SIPP question

maker_2

May I ask the advice for my calculation on the SIPP return below, please?

Backgound:
As example, for a 20% tax payer.
Pay SIPP in sum: 8,000 pounds.
Government contribution: 8,000 * 25% = 2,000 pounds.
For easy comparison, say until age 55, the amount with the investment profit increase to 12,000 pounds in total (20% increase - say income tax has been taken out).

Question:
At 55, I start to draw money. I can take out total amount as:
1. 12,000 * 25% = 3,000 pounds (most people for 25% tax free cash)
2. 9,000 * 80% = 7,200 pounds (the rest of my money takes 20% of income tax)
Therefore, the real money in total back in my hand is 10,200 pounds.

Is all my understanding correct in terms of taxing requiremnts? Thanks for reading and any advice.:beer:

MoneySaverLog

SIP's usually come out of your Gross Pay, so you don't pay Tax and NI, so I save whatever that works out on in terms of the £125 max I can put into buying company shares.

I believe there are rules about cashing in, that you have to hold the shares for 5 years before taking them out else you have to pay the tax and NI.

So until the point you stop making contributions you'd need to leave 5 years worth of shares in, then take out a year at a time as the final 5 years mature with no further contributions in that time. Well that's how our scheme operates as far as I know.

MoneySaverLog

Oops ignore last post, realise now you mean a personal pension and not a share plan. Similar names.

BLB53

Question:
At 55, I start to draw money. I can take out total amount as:
1. 12,000 * 25% = 3,000 pounds (most people for 25% tax free cash)
2. 9,000 * 80% = 7,200 pounds (the rest of my money takes 20% of income tax)
Therefore, the real money in total back in my hand is 10,200 pounds.

You can take the 25% TFLS no problem at 55.
With the remainder you either purchase an annuity or go for income drawdown. There are limits on what percentage income you can drawdown according to government GAD rules.

In theory, you should get back much more than you pay in but of course there are lots of unknowns and variables.