Sipp Query, Withdrawal & Personal Tax Allowance
Sun-Is-Fun
Posts: 243 Forumite
Although a few years to go yet, I would like to retire at 55 if possible and am thinking of starting a SIPP, which will provide a yearly income until I reach 60, when my DB pension will start.
Lets imagine I have £57,500 in my SIPP by the time I reach 55, so £57,500 shared by 5 years is £11,500 per year (personal tax allowance from April). By the time I reach 60, the SIPP will be exhausted.
Obviously, I am aware the personal tax allowance will have risen by then, so these calculations are only hypothetical on current rates.
Can this amount (£11,500) be withdrawn each year tax free, as I won't be working and I would be using this amount as my retirement annual income?
Thanks.
Lets imagine I have £57,500 in my SIPP by the time I reach 55, so £57,500 shared by 5 years is £11,500 per year (personal tax allowance from April). By the time I reach 60, the SIPP will be exhausted.
Obviously, I am aware the personal tax allowance will have risen by then, so these calculations are only hypothetical on current rates.
Can this amount (£11,500) be withdrawn each year tax free, as I won't be working and I would be using this amount as my retirement annual income?
Thanks.
0
Comments
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Don't forget your 25 % TFLS.
So you could actually have a pot of £76666 and withdraw it over 5 years to zero and pay no income tax.
Year 1 25% tax free (£19166) + Tax allowance (£11500)
Years 2 -5 £11500 each year.
Gives you an average annual retirement income of £15333.
Figures rounded and not account of inflation or investment gains of course.0 -
Theoretically you can now have upto £22500 taxable income before you'd have to pay any income tax (in 2017:18) but that would involve a very specific mix of pension (or wages/business profits), savings interest and dividends
Your sipp should be fine providing you genuinely have no other income in the years you draw down from the sipp0 -
Or could use UFPLS (google it) and withdraw £15333 each year with no tax to pay.Don't forget your 25 % TFLS.
So you could actually have a pot of £76666 and withdraw it over 5 years to zero and pay no income tax.
Year 1 25% tax free (£19166) + Tax allowance (£11500)
Years 2 -5 £11500 each year.
Gives you an average annual retirement income of £15333.
Figures rounded and not account of inflation or investment gains of course.0 -
Thanks zagfles, forgot about UFPLS, slighlty different way to withdraw it but the maths work out the same either way for average yearly tax free income over the 5 years.0
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Thanks for your input everyone, definitely given me something to think about and do. Now got to think about what SIPP portfolios to buy !0
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Good plan, with I had been able to do that :-)"A nation's greatness is measured by how it treats its weakest members." ~ Mahatma Gandhi
Ride hard or stay home :iloveyou:0 -
Been looking around. Think I'll go with the Vanguard Target Retirement 2025 Fund for the SIPP. Seems to suit my needs.0
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