SIPPs: Understanding Contribution Limits and Building Your Retirement

The contribution limits for SIPPs, or Self-Invested Personal Pensions, vary depending on the individual’s age and the type of SIPP. As of the 2023/2024 tax year, the annual allowance for most individuals is £40,000, but it can be lower for high earners. There’s also a three-year carry forward rule that allows you to use any unused annual allowance from the previous three tax years, which could potentially increase your contribution limit.

It’s important to note that tax rules can change, so it’s strongly recommended to consult a financial advisor for the most up-to-date information based upon your personal circumstances.

Introduction to SIPPs

A Self-Invested Personal Pension (SIPP) is not just a pension; it’s a vehicle for long-term investment in your future. With a SIPP, you have the freedom to choose and manage your own investments, whether it be in stocks, funds, or commercial property. This autonomy is empowering but also demands that you understand how to navigate the operational nuances—especially the contribution limits and tax reliefs that define the SIPP framework. Gaining a firm grasp on how SIPPs work is the first step to building a diversified and potent retirement plan, as eloquently explained on Alltrust’s What is SIPP page for those wanting to begin their journey What is SIPP.

Annual Contribution Limits for SIPPs

Each tax year brings with it an opportunity to save for retirement in a tax-efficient way through a SIPP. The annual contribution limit is your gateway to tax relief, which can be a considerable amount, depending on your income tax bracket. SIPPs allow for contributions up to £40,000 or 100% of your earnings, whichever is lower, each tax year, with the chance to carry forward unused allowances from the previous three years under certain conditions. Understanding these limits is pivotal to maximizing your retirement savings without drawing unwelcome tax charges. For an intricate overview and expert advice on contribution limits, Alltrust provides detailed guidance to ensure you’re making the best decisions for your financial future SIPP Contribution Limits.

Lifetime Allowance in SIPPs

While annual limits control what you can put into your SIPPs each year, the lifetime allowance is a ceiling on the total pension savings you can amass over your lifetime before incurring a tax charge. As of my knowledge cutoff in April 2023, this figure stands at £1,073,100. Exceeding the lifetime allowance can lead to a tax charge of up to 55% on the excess when you take it as a lump sum, or 25% if taken in any other form. These numbers underline the importance of strategic planning throughout your working life to avoid a tax shock in retirement. For further information on the lifetime allowance and how it affects your retirement strategy, Alltrust has you covered with their expertise on the subject SIPP Lifetime Allowance.

Tax Relief and SIPPs

In the realm of retirement saving, SIPPs stand out due to their favourable tax treatment. They are vehicles through which individuals can receive tax relief at their marginal rate. This incentive means that for every £80 you pay into your pension, the government adds £20, providing a 25% boost to your contributed funds up to the annual allowance. For higher-rate taxpayers, the benefit is even more pronounced, as they can claim an additional amount through their tax return, effectively reducing the net cost of their contribution.

Tax BandTax Relief at SourceTotal Claimable
Basic Rate25%20%
Higher Rate25% + claim 20%40%
Additional Rate25% + claim 25%45%

Understanding and harnessing this element of tax planning can result in a more comfortable retirement and aligns precisely with an investment ethos wherein you make your money work as effectively as possible SIPP Tax Benefits.

Optimising SIPP Contributions

The process of optimising SIPP contributions is multi-faceted, involving:

  • Year-round planning: Spreading contributions throughout the year can manage cash flow and tax implications more efficiently.
  • Utilising carry-forward rules: This allows you to make larger contributions in a particular year without waste if you have unused allowances from the preceding three years.
  • Assessing personal circumstances: Tailoring contributions in response to changes in income, tax status, or life events to adapt to annual and lifetime limits.

Alltrust offers bespoke structuring for clients that aligns with the complexity of such financial decisions and helps individuals ensure that their contributions are as effective as possible. This strategic planning is crucial to optimising your SIPP for the long term.

