Can I pay into SIPP after drawing

bwise

After age 55 I understand I can start to take money from my SIPP. Say you start drawing your pension, then circumstances change and you find you are earning again. After you have started to draw money, can you at a later date decide to top up your pension by paying some money into it. If so, how much can you pay into it?

kidmugsy

bwise wrote: »

After age 55 I understand I can start to take money from my SIPP. Say you start drawing your pension, then circumstances change and you find you are earning again. After you have started to draw money, can you at a later date decide to top up your pension by paying some money into it. If so, how much can you pay into it?

As far as I know you can, as long as your provider can cope. The nearest I've come to it was starting income drawdown from a SIPP; then I transferred an uncrystallised personal pension into the SIPP. No problem: on my statements from Hargreaves Lansdown they just distinguish the two "arrangements", the crystallised and uncrystallised.

The annual amount you can contribute after April 2015 is going to be potentially limited in some ways that I haven't absorbed because they won't affect me. But I understand that they are intended not to act retrospectively, so your earlier decision to drawdown shouldn't restrict you. I'm open to correction.

bwise

kidmugsy wrote: »

As far as I know you can, as long as your provider can cope. The nearest I've come to it was starting income drawdown from a SIPP; then I transferred an uncrystallised personal pension into the SIPP. No problem: on my statements from Hargreaves Lansdown they just distinguish the two "arrangements", the crystallised and uncrystallised.

The annual amount you can contribute after April 2015 is going to be potentially limited in some ways that I haven't absorbed because they won't affect me. But I understand that they are intended not to act retrospectively, so your earlier decision to drawdown shouldn't restrict you. I'm open to correction.

My situation is quite simple as I only have a SIPP. But I would like to know if after I am 55 I can start to take money out if I need it (either the cash free lump sum, or drawing an income, or both), but then at a later date choose to stop taking money out and revert to paying into it again.

So far have been unable to find any clear information about whether you can, and what amounts you can pay into the SIPP once you have taken some out.

zagfles

In some circumstances you'll have a reduced annual allowance of £10k. See https://forums.moneysavingexpert.com/discussion/5055751

PaulCooper

I've got a SIPP, all of it has been crystallised, some years I take some drawdown, other years I take nothing. So what you are asking is possible.
Regarding future payments into the SIPP, at present this is limited to the £40k max amount. After April next year, due to the fact I am already in drawdown, what I will be limited to pay, is the maximum amount I am allowed to draw as a pension. In other words, if I'm allowed to draw a pension of £30k now (or early next year), then my future payments after April 2015 will be limited to no more than £0k.
I believe (and stand to be corrected on this), if I crystallised my pension pot after April next year, I wouldn't be allowed to contribute further

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I'm a little vague on that point as it doesn't affect me, but it might significantly affect others
Paul

bwise

Thanks for the link to the other posts that had discussed something similar. One of the posts was from james d as follows:

jamesd wrote: »

Taking the 25% tax free lump sum does not reduce the annual allowance from £40,000 to £10,000. Taking more does unless it's from a defined benefit pension or you have a pot in drawdown already, in which case all pots now or in the future can use the GAD allowance in addition to the 25% without triggering the reduction.

So if you are 55 already or will be before 6 April 2015 put at least some money in one pot into capped income drawdown as soon as you can. Then you can use the GAD limit for all future pots.

For example, put £1,000 of a £1,000,000 pot into drawdown and get a GAD limit calculation of say 7%, also pay in £40,000. You can then at any time put the million, the £40,000 or any part or any future contributions into drawdown and take out the GAD limit amount each year in addition to the 25% lump sum.

Provided you do not exceed the GAD limit you will not trigger the reduction.

I am not sure how or if it applies to my position as per my first post. Not sure either what GAD means, and the references to different 'pots'. I have just a SIPP, no other pensions. When I get to 55, if I am not earning and decide I need extra income, if I decide to take some money from my SIPP (either 25% lump sum, or some income, or both), if my circumstances change in future - e.g. I start earning again - and I want to stop taking money from my SIPP and start paying into it again to build it up, can I, how much can I pay in, and what dictates how much?

