The Pension Loophole article discussion

Dand3lions

Useful article and informative forum comments.
Can someone please clarify the 60+ rule, as opposed to 55+.
I am a non-taxpayer, receiving a small pension, who turns 60 in late March. Will I be able to invest £2880 in a SIPP and drawdown (withdraw) the grossed up £3600 by April 5th 2015?

gadgetmind

It will be interesting to see what fees come along for UFPLS come next April.

2014

To take advantage of the pension loophole.
Do you have to be strict on certain dates in the year in which to put in money ?
Take out the money ?

Over62

I invested £5000 in this scheme in August with HL, the maximum I could as I retire this year and my earnings are lower than usual. HL showed right at the start that the tax would be credited at the end of October, at bit longer than the 4-6 weeks shown in the article. I did not realise the charges involved until I have come to cash in the SIPP and although these are high, the net return is still excellent. I will have made almost £200 in 2 months.


One thing that may be relevant to those investing the maximum amount - my SIPP has earned 27p during its lifetime. If this was added to a pension pot of £10000, it would bring the total pot above the maximum for claiming, so could the company refuse to pay out?

kidmugsy

Over62 wrote: »

If this was added to a pension pot of £10000, it would bring the total pot above the maximum for claiming, so could the company refuse to pay out?

Could it? It would be obliged to, by the law of the land.

Fulls1982

Anyone have any further experience of the fees associated with the SIPP providers? Who's best to use? And any providers allow you to open 3 accounts? Finally, is it best to invest less to avoid going over £10k because of the small interest paid whilst waiting for the tax relief?

TBC15

For someone over 55 with no income or private pension provision other than a £7200 HL SIPP (made up of 2 years of £3600), what would be the most cost/tax effective strategy for extracting the cash. Bearing in mind a further £3600 will be going in on an annual basis?

dunstonh

what would be the most cost/tax effective strategy for extracting the cash

One that results in the least tax payable. That maybe not extracting the cash at all or doing it on a phased basis. However, without knowing your financial affairs and objectives it is hard to say.

TBC15

The gist of it is that we started contributing the maximum allowable for my wife ( current age 59) into a PEP to take advantage of the free contribution from the Government. When she reaches State Pension age she will not be receiving a full pension, due to lack of contributions. The intention at the time was to do this until 3 sub £10000 pots had been cashed in.

Does the recent proposed changes in legislation make the small pots/ trivial pension rules relatively irrelevant for our purposes.

While your answer of not cashing the PEP in at all was technically100% correct it’s obviously not the desired result.

kidmugsy

TBC15 wrote: »

The gist of it is that we started contributing the maximum allowable for my wife ( current age 59) into a PEP to take advantage of the free contribution from the Government. When she reaches State Pension age she will not be receiving a full pension, due to lack of contributions. The intention at the time was to do this until 3 sub £10000 pots had been cashed in.

Does the recent proposed changes in legislation make the small pots/ trivial pension rules relatively irrelevant for our purposes.

With the typo corrected (PEP - > SIPP) I think the answer is "yes" ; from April you wouldn't be using "small pots" but just the new general flexibility.