How much can I contribute to a SIPP if I also have a DB pension?

Hi,

I have recently retired as a firefighter and started a new job earning more money. I have maxed out my ISA contributions - just made the 2024 tax year end with £20k and have added another £20k in this tax year. I have my fire service pension I receive and the salary of my new job takes me into the higher tax rate of 42%, I now earn £60,100. I want to bring my payments down to the lower tax rate of 21% by investing part of my income in a private pension. That would mean investing about £18k a year into my pension so that my income is under £43k to qualify for the 21% tax rate. I read somewhere that I may only be permitted to invest up to £10k a year into my pension if I was currently receiving another pension. For clarity, my current pension is a workplace DBS pension from the fire service. As it is a DBS pension, am I permitted to invest more than £10k a year into a private pension?

Thanks.

It's great to hear that you are utilising your ISA allowances, that’s a really good way to save/invest tax efficiently.

There are a few allowances/limits when it comes to saving/contributing into a pension, therefore it can be quite complicated!

You are right, there is a £10,000 limit on what you can invest/save into defined contribution (money purchase) pensions called the Money Purchase Annual Allowance (MPAA). However, generally one is only subject to this allowance upon taking income from a defined contribution (Money Purchase) pension, not a defined benefit (final salary) pension. Assuming you have not taken any income from a defined contribution pension, then it is unlikely you will be subject to the MPAA and its £10,000 annual limit.

Assuming you are not subject to the above, then one can save/contribute into a pension up to the level of the Annual Allowance which is currently £60,000 p/a. That’s said, within this you are restricted to making contributions of no more than your relevant earnings (earned income, not pension income) or the annual allowance (£60,000) if your earnings are higher than the allowance.

Without having complete knowledge of your personal and financial circumstances, I cannot provide you with advice or say for certain, therefore the above is for information purposes only and is not intended to be personal financial advice.

If the above isn’t clear, please do not hesitate to give me a call and we can talk through it.