New Pension Rules-Cashing in SIPP

GTG

I am 57 and only have about £7,500 in my SIPP. I understand that I can now cash it in. My questions are:

1) Is this classed as earned income for tax purposes and
2) if I apply now will I be able to declare it as income against my personal allowance in the current tax 2014/15

Thank you very much in anticipation of your help.

jamesd

1) it is not earned income. No pension income is ever earned income.

2) yes, 75% