Paying £2880 into pension when retired

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  • bikeman
    bikeman Posts: 318 Forumite
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    jamesd wrote: »
    There is no five year rule within five years of taking the cash. It's the two tax years before, the tax year it's taken and the two following tax years.

    That's what I meant by 5 years.
  • TBC15
    TBC15 Posts: 1,451 Forumite
    First Post First Anniversary Name Dropper
    Wife has just filled in the questionnaire HL have sent. Once they get that is there any other forms to sign fill in before she can start drawdown?
  • missile
    missile Posts: 11,684 Forumite
    Name Dropper Photogenic First Post Combo Breaker
    Yes, they send you another form online for her to complete and return with her instructions e.g.> 25% tax free and £x per year drawdown, paid monthly.

    Please note: Instructions received by 12th are paid on the 28th of each month.
    "A nation's greatness is measured by how it treats its weakest members." ~ Mahatma Gandhi
    Ride hard or stay home :iloveyou:
  • JohnB47
    JohnB47 Posts: 2,544 Forumite
    First Anniversary Name Dropper First Post
    I'm thinking of getting my wife, self employed, income <£8000, aged 61, to set up a SIPP with HL.

    Am I right in thinking that I still have time, this financial year, to start one with a lump sum of £2880 and at the same time set up regular payments in of £2880/12 ? Do I have to say, at the outset, that I intend to take out 25% later in the year and start drawdown then? I've looked at the on-line form you complete but I can't find a guide to the steps to be taken and when to take them. Just interested in the full procedure before I start things. Anyone know of a step by step guide? eg someone is talking about an illustration, what's that and when does it appear in the sequence?

    Thanks.
  • AnotherJoe
    AnotherJoe Posts: 19,622 Forumite
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    JohnB47 wrote: »
    I'm thinking of getting my wife, self employed, income <£8000, aged 61, to set up a SIPP with HL.

    Am I right in thinking that I still have time, this financial year, to start one with a lump sum of £2880 and at the same time set up regular payments in of £2880/12 ? Do I have to say, at the outset, that I intend to take out 25% later in the year and start drawdown then? I've looked at the on-line form you complete but I can't find a guide to the steps to be taken and when to take them. Just interested in the full procedure before I start things. Anyone know of a step by step guide? eg someone is talking about an illustration, what's that and when does it appear in the sequence?

    Thanks.

    If her income is less than £8000 (so, above £7k?) there's no need to specifically pay in £2880. It could be any amount up to 80% of what she earns. The more you put in the more you'll gain.

    I don't know about the timescales between opening and withdrawal, but I do believe that HL reserve the right to shut a pension down if it has less than £1000 in it, so given that it takes some time to open the pension, I'd wait until the next tax year before starting withdrawal.

    Then you could also put another lump sum from April 6th onwards which would provide a buffer ensuring that she didn't drop between the £1k.
  • missile
    missile Posts: 11,684 Forumite
    Name Dropper Photogenic First Post Combo Breaker
    JohnB47 wrote: »
    I'm thinking of getting my wife, self employed, income <£8000, aged 61, to set up a SIPP with HL.

    Am I right in thinking that I still have time, this financial year, to start one with a lump sum of £2880 and at the same time set up regular payments in of £2880/12 ? Do I have to say, at the outset, that I intend to take out 25% later in the year and start drawdown then? I've looked at the on-line form you complete but I can't find a guide to the steps to be taken and when to take them. Just interested in the full procedure before I start things. Anyone know of a step by step guide? eg someone is talking about an illustration, what's that and when does it appear in the sequence?

