Teachers SIPP question

Batfink

Hello,
I wonder if anyone can offer a little guidance please.

I'm a teacher, paying into the teachers pension - but I want to retire much earlier than it will allow me. So I've been looking into SIPPs and wondered if it'd be possible to use a SIPP to plug the gap.

i.e. Use my SIPP to provide a pension for just 10 years, between the age of 55 and 65, when I can start drawing my teachers pension.

Anyone know if such a plan is viable?
Thanks in advance.

Lokolo

Yeh if you want to do that go for it. You have the choice of using your ISA allowance instead of SIPP if you want (but obviously you'll need to make sure you don't keep dipping into it until 55!).

Andy_L

Batfink wrote: »

i.e. Use my SIPP to provide a pension for just 10 years, between the age of 55 and 65, when I can start drawing my teachers pension.

Anyone know if such a plan is viable?
Thanks in advance.

No. With a SIPP (or any other personal pension) you can only take 25% of the pot as a lump sum. The rest has to be used to pay an annual income instead.
If you just want something to bridge that 10 years then an ISA is the better vehicle.
Alternativly you could take the teachers pension early (in which case it will be reduced) and use the personal pension to make up that reduction.

Incidently, why would you want to use a SIPP rather than a stakeholder or personal pension?

hugheskevi

Although an ISA would be better due to only being able to access 25% of the pension as capital, a personal pension may be very attractive if you are a higher rate taxpayer and expect to have a teacher's pension of more than £20,000. [this is not to say a pension wouldn't be attractive as a higher rate taxpayer even if you didn't have an income of £20,000 - just that in your position it would be particularly attractive with a pension over £20,000]

If you do expect more than £20,000 then flexible drawdown can be used to allow you to take the personal pension in a lump sum (but only once the teacher's pension is in payment).

That doesn't help the period before 65 of course, but there might be ways to effectively borrow the money, eg, via mortgage, and later use flexible drawdown to pay off the debt, using the borrowing to fund the period prior to 65.

Lokolo

Andy_L wrote: »

No. With a SIPP (or any other personal pension) you can only take 25% of the pot as a lump sum. The rest has to be used to pay an annual income instead.
If you just want something to bridge that 10 years then an ISA is the better vehicle.
Alternativly you could take the teachers pension early (in which case it will be reduced) and use the personal pension to make up that reduction.

Incidently, why would you want to use a SIPP rather than a stakeholder or personal pension?

Yes but I was thinking she could take income drawdown over 10 year period? Is that not possible?

jem16

Lokolo wrote: »

Yes but I was thinking she could take income drawdown over 10 year period? Is that not possible?

It's possible to take income drawdown but the GAD rate at age 55 would probably not provide a high enough income.

The ISA route is probably the best option for funding that 10 year gap.

ecoworrier

Batfink wrote: »

Hello,
I wonder if anyone can offer a little guidance please.

I'm a teacher, paying into the teachers pension - but I want to retire much earlier than it will allow me. So I've been looking into SIPPs and wondered if it'd be possible to use a SIPP to plug the gap.

i.e. Use my SIPP to provide a pension for just 10 years, between the age of 55 and 65, when I can start drawing my teachers pension.

Anyone know if such a plan is viable?
Thanks in advance.

Hi batfink.
You need to learn a lot more about pensions. You cannot run a SIPP (or other personal pension) and pay into teachers' scheme at the same time. As others have said, you may be able to take early pension but at reduced rate. If you come out of the scheme, you will lose the employer contribution so don't think about it as, at present, there is no better option available to you for saving for retirement.

hugheskevi

You cannot run a SIPP (or other personal pension) and pay into teachers' scheme at the same time.

You can contribute to both an occupational and personal pension at the same time.

SippTechie

hugheskevi wrote: »

You can contribute to both an occupational and personal pension at the same time.

This is correct.

Pension rules (called concurrency rules) used to prevent people from contributing to a SIPP and being an active member of an occupational pension scheme at the same time, but those rules fell away over 5 years ago.

dkmax_2

ecoworrier wrote: »

You need to learn a lot more about pensions. You cannot run a SIPP (or other personal pension) and pay into teachers' scheme at the same time.

Methinks it is ecoworrier that needs to learn about pensions before chastising people and offering incorrect advice.

ecoworrier

SippTechie wrote: »

This is correct.

Pension rules (called concurrency rules) used to prevent people from contributing to a SIPP and being an active member of an occupational pension scheme at the same time, but those rules fell away over 5 years ago.

Shows how much I know! What I did want to emphasise was the importance of the occupational pension. Unfortunately, if the government gets its way, the teachers' and other public service schemes will become a lot less attractive and more costly, leaving less in "surplus" earnings to put into an alternative retirement fund. Saving into a pension scheme of any type could be further undermined if they then remove the "contracted out" discount on NI payments, which they have hinted at doing.