HMRC has issued a warning to pensioners about seeking financial advice, as it is unable to provide guidance on certain aspects of an individual’s circumstances. The tax authority was approached by a retired teacher who had questions about setting up a SIPP (self-invested personal pension).

They queried: “I’m a retired teacher who claims Teacher Pension. I also work part-time. I have used my ISA Allowance. Can I also set up a SIPP in this tax year? ” In response, a customer service representative stated: “Most SIPPS are not linked to ISAs unless it is a specific type. Unless the SIPP is linked, which the pension provider should tell you, there wouldn’t be an issue.”

The customer then provided further details about their situation, stating: “Just to explain more, I’m not claiming State Pension yet. However, if I were to stop my supply teaching, can I still open a SIPP and what is my investment limit per year? ” The tax body then asked if they would have any employment or taxable income. They replied: ” There is a teacher pension and some savings. Currently got a cash ISA. I am happy to continue working part-time but interested to know if the SIPP is possible if I stopped working.”

A woman checks her finances
A retired teacher had a query about their pensions (Image: Getty)

HMRC then informed them that there is no limit to how much a person can pay into a pension scheme, but there is a limit on the tax relief you can get on your pension savings.

The customer sought to understand how the rules applied to their situation, asking: “Put simply, I think I need to remain in employment in order to invest significantly into a SIPP. Allowance being up to £60,000. Otherwise it’s reduced to £2,888 if I’m fully retired. Correct? ” HMRC confirmed: “Yes, you do need to have a taxable income in order to get tax relief on it above the £2,888.”

The individual then posed another question about their circumstances: “I am a retired teacher receiving a teacher pension. I am also working as a supply teacher and paying into a work pension. Can I also open a SIPP or would it be better to pay into the work pension in terms of added funds. If I stop work, can I open a SIPP? “.

HMRC responded with caution, advising: “You would need to get advice from a financial adviser as to whether the work pension or SIPP is better for you, that’s not something we can advise on. Yes you can have both a SIPP as well as a work pension and pay into both.”