Time limits on withdrawing 25% TFLS from SIPP?

dunroving

Is there within the pension regulations any time limit between putting money into a SIPP and when you can withdraw it with 25% as a TFLS?

Could someone open and invest in a SIPP in one tax year and then the following year withdraw (or start to withdraw) that SIPP, for example:

In the final year of employment, put £20,000 of your salary into a SIPP.

Then either "retire" (from the job) or resign/leave.

The following year (assuming you are over 55 years of age) either:

Withdraw the whole lot, with 25% tax-free and potentially some of the rest tax-free if the person was below the tax threshold.

or

Withdraw the 25% tax-free lump, and then withdraw the rest at times when the person was below the tax threshold?

Within my occupational AVC scheme, there are penalties if you draw from the AVC lump within 5 years of setting it up (I'm pretty sure these are scheme penalties, not tax penalties). Anything similar, either within SIPP company (e.g., Fidelity) rules or HMRC pension tax exemption regulations?

Linton

If you re 55 or older, there is no reason why you cant take the TFLS immediately after depositing some money in a SIPP. And then from April you can withdraw the rest any time you want.

purch

dunroving wrote: »

Then either "retire" (from the job) or resign/leave.

You don't need to do that either.

dunroving

Linton wrote: »

If you re 55 or older, there is no reason why you cant take the TFLS immediately after depositing some money in a SIPP. And then from April you can withdraw the rest any time you want.

purch wrote: »

You don't need to do that either.

Thanks, both. It seems too good to believe (though I do realise that the tax break on pensions is almost too good to believe in some ways, anyway).

So to be clear, I am already over 55. Without changing my job situation at all, I could:

1) Open a SIPP
2) Put £25k in it by depositing £20k and getting the £5k top-up
3) Next year take 25% of it back as tax-free cash?

(I'm at the moment most curious about this aspect)

What's to stop someone over 55 doing this every year, simply to avoid income tax on 25% of their income?

kidmugsy

dunroving wrote: »

1) Open a SIPP
2) Put £25k in it by depositing £20k and getting the £5k top-up
3) Next year take 25% of it back as tax-free cash?

(I'm at the moment most curious about this aspect)

(i) With some providers you'd want to wait a few weeks so that they've received the tax relief from HMRC, before withdrawing your TFLS.
(ii) There are rules that constrain recycling TFLSs into pension contributions. They might catch you. It's worth checking.
(ii) There will be charges to pay.

dunroving wrote: »

What's to stop someone over 55 doing this every year, simply to avoid income tax on 25% of their income?

His name's Balls; Ed Balls.

dunroving

kidmugsy wrote: »

(i) With some providers you'd want to wait a few weeks so that they've received the tax relief from HMRC, before withdrawing your TFLS.
(ii) There are rules that constrain recycling TFLSs into pension contributions. They might catch you. It's worth checking.
(ii) There will be charges to pay.




His name's Balls; Ed Balls.

When you say charges to pay, are you referring just to the typical management charges associated with a SIPP, or some additional charges associated with my master plan?

I have been reading about TFLS recycling but presumably as long as I can demonstrate that payments into the SIPP each year are from income, recycling would be difficult to establish?

Lastly, are you suggesting Labour would meddle with the 25% TFLS if they came into power? Wouldn't that be political suicide?

kidmugsy

dunroving wrote: »

When you say charges to pay, are you referring just to the typical management charges associated with a SIPP, or some additional charges associated with my master plan?

I have been reading about TFLS recycling but presumably as long as I can demonstrate that payments into the SIPP each year are from income, recycling would be difficult to establish?

Lastly, are you suggesting Labour would meddle with the 25% TFLS if they came into power? Wouldn't that be political suicide?

Charges: you'd be paying for each income distribution, I suspect, but we need to await the providers' publication of their charges for the new regime.

Recycling: since money is fungible the whole business is a !!!!!! to make sense of. Balls: they could meddle with the recycling rules. In fact, I'm beginning to suspect that probably it would be in the public interest if they did. Not often Labour manages that.