, if overtime is variable, and when on holiday for 6 weeks I only get the 30 hours, how on earth do I work out the sweet spot for not getting slammed for NI??
Thanks in advance, wages were useless when I rang up and although tried to explain, I wasn't entirely convinced what they said was correct- basically that I need to reduce my 54% AVC's but couldn't say down to what level.

Overtime isn't counted. To stay within PSE you use your basic pay ONLY. No allowances or overtime. Deduct your AVC payments from your basic wage. Divide that figure by your contracted hours, 30, 24 or whatever. If the figure is below the minimum hourly rate, then you drop out of PSE. Simple.

Dexydog · Post by **Dexydog** » 12 Apr 2018, 20:33

Thanks for reply.
However....
1. Why would I have been ok last week but not this? ie last week the 171.26 plus the 19.03 was taken off before NI deductions, this week not so.
2. 1st 9 hours o/t was shown as arrears from last week and taken off before deductions, the rest not so.
My basic is 6 weeks per year. The rest of year a minimum of 9 hours o/t, how does this compute when trying to work out what the optimum AVC percentage?
Apologies if I sound dumb but I just don't get it.
If it was that simple would you not just take the minimum wage and multiply by, in my case 30 (or 39 if this does count as wages suggested), then work out the percentage from there?? In my case 30x 7.83 from April 2018 of 234.9 and take this from basic of 317.15 = 82.85 as a percentage. (or 39x 7.83 I can't see is any different it's still the same pro rata if allowed under PSE). This would give a percentage of around 18%. In this case do I take the 6% standard payment off before or after the 18%?
Hope I'm making sense, if not I'm looking at this the wrong way me thinks.

heapsy · Post by **heapsy** » 13 Apr 2018, 17:15

Week 52 I fell out of PSE, even though nothing changed regarding my payments. Week 1 I came within PSE, and my Pensions Contributions Pay (top right of payslip) jumped by the amount I mentioned in a previous post in this thread. Week 2 I fell back out of PSE. Think, payroll must average out you pay through the month, for PSE purposes at least. Someone did mention previously that the minimum hourly rate had gone up, this, coupled with the delay in giving us our long overdue pay rise is probably to blame here. I strongly suspect that PSE will resume, once our pay rise comes through. Please note, the new pension arrangement started in Week 1, so I am now paying a higher contribution EVEN THOUGH the pay rise has not come through. When it does, I think our contribution may increase further. This might cause further issues, will have to wait on that one.
The issue of you having pay in arrears seems to be a local one, maybe based on late payment of overtime? Sorry I can't be of more help, I'm a bit muddled myself when it comes to what goes on in payroll and pensions departments. They are not always very helpful when trying to sort things out, depends on who you get through to.