Understanding SIPP Contributions Through Different Phases of Life

The strategies for SIPP contributions often shift as one progresses through different stages of life. For someone in their 30s, the emphasis might be on growing the pension pot aggressively, hence maximizing contributions might be prudent. In contrast, a person in their 50s may be looking at a careful calibration of contributions to optimize for the lifetime allowance while considering the possibility of catch-up contributions.

  • In your 30s and 40s: Focus on growth, utilize maximum allowable contributions.
  • In your 50s: Balance between growth and approaching the lifetime allowance cap, implement catch-up contributions if necessary.
  • Approaching retirement: Potentially wind down contributions, focus on planning for withdrawal and tax efficiency in retirement.

Each of these life stages presents unique considerations that Alltrust’s advisors can help navigate as part of a coherent lifetime financial strategy Types of SIPPs.

Types of SIPPs and Contribution Structures

Choosing the right type of SIPP is crucial, as each comes with a distinct contribution structure. Here are the main types of SIPPs you can consider:

  • Low-cost SIPPs: Typically targeted at individuals comfortable with choosing their own investments without the need for continuous advice.
  • Full SIPPs: Offer a more comprehensive range of investment options and typically come with a higher cost, often suited to those with larger pension pots or complex investment needs.
Low-cost SIPPFull SIPP
CharacteristicsCost-conscious, self-managedHigh-value, advice-seeking clients
FeaturesLimited investment options, lower feesWide investment choice, personalised advice

When considering which SIPP to open, think about your investment experience, the size of your pension pot, and the level of advice you require. Alltrust provides a deep dive into the different types of SIPPs available, empowering you to make an informed choice tailored to your specific financial situation Understanding SIPP Investment Choices.

SIPP Eligibility and Its Effect on Contributions

SIPP eligibility can have a direct effect on the contributions you’re able to make. Generally, anyone below the age of 75 with relevant UK earnings can pay into a SIPP and receive tax relief. Here’s a quick overview of eligibility criteria:

  • Age: Typically, the younger you are, the longer your pension has to grow.
  • Earnings: Tax relief on contributions is limited to 100% of your annual earnings or the annual allowance, whichever is lower.
  • Residence: UK residency is generally required for tax relief eligibility.

For detailed information on the criteria that may affect your ability to contribute to a SIPP, Alltrust’s SIPP Eligibility page provides all the guidelines you need to determine how you can maximize your SIPP contributions SIPP Eligibility Criteria.

The Role of Employer Contributions in SIPPs

It’s also possible for employers to contribute to your SIPP, and these contributions can markedly increase your retirement savings. These contributions can count towards your annual allowance, and when combined with personal contributions, should not exceed the limit. However, employer contributions are considered a benefit in kind and may have different tax treatment.

  • Employer contributions: They are not subject to National Insurance contributions and are deducted from earnings pre-tax, providing immediate tax benefits to both employee and employer.

Understanding the tax implications and benefits of employer contributions is key to your overall SIPP strategy, and Alltrust offers insights into how to navigate and negotiate these contributions SIPP Employer Contributions.

Catch-Up Contributions for Late Starters

For individuals who may have commenced their retirement savings later in life, SIPPs provide the facility for catch-up contributions. These are advantageous for enhancing your pension pot in the years leading up to retirement:

  • Individuals over the age of 50 can make higher annual contributions.
  • This can be particularly beneficial for those who have experienced a peak in earnings later in their careers.

Making the most of these provisions requires understanding how catch-up contributions work and the best way to utilise them within the framework of annual and lifetime allowances. More information can be found in Alltrust’s comprehensive guide on maximising your retirement savings through late-life contributions SIPP Catch-Up Contributions.

Influence of Income on SIPP Contributions

The amount of money you can contribute to a SIPP is directly related to your earned income. The current rules state:

  • £3,600: You can contribute and still receive tax relief even if you have no earnings or earn less than this amount.
  • 100% of your earnings: The maximum contribution that qualifies for tax relief, up to the annual allowance.

