Revisiting the idea of SIPPs

gterr

I just fired off a message to Charles Stanley Direct and have had a prompt reply. They can't yet say anything about the fees post April 2015, but are intending to produce a newsletter this spring to address all the issues and explain the new fees in detail.


So, I may wait until I can study this. On the other hand, it would be a shame to waste this year's contribution.


(Just reducing this to its very basics: If I were to contribute £2880 to a SIPP now, this would be grossed up to £3600. I could later take a TFLS of £900 leaving £2700, which would be taxable. If I've no spare tax allowance and chose to withdraw the entire amount then I'd pay £540 tax. Thus, even if I paid (basic rate) tax on the whole taxable amount I would still be £180 in credit - less whatever fees I paid for the SIPP (opening, holding, fund costs and drawdown). Obviously, I'd plan to draw it down in a way that minimised or eliminated tax to pay. Have I missed anything?).


Thanks for your time.

jamesd

Using rent-a-room seems like a bad idea in your situation. You can recover the income tax via pension contributions and gain on at least the 25% tax free lump sum portion. Time to maximise earned income to maximise pension contributions and the potential pension gain.

gterr

Just a couple of quick questions:


Can I still open a SIPP and commence contributions to it if I already have two final salary scheme pensions in payment?


Am I right in thinking that if I haven't made pension contributions in the previous few years I can use the previous 2 years' pension allowance (earnings) to increase this year's contributions?


And (thinking of husband) if some contributions have been made to a DC scheme in the last two years but these are lower than total earnings can this year's contribution similarly be increased to use up unused allowance from the previous two years?


Thanks for your time.

jem16

gterr wrote: »

Just a couple of quick questions:


Can I still open a SIPP and commence contributions to it if I already have two final salary scheme pensions in payment?

Yes you can although the contribution limit may fall from April 2015 to £10k.

Am I right in thinking that if I haven't made pension contributions in the previous few years I can use the previous 2 years' pension allowance (earnings) to increase this year's contributions?

Yes you can carry forward allowances. However you cannot carry forward tax relief as that's limited to the tax year you make the contribution.

The carry forward basically allows you to contribute more than the annual allowance of £40k and will allow tax relief up to your earnings limit.

And (thinking of husband) if some contributions have been made to a DC scheme in the last two years but these are lower than total earnings can this year's contribution similarly be increased to use up unused allowance from the previous two years?


Thanks for your time.

Yes with the same proviso. You also need to include any DB pensions in the calculations.

jamesd

DB pension payments do not cause a reduction in the annual pension contribution allowance from £40k t0 £10k.

gadgetmind

Can you still put your entire taxable income (subject of course to £40k cap) into a SIPP if you also have a DB pension running? I'm pretty sure the answer is "yes" as my wife's 6% contribution reduces her taxable income, and I can't see how I'd figure in anything to do with the notional contribution by her employer.

jem16

jamesd wrote: »

DB pension payments do not cause a reduction in the annual pension contribution allowance from £40k t0 £10k.

Thanks for confirming that. I had seen one or two conflicting versions.

jem16

gadgetmind wrote: »

Can you still put your entire taxable income (subject of course to £40k cap) into a SIPP if you also have a DB pension running? I'm pretty sure the answer is "yes" as my wife's 6% contribution reduces her taxable income, and I can't see how I'd figure in anything to do with the notional contribution by her employer.

As you're taking her contributions into account by looking only at her taxable income, then yes provided it's for tax relief purposes and you're nowhere near the annual allowance limit.

If you're getting close to the annual allowance limit you have to also consider the increase in value in the DB pension.

Daniel54

gadgetmind wrote: »

Can you still put your entire taxable income (subject of course to £40k cap) into a SIPP if you also have a DB pension running? I'm pretty sure the answer is "yes" as my wife's 6% contribution reduces her taxable income, and I can't see how I'd figure in anything to do with the notional contribution by her employer.

For a DB pension,the Pension input amount appears to be the increase in benefit mutliplied by 16.It loks to be quite complicared and I found this by googling,so have no specific experience in this area

http://www.hmrc.gov.uk/manuals/rpsmmanual/RPSM06107030.htm

Perelandra

I may be stating the obvious, but just in case...

I wouldn't worry too much about the fees in retirement at this stage. If you're starting a pension now, you should find it a relatively easy process to transfer that pension to another provider when the time comes if your existing provider's fees are not to your liking. So yes, it may be murky at the moment as to what they are- but there's no commitment to a particular provider at this point.