Savings to SIPP

koops wrote: »

Hello.....My wife is 55 and earns £8000 a year,has no pension but has approx £30000 in savings gathering poor returns.I gather from this forum it would be wise to invest £6000 in a SIPP every year to benefit from the £2000 tax relief, maybe for 3 or 4 years when we plan to retire.My question is....Is a SIPP suitable for a novice,we are not seeking big returns(£2000 relief for 4 years is not bad!).Is HL,s own Conservative low risk portfolio suitable...many thanks,Koops

It might be OK just to leave it as cash. The interest rate will be utterly feeble but for 3 or 4 years that hardly matters. Note that if your wife were to withdraw tax-free lump sum of £2000 each year that would not inhibit her ability to continue to contribute £6000 net. At least I think not; we really need the view of one or two of the people hereabouts who understand the rules against recycling lump sums.

But my main point is that she mustn't drawdown any more than her due TFLS because then she would be limited to contributing £4000 (gross) p.a. = £3200 net in future.

P.S. Shouldn't she contribute £6400 net to get £8000 gross? Or am I too tired today to get the arithmetic right?

kidmugsy wrote: »

Note that if your wife were to withdraw tax-free lump sum of £2000 each year that would not inhibit her ability to continue to contribute £6000 net. At least I think not; we really need the view of one or two of the people hereabouts who understand the rules against recycling lump sums.

Yes I think that is right:

- Only draw the tax free lump sum to avoid MPAA triggering and;
- The £7.5k rule applies for recycling purposes:

http://adviser.royallondon.com/technical-central/pensions/contributions-and-tax-relief/recycling-of-tax-free-cash/

Where recycling doesn't apply
Jim takes a tax-free lump sum of £7,000 on 1 May 2015 with the intention of using it to pay significantly greater contributions to a registered pension scheme.
The amount of the tax-free lump sum doesn't exceed £7,500 and no other lump sums have been paid to Jim in the last 12 months. The recycling rule isn't triggered as the amount of the tax-free lump sum is less than £7,500.