It’s vital to plan your contributions according to income fluctuations, as changes could affect the tax relief you receive and your total pension savings. To understand how your income influences your SIPP contributions and the strategies you can employ, explore Alltrust’s resources on this topic Income and SIPP Contributions.

Risk Management: Over-Contributing to SIPPs

Exceeding contribution limits in your SIPP can result in punitive tax implications. Here is what can happen if you over-contribute:

  • Annual Allowance Charge: On contributions that exceed the annual allowance.
  • Lifetime Allowance Charge: On the overall pension savings that exceed the lifetime allowance upon withdrawal.

Staying vigilant about these limits and actively managing your contributions is essential to avoid unnecessary penalties. For insights into risk management regarding your SIPP contributions, Alltrust offers expert advice Steps to Correcting Over-Contributions.

Monitoring Your SIPPs Regularly

Keeping a close eye on your SIPP contributions will help you reap maximum benefits.

  • Establishment of regular review schedules.
  • Utilisation of advanced tools for tracking and analysis of your pension performance.

Engaging with Alltrust’s monitoring systems and services will ensure you stay within the limits and keep your retirement planning goals on track Monitoring SIPP Contributions.

Preparing for Future SIPP Contribution Limit Changes

SIPP contribution limits and the wider tax landscape are subject to change. It is therefore crucial to remain informed and prepared:

  • Regular updates on legislation and tax rules.
  • Flexibility in your retirement planning to adapt to these changes.

Alltrust endeavors to keep their clients ahead of the curve by providing up-to-date information and strategies in the event of any changes to SIPP policies SIPP Contribution Limit Changes.

Utilising Expert SIPP Advice

Given the complexity surrounding SIPPs, expert financial advice can be invaluable:

  • Personalised Consultations: Tailored advice from experienced financial advisors can optimise your SIPP strategy.
  • Long-Term Planning: Professional input assists with navigating through tax implications and investment options.

Alltrust’s team of advisors is on hand to help you maximise the potential of your SIPP contributions, with an understanding that it is not just about saving for the future, but investing in a retirement that is rewarding and secure Expert SIPP Advice.

Understanding the Intersection of SIPP Fees and Contribution Limits

When it comes to SIPPs, it’s not just about how much you can contribute but also the fees that accompany these investments:

  • Comparison of provider fees.
  • Analysis of cost-benefit ratios for different types of SIPPs.

Alltrust’s guidance on SIPP fees and how they can impact your contribution strategy is a vital resource. It helps ensure that the costs associated with your SIPP don’t erode the value of your retirement savings Understanding SIPP Fees.

Learning from Real-Life SIPP Contribution Scenarios

Case studies and real-life scenarios can provide pragmatic insights into the application of SIPP contribution limits:

  • Understanding varied strategies and outcomes.
  • Drawing lessons from the experiences of others.

Alltrust shares case studies to provide context and practical knowledge that can help shape your approach to your SIPP contributions SIPP Case Studies.

Concluding Your SIPP Contribution Plan

Armed with comprehensive knowledge about SIPP contribution limits and how to effectively manage them, it’s time to take action:

  • Reflect on and refine your contribution strategy.
  • Engage with the tools and advice offered by Alltrust to craft a well-rounded and tax-efficient retirement plan.

Revisiting your plan regularly, staying informed of changes, and seeking expert advice can help ensure that you’re making the best possible contributions to your SIPP, paving the way for a financially secure retirement. Next Steps in SIPP Contributions.

Frequently Asked Questions About SIPP Contribution Limits

How Much Can My Company Pay Into My SIPP?

The amount your company can pay into your Self-Invested Personal Pension (SIPP) is dictated by the annual allowance rules specified in the Finance Act 2004. Crucially, your company’s contributions, along with your own, are considered ‘pension inputs’ and are summed to measure against the annual allowance.

