SIPP question?

edited 30 November -1 at 1:00AM in Pensions, Annuities & Retirement Planning
2 replies 911 views
wanna_make_some_doughwanna_make_some_dough Forumite
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Tenth Anniversary First Post Combo Breaker
Trying to understand some basics on SIPPs

If I start a SIPP (age 50) and buy some funds with a provider (HL/Best Invest or whoever). At age 55, can I draw down 25% of my deposit as lump sum without incurring any tax? Does the SIPP provider have a say on which funds I sell to get the 25% cash lump sum at age 55 without incurring a tax? Is the 25% the then net asset value or is this the amount invested?

Can I continue to pay into this SIPP after age 55 after having drawn down 25% of the money as a lump sum?

What happens to the money if I do not draw down on the pension before death? What is the tax implication to the beneficiary?

If I do not buy an annuity, how can I draw down on the pension? What happens to the residual amount in the SIPP that is not drawn down after death? What is the tax implication for the beneficiary?

[FONT=&quot]Thanks for the answers.[/FONT]


  • edited 11 January 2015 at 10:15PM
    jamesdjamesd Forumite
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    Part of the Furniture 10,000 Posts Name Dropper
    edited 11 January 2015 at 10:15PM
    It is 25% of the asset value at the time you do it and yes you can do it at 55 and pay no tax on that 25%. You choose the funds to sell.

    Yes, you can continue to pay in. The SIPP will then usually have two portions internally, a crystallised amount that you've taken 25% from and an uncrystallised part where you still have the 25% available.

    Assuming you don't die before 6 April 2015 the death benefits are inheritance by anyone free of all tax if you are under 75. If you die over age 75 there is no immediate tax but the person who gets the money will have any amount withdrawn added to their normal taxable income in the year in which they take it, so it could be taxed at anything from 0% to 45% depending on their own income tax situation.

    If you do not buy an annuity, after 6 April 2015 you just tell the pension firm how much you'd like it to pay you each month or ask for withdrawing whenever you want some money. You'd pick investments to facilitate this, probably some producing income, and arrange to sell enough to cover any shortfall in that. You can choose any amount up to 100% of the remaining pot assuming you choose the newly introduced flexi-access drawdown, though since this is added to your normal taxable income it's not a good idea to take it all at once if that would cause higher or top rate income tax to be paid. Other than the withdrawing instruction it continues to work just like it did before, with you changing investments whenever you like. The death benefits are the same as described in the previous paragraph.

    Since you're 50 it's not worth going into the rules that apply before 6 April 2015 because they won't apply to you, though the death benefits for the next three months are 100% inheritance to anyone you like tax free, outside a pension.
  • thenudeonethenudeone Forumite
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    Does the SIPP provider have a say on which funds [FONT=&quot]Thanks for the answers.[/FONT]

    The clue is the title - "SELF INVESTED personal pension". You make all the investment choices, including what assets / funds you want to sell.
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