    Thanks.
    From my experience:
    1.Deposit funds into a SIPP account, you can do this on line using her debit card.
    2.HL will apply to HMRC for their contribution to her SIPP.
    3.Apply to transfer all or part of her SIPP to a SIPP Drawdown account
    4.Fill in a risk assessment form
    5.Then a draw down application form to specify how and when she wants to drawdown
    Note:
    *She can take 25% tax free
    *Plus any other amount; monthly / quarterly / bi-annually or annually as cash paid into her bank account. These payments are subject to tax.
    6.Instructions for drawdown received by 12th are paid on 28th of each month.
    7.It takes time for HMRC contribution and to arrange drawdown. She can apply today, but it is too late to arrange drawdown from a SIPP before April 05th.
    "A nation's greatness is measured by how it treats its weakest members." ~ Mahatma Gandhi
    Ride hard or stay home :iloveyou:
  • JohnB47
    JohnB47 Posts: 2,544 Forumite
    First Anniversary Name Dropper First Post
    AnotherJoe wrote: »
    If her income is less than £8000 (so, above £7k?) there's no need to specifically pay in £2880. It could be any amount up to 80% of what she earns. The more you put in the more you'll gain.

    I don't know about the timescales between opening and withdrawal, but I do believe that HL reserve the right to shut a pension down if it has less than £1000 in it, so given that it takes some time to open the pension, I'd wait until the next tax year before starting withdrawal.

    Then you could also put another lump sum from April 6th onwards which would provide a buffer ensuring that she didn't drop between the £1k.

    Thanks. I think I need to read up more about this. I seem to have become hung up on the £2880 figure. Presumably that is just talked about as an illustration? The 3600, 2800 and 720 figures suggest that whatever we invest, the taxman donates 25%. Is that correct? You mention <£7000. Is there an minimum income limit on these schemes? My wifes income fluctuates, although it's been slowly growing over recent years.

    I've worked out that we have only a max of four years to take part in this arrangement, before her SP kicks in and her allowance tax would be all used up (assuming she continues to work).

    Seems like a bit of juggling of figures is needed, otherwise she'll end up paying tax on the drawdown income. Then again, she could go the drawdown route for a few years, then stop drawdown and just take 25% tax free every tax year?

    Just trying to get my head around this. Seems like a great way to make use of extra funds for a few years.

    Thanks again.
  • JohnB47
    JohnB47 Posts: 2,544 Forumite
    First Anniversary Name Dropper First Post
    missile wrote: »
    From my experience:
    1.Deposit funds into a SIPP account, you can do this on line using her debit card.
    2.HL will apply to HMRC for their contribution to her SIPP.
    3.Apply to transfer all or part of her SIPP to a SIPP Drawdown account
    4.Fill in a risk assessment form
    5.Then a draw down application form to specify how and when she wants to drawdown
    Note:
    *She can take 25% tax free
    *Plus any other amount; monthly / quarterly / bi-annually or annually as cash paid into her bank account. These payments are subject to tax.
    6.Instructions for drawdown received by 12th are paid on 28th of each month.
    7.It takes time for HMRC contribution and to arrange drawdown. She can apply today, but it is too late to arrange drawdown from a SIPP before April 05th.

    Thanks - that's exactly what I needed. I'll probably get back to you later, when I've thought of more questions!

    Cheers.
  • Dazed_and_confused
    Dazed_and_confused Posts: 6,458 Forumite
    Uniform Washer
    JohnB47

    I'm thinking of getting my wife, self employed, income <£8000, aged 61, to set up a SIPP with HL

    If this is total income (each year) in 2015:16 and 2016:17 has your wife applied for the Marriage Allowance?

    If you pay tax it could benefit you by £200+ per year
  • xylophone
    xylophone Posts: 44,330 Forumite
    Name Dropper First Anniversary First Post
    Your wife's " relevant earnings" are (say) £8000 a year gross.

    With regard to a pension contribution, she may contribute up to £2880 or total net relevant earnings (whichever is the greater) to a personal pension and receive tax relief, even though she does not actually pay tax.

    £2880 + TR £720 = £3600 in the pension.


    £6000 + TR £2000 = £8000 in pension.

    Suppose she opened the HL SIPP, made no investments and after four years had £32,000 in the pension.

    She might then choose to take the tax free lump sum and then draw down as much as with her state pension would keep her a non tax payer.

    Or she might choose to defer her state pension until she had used up the whole of the HL pension against her personal tax allowance.

    She might choose to continue to contribute £2880 and receive tax relief to the HL pension until she reached age 75, (assuming the rules don't change).
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