As detailed in the HMRC Pensions Tax Manual, the annual allowance—the maximum amount that can be contributed to pension schemes in one year without incurring tax charges — is typically £40,000 for the current tax year. However, it’s important to note that from the tax year 2023-24 onwards, the annual allowance has been set at £60,000.

Moreover, if previous years’ allowances have not been fully utilized, it is possible to carry forward the unused allowance from the last three tax years, which can significantly increase the amount that can be paid in up to the maximum annual allowance for the current year, combined with the carried-forward amount.

Annual Allowance£60,000 for tax years 2023-24 onwards
Carry ForwardFrom the last three tax years
Order of UseEarliest year’s unused allowance used first
LimitationCannot exceed the combined annual allowance
Previous Years’ ImportanceUnused allowances can increase current limit

Key Takeaways on SIPP Annual Allowances:

Your company can use this allowance alongside any personal contributions, with the understanding that the total pension input amount is within the set annual allowance after accounting for carried forward allowances. Always consult a tax advisor or a pensions specialist to ensure compliance with the regulations and to maximize pension contributions effectively. For more tailored advice and services related to SIPPs, don’t hesitate to explore our pension offerings on

What happens if I pay too much into my SIPP?

If you pay too much into your Self-Invested Personal Pension (SIPP), you may face an annual allowance charge. The annual allowance is the maximum amount of money you can contribute to your pension schemes each year without tax penalties. For example, if your salary for a given period is £180,000 and you contribute 10% (£18,000) while your employer contributes 20% (£36,000), your total contributions will be £54,000. If this amount exceeds your annual allowance for the year and you have no unused annual allowance to carry forward, you will be required to pay the annual allowance charge.

Key Takeaways

Annual AllowanceThe maximum amount you can contribute to your pension schemes each year without incurring tax penalties
Excess ContributionsContributing more than the annual allowance without available carry forward results in an annual allowance charge
ExampleIf an individual on a £180,000 salary has a total pension contribution of £54,000 without unused allowances, they will have to pay the annual allowance charge
Carry ForwardUnused annual allowances from the last three tax years can be carried forward to increase the current year’s annual allowance
Tax PenaltiesFailure to stay within the annual allowance limit could lead to tax penalties – the annual allowance charge
Self-AssessmentThe charge needs to be reported on a Self-Assessment tax return and the tax paid alongside regular taxation


If you wish to explore the intricacies of managing your pensions and investments, you might consider delving into our comprehensive pension advisory services. With expert guidance, you can make informed decisions on how to best prepare for retirement.

Can I pay more than 40k into my pension?

When considering the possibility of contributing more than £40,000 to your pension, several factors influence this, such as the annual allowance, carry-forward rules, and any transitional protections.

The annual allowance is the maximum amount of money you can contribute to your pension pots in a year before you have to pay tax. For most people, this limit is £40,000, but for some, it can be lower, for instance, if you have a very high income or if you’ve already started drawing a pension.

However, if you haven’t used your full annual allowance in the previous three tax years, you may be able to use carry-forward to increase your contributions above the typical £40,000 cap.

Here’s a simplified overview of the annual allowance and carry-forward rules:

Standard Limit£40,000 per year or 100% of your earnings, whichever is lower.
Carry-ForwardUnused allowances from the past three tax years can be added to the current year’s allowance.
Tapered AllowanceHigh-income individuals may have a reduced allowance, depending on threshold and adjusted income.
Money Purchase Annual Allowance (MPAA)If you’ve already accessed a pension, the MPAA may further limit contributions to £4,000 per year.


It’s essential to seek professional financial advice or check with your pension advisor to understand your specific circumstances. They can help you navigate the complexities of tax rules and ensure you optimise your pension contributions effectively.

The answer to whether you can pay more than £40k into your pension fundamentally rests on the details of your financial situation, any unused allowances from previous years, and adherence to HMRC rules and regulations around pension contributions.

What is the 3 year rule for SIPP?

