Small Pensions - is it really this simple

Linton

OldBeanz wrote: »

The starting rate for tax is now £10.5k and on top of that she can take a 25% TFLS. So assuming no other earned income she can max out at £14k pa. From 2015 she will not need to worry about the size of the pots as she can take the pensions at will.

I agree about the 2015 situation assuming the current proposals are implemented. On the previous scheme I am not clear as to whether the £2K, soon to be £10K, is before or after the 25% tax free lump sum payment as the web pages I have looked at dont seem to say.

Hal17

Further to my original post 12 months ago about my wife's small pension pots.

On the last reply from Linton and the new Pension rules that we all know about now - I guess we do not need to worry about keeping her small pension pots under £10K in order to withdraw them as previously required.

If they were to grow to say £11K during the next tax year - she could just take the full amount under the new rules. Is this correct?

Thanks again.

kidmugsy

Hal17 wrote: »

If they were to grow to say £11K during the next tax year - she could just take the full amount under the new rules.

The personal allowance for 2015-16 will be £10,600. What it will be for 2016-17 is anyone's guess: there's a General Election before then.

atush

If the pot is 11K, then you take 2750 tax free then 8250 taxed (but in her case tax free under her PA if she doesn't have more than 2350 in other income)?

Hal17

Thank you both. Sorry I did not explain myself very well.

The old rule that you could take up to 3 pensions if they were each under £10K - this does apply from next week I guess?

My wife can just take the pension pots as and when depending on value and her personal allowance. So for example her pot on one of them is £10,400, so she could just this out in full - the old old £10K limit does not apply.

Thanks.

atush

No the 10K limit does not apply. After next week you can take out any amount even larger.

But in general is unwise to do so because of tax. But you are wisely timing her WD to use her PA.

Given her non earning status, you can continue to put 2880 into pension for her each year even as you are taking other pensions. She will be limited in future to 10K per annum, but as she doesnt earn this is irrelevant to her.

Hal17

Thank you atush, really appreciate your help. Totally understand now.

Liliyanna

Hi everyone,

I've just been talking about this very thing today with my in laws. A (60) is due to retire this October but isn't eligible to take their pension for another 6 yrs. P(68) is retired and taking their company pension whilst still doing part time consultancy, this takes P into the higher tax bracket.

Could P pay into SIPP's for A, and then each year A draw one down when it reaches £10,000, keeping under the PA so no tax is paid on the SIPP.

Is there any rule against this?

Thanks in advance


Lily x x

xylophone

P can pay into a SIPP for A but this won't lessen P's tax bill.

Can P pay into a SIPP for himself?

http://www.hl.co.uk/pensions/sipp/how-much-can-i-invest

See also http://www.ftadviser.com/2015/03/23/ifa-industry/companies-and-people/another-provider-unveils-post-april-pricing-ANAJUYHMqJQJydqxvKaxEJ/article.html

atush

A (not using your tterms too confusing?)

As a higher rate taxpayer who is still earning income (as opposed to non earned income like pensions and investments) the biggest gain for this family/partnership is the higher earner to put in as much into a pension as to take then out of the HRT band. AS they get 40% tax relief.

Then, the lower earning spouse. This person will still have a full PA of the same 10.6K-11K or more depending on date of retiring). They should continue if not earning themselves to put 2880 into a pension each year (from their savings or yours) this will be grossed up to 3600.
then this money can be taken out later without tax either using the 25% TFLS or their personal allowance of 10.6K PA.