We'd like to remind Forumites to please avoid political debate on the Forum. This is to keep it a safe and useful space for MoneySaving discussions. Threads that are - or become - political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
We're aware that dates on the Forum are not currently showing correctly. Please bear with us while we get this fixed, and see Site feedback for updates.
Multiple Pensions

babychunder
Posts: 7 Forumite
Hi, I have a SIPP with about 500k in it and another workplace defined contribution pension with 200k, which I am currently contributing to.
Can I take a lump sum out of the SIPP at age 55, without going into drawdown (I don't need the income) and carry on contributing to the other workplace pension? I will be spending the lump sum and don't intend to recycle it into the other pension or change my regular contributions to it. I also don't need to make any more contributions to the SIPP, but I might want to merge the workplace pension into it when I am ready for drawdown.
All advice greatly appreciated.
Can I take a lump sum out of the SIPP at age 55, without going into drawdown (I don't need the income) and carry on contributing to the other workplace pension? I will be spending the lump sum and don't intend to recycle it into the other pension or change my regular contributions to it. I also don't need to make any more contributions to the SIPP, but I might want to merge the workplace pension into it when I am ready for drawdown.
All advice greatly appreciated.
0
Comments
-
You can't take a lump sum without either going into drawdown or purchasing one or more annuities. But you can take the 25% tax free lump sum and go into drawdown without taking any income.
What I suggest you do, though, is take maximum drawdown income and recycle the income into the other pension. This has these benefits:
1. You accumulate a right to a new tax free lump sum on the recycled money, so you gain on the income tax. If you're using a work salary sacrifice scheme you might also gain on the NI savings.
2. The death benefits of a pension where no benefits have been taken are better than for one where benefits have been taken. If no benefits have been taken anyone can get the pot with no tax charge, either inside or outside a pension. After benefits have been taken a spouse can get it into a pension in their name with no tax charge but a spouse or other person can only get it outside a pension after a 55% tax charge.
You might also want to investigate whether you can transfer the work defined contribution pension to the SIPP, continue to pay in at work, and take benefits and recycle the larger income and some lump sum. This has the death benefit reduction disadvantage but the advantage of the tax on the recycling. If the death benefit difference matters you can use life assurance to cover it. Some schemes will allow transfers out while remaining a member, some won't.
If you did combine and recycle some of the larger potential lump sum you'd need to ensure that you stay within the limits for that. Given the amounts and your plan not to recycle the lump sum from the £500k it seems likely that you would be fine due to the 30% rule. 200 / (500+200) *100 = 28.6%, not more than 30%, so not a problem to recycle the lump sum portion from the £200,000.
You'd also need to watch out for the annual contribution limits as well. And of course if you recyled the lump sum you'd only get 25% of the lump sum plus tax relief back, so that wouldn't be suitable if you needed the lump sum more quickly than that plus taking income could re-accumulate it.0 -
@Jamesd
That is a very helpful reply, thank you. It never occurred to me to recycle the drawdown income, however as I will be maxed out at 40k p.a. contribution into the workplace dc scheme it's not an option for me.
:j0 -
Why would you not want to go into drawdown?
Why do you need the Pension Commencement Lump Sum?
You could simply sit it in a deposit account within your SIPP and this will preserve the capital value if you don't want to remain invested.
Alternatively you could invest in a short term money market fund or something equivalent?0 -
I suppose you also have insufficient unused allowance from past years to carry forward?
I'm assuming that if you can't recycle you don't want the income because you anticipate being in a higher tax bracket now than later.
You might consider whether some use of VCT investing is appropriate. Very small companies. Income tax free. 30% income tax relief when investing, capped at the amount of income tax you actually pay in the year, has to be repaid if you sell within five years. Some of the generalist VCTs pay income at perhaps 5% a year. One possible advantage is that after five years you can sell and then reinvest to get the tax relief again, if you still have sufficient income for it.0 -
Daniel_Elkington wrote: »Why would you not want to go into drawdown?
Why do you need the Pension Commencement Lump Sum?
You could simply sit it in a deposit account within your SIPP and this will preserve the capital value if you don't want to remain invested.
Alternatively you could invest in a short term money market fund or something equivalent?
I don't need the drawdown income yet, figured it would be better to manage the remaining SIPP balance for capital growth (assuming that's allowed).
I want the lump sum to buy a Porsche, before I get too old to pull tottie any more.
Deposit and money market are not quite adventurous enough for me, I'll probably keep working for a few years yet.0 -
I suppose you also have insufficient unused allowance from past years to carry forward?
I'm assuming that if you can't recycle you don't want the income because you anticipate being in a higher tax bracket now than later.
You might consider whether some use of VCT investing is appropriate. Very small companies. Income tax free. 30% income tax relief when investing, capped at the amount of income tax you actually pay in the year, has to be repaid if you sell within five years. Some of the generalist VCTs pay income at perhaps 5% a year. One possible advantage is that after five years you can sell and then reinvest to get the tax relief again, if you still have sufficient income for it.
Yes that's right, I got a redundancy payment and maxxed up my carry forward with it.
And yes, currently in the top tax bracket, whereas I may not be later when I come to take the pension.
VCTs are maybe a bit TOO adventurous for me given the history!
Thanks again for all replies, friendly forum this0
This discussion has been closed.
Confirm your email address to Create Threads and Reply

Categories
- All Categories
- 348.4K Banking & Borrowing
- 252.1K Reduce Debt & Boost Income
- 452.4K Spending & Discounts
- 241K Work, Benefits & Business
- 617.3K Mortgages, Homes & Bills
- 175.7K Life & Family
- 254.2K Travel & Transport
- 1.5M Hobbies & Leisure
- 16K Discuss & Feedback
- 15.1K Coronavirus Support Boards