SIPP pension - can I carry over?

[betterwhenthesunshines]

I'm not earning at the moment so my contributions are limited. I meant to open a SIPP pension this year but, as it's never my top priority to do this kind of stuff, I've left it until the last minute.

I know you can 'carry over' pension payments if you haven't used your allowance for the year, so does this mean that if I open my pension next week when the tax year has changed I can still claim the basic tax relief on a contribution by allocating it to the 2011 / 2012 year?

You will need to use your current years allowance of £50k/100% of earnings/£3600 for non taxpayer.

The amount you contribute to your pension each year is subject to an 'annual allowance'. The annual allowance is the maximum amount of pension saving you can have each year that benefits from tax relief. If your pension saving is more than the annual allowance you will pay a tax charge on the amount this exceeds the annual allowance. The annual allowance has reduced from £255,000 in the 2010-11 tax year to £50,000 for the 2011-12 tax year. If your pension saving is more than £50,000 you might still not have to pay the annual allowance tax charge. From the 2011-12 tax year if you haven't used all of your annual allowance in the last three tax years you can carry forward any unused annual allowance. This will reduce the amount of your pension saving that may be liable to the tax charge.

The annual allowance therefore only really impacts those people with earnings over £50k and the ability to save over the annual allowance. From what you say this may not be you right now. However the fact you can contribute £3600 (2880) net and receive tax relief, or contribute 100% of your earnings up to the annual allowance may be sufficient. If you suddenly earn vastly more you can use the carry forward as above.

BTW why a SIPP? It may be the right vehicle for you, but they can often have charges that are higher than other pension products and unless you use the features they are not worth it.