I am asking the same question but none of the replies so far have left me any clearer on the answer.

zagfles

bwise wrote: »

Thanks for the link to the other posts that had discussed something similar. One of the posts was from james d as follows:



I am not sure how or if it applies to my position as per my first post. Not sure either what GAD means, and the references to different 'pots'. I have just a SIPP, no other pensions. When I get to 55, if I am not earning and decide I need extra income, if I decide to take some money from my SIPP (either 25% lump sum, or some income, or both), if my circumstances change in future - e.g. I start earning again - and I want to stop taking money from my SIPP and start paying into it again to build it up, can I, how much can I pay in, and what dictates how much?

I am asking the same question but none of the replies so far have left me any clearer on the answer.

GAD is the govt actuary department capped drawdown limit. Irrelavent to you if you're not 55 before April 2015.

You'll have to read all the linked documents in this thread and the linked one for full details, but basically as I understand if you take more than the tax free 25%, your annual allowance reduces to £10k. You also have to be aware of recycling rules, there are rules to stop people recycling their tax free lump sum back into their pension.

bwise

The reason I ask the question is that I was previously under the impression that taking money out of a pension (in my case a SIPP), some sort of line was drawn - a point of no return - and after that your pension entered a phase when you could only take money out and no more contributions were allowed. Maybe I am wrong and this was never the case.

So in summary, after April 2015 if I am over 55 and start to withdraw money from my SIPP, if I take any money out the SIPP I can still pay money into it.

If I take less than 25% out I will be able to continue to add to my SIPP up to £40,000 a year. If I take out more than 25% I will only be able to continue to add up to £10,000 a year (is that if I take out more than 25% in one tax year, or in total?

PaulCooper

Bwise
If you read my post again, after me saying that I still work, still draw a salary etc, it probably clarifies things. Some years I put in the max amount allowed, some nothing, some years I withdraw the max I can & others nothing. Sorry should have made it clear that I still work.
Very important point ---- when will you reach the age of 55?, if it is before April next year, there is a very good reason to crystallise when you reach 55, otherwise you will be limited as Zagfles says, to putting in a max of £10k into the SIPP once you start drawdown (after April next year).
Hope that helps
Paul

bwise

PaulCooper wrote: »

Bwise
If you read my post again, after me saying that I still work, still draw a salary etc, it probably clarifies things. Some years I put in the max amount allowed, some nothing, some years I withdraw the max I can & others nothing. Sorry should have made it clear that I still work.
Very important point ---- when will you reach the age of 55?, if it is before April next year, there is a very good reason to crystallise when you reach 55, otherwise you will be limited as Zagfles says, to putting in a max of £10k into the SIPP once you start drawdown (after April next year).
Hope that helps
Paul

Thanks for replying. I have read your post again but there are some things I don't understand. For example you mention that after April next year the amount you can pay into the SIPP will be limited to the amount you are allowed to draw as a pension. Assuming this applies to all SIPPs like mine too, what are these limits of the amount you are 'allowed' to draw? If a SIPP has a total fund value of £100,000, can't you (in theory) withdraw it all? Maybe I would be closer to understanding how much a year you are allowed to pay into a SIPP once you have touched it if I understood how much you are 'allowed' to take out of it.

When I get to 55 (in a couple of years) I had planned to just start withdrawing about 3% of the value of the SIPP each year, so that there is still some scope for it to continue to grow. Then if I find myself with spare cash or a new income in the future I would prefer to stop withdrawing and start investing again.

PaulCooper

Hi bwise
I was hoping that one of the experts on here would come to my rescue, as it's quite complex

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but I'll try
As you won't be 55 by the time the rules change, it's easier, although not being in that category I haven't taken a great deal of notice. I think it'll work like this
You can take 25% of the total fund, or 25% of less than the total fund, this is tax free. After that you could take anything from 0% to the remaining 75% (this will be taxable at whatever tax rate this puts you into)
Regarding what you can pay in, I think once you go into drawdown after April 2015, you'll be limited to a max of £10k pa (this is supposed to stop recycling)
Paul