The 3 year rule for SIPPs refers to the provision under UK pension regulation that allows individuals to carry forward unused annual allowances from the previous three tax years to the current tax year. This can be beneficial for those who have not fully utilised their annual allowance in the preceding years and wish to make a larger pension contribution without facing an annual allowance charge.

Starting from the tax years 2023-24 onwards, the annual allowance for the current tax year is used first, which is £60,000. After utilising the current year’s allowance, any unused annual allowance from the previous three tax years can be carried forward, and it must be used starting with the unused allowance from the earliest tax year first

If you require further information on managing your SIPP and understand how the 3-year carry-forward rule can work to your advantage, consider exploring Alltrust’s SIPP services.

Can my company contribute to my SIPP?

Yes, a company can contribute to an individual’s Self-Invested Personal Pension (SIPP). For other money purchase arrangements, such as SIPPs, the pension input amount for each ‘mini’ tax year is the sum of all member contributions that qualify for tax relief and all employer contributions made on behalf of the individual during a pension input period that ends in the ‘mini’ tax year.

Notably, these contributions are included in the calculation method as summed in PTM053200 from the Pension’s Tax Guide, with adjustments for any changes in tax year structures, such as the splitting of the tax year into ‘mini’ tax years for purposes such as the annual allowance and money purchase annual allowance.

Here’s an explanatory example:

Sandip’s SIPP received both Sandip’s personal contributions and his employer’s contributions.
The contributions made from 1 June 2014 to 31 May 2015 totaled £24,000.
In the next input period, from 1 June 2015 to 8 July 2015, the total contributions amounted to £4,100.
The total pension input amount for Sandip’s pre-alignment tax year was £28,100, which fell below the annual allowance of £80,000 for that mini tax year; hence, there was no chargeable amount for him for the pre-alignment tax year.

This means your company can make contributions to your SIPP which will be combined with your own contributions when determining whether you have exceeded the annual allowance for pension contributions in any tax year.

Can I pay a lump sum into my SIPP?

Yes, you can pay a lump sum into your Self-Invested Personal Pension (SIPP). The process of adding funds to your SIPP and how those funds are treated depends on whether they have been designated for drawdown or not, along with your age and the type of pension arrangement.

Particularly when you reach the age of 75 with remaining unused funds under a money purchase arrangement, a scenario described as Benefit Crystallisation Event (BCE) 5B occurs. This is of particular relevance as it concerns how unused pension funds are assessed with regard to the Lifetime Allowance.

Here is an example illustrating the process:

  • Situation: Sylvia, aged 75, has unused funds in her money purchase arrangement.
  • Unused Funds: These are funds not designated for drawdown pension nor used to provide a scheme pension.
  • Crystallisation Event: Sylvia’s remaining funds of £70,000 are tested against her Lifetime Allowance at age 75 as a BCE 5B.
  • Outcome: The funds remain available for benefit payment, but have crystallised for Lifetime Allowance purposes.

In the context of a cash balance arrangement, the valuation approach for remaining unused funds differs, and a specific method is prescribed by the legislation.

Key Takeaways about Paying a Lump Sum into a SIPP at Age 75:

Money Purchase ArrangementUnused funds refer to any portion of your pension savings that haven’t been designated for drawdown pension payments.
Benefit Crystallisation Event (BCE 5B)When you reach age 75, any remaining unused funds trigger a BCE 5B.
Lifetime Allowance TestDuring BCE 5B, the crystallized value of those unused funds is assessed against your Lifetime Allowance (LTA).
Availability of FundsEven though the funds crystallize for LTA purposes, they still remain available for you to draw down as pension income or use for other options within the scheme.

To further understand these rules or explore the vast array of pension options, consider visiting Alltrust’s pension services for specialised guidance tailored to your specific circumstances.

Table of Contents

Scam Warning

Please be aware of scammers purporting to be representing The Resort Group, GPG Partnership (formerly Dolphin), Storefirst or Rowanmoor and any administrator / liquidator representing them.  Click here for more details.

This will close in 20 seconds

Alltrust Enquiry Form