Personal Pensions Options

chico

I plan to retire at 64, one year from state retirement age, and am looking at personal pensions options.

In Year 1, the current tax year, I plan to put £24,000 from earned income into a SIPP and get tax relief of £6,000.

In Year 2, my only taxable income will be £3,600 gross per annum from an old company pension, plus the interest from my non-ISA savings.

In Year 3, I will be entitled to take the state pension, forecast to be £11,500, but I can defer at 5.8%.

I'd be grateful for some advice and comments from you tax experts:

1. In Year 2, if my taxable income is less than the £10,000 allowance, is it worth crystallising the SIPP to take the 25% tax free sum and from the 75% to use up the tax allowance?

2. If I crystallise the SIPP, am I still entitled in each subsequent year to start a separate SIPP with £2,880 and tax relief top up to £3,600?

3. In Year 3, if I decide to defer the state pension by one year, can I do as in Year 2, take from the existing SIPPs to use up the tax allowance, and also start another £2,880 SIPP?

4. I currently have three or four old personal pensions that mature at age 65 for small amounts between £7,000 and £12,000; should I combine these pensions in some way, and is it worth deferring them for tax reasons plus a little potential growth?

atush

Yes, yes and yes.

And those old pensions may SAY they re at 65, but they should as personal pensions be available now or whenever you want to take them.

Linton

Probably easiest to transfer your small PPs into your SIPP and treat it all as one big pot.

kidmugsy

chico wrote: »

I plan to retire at 64, one year from state retirement age, and am looking at personal pensions options.

In Year 1, the current tax year, I plan to put £24,000 from earned income into a SIPP and get tax relief of £6,000.

In Year 2, my only taxable income will be £3,600 gross per annum from an old company pension, plus the interest from my non-ISA savings.

In Year 3, I will be entitled to take the state pension, forecast to be £11,500, but I can defer at 5.8%.

Hold on, if you are now only one year precisely from SRA won't an SRP deferral earn you 10.4% p.a.? Or is your "one year" approximate; do you fall just on the wrong side of the line?

P.S. In your shoes I might even try to maximise this year's contribution: is £24k the whole of your annual earnings less your other pension contributions?

chico

Many thanks for the advice, people.

>kidmugsy

Yes, my state retirement date is just after the deferral rate change date.

And yes, I can increase this year's contribution, but I thought that once I start taking my state pension, which is already above the tax threshold, any remaining portion of the 75% of the SIPP would be taxed back so as to lose the benefit of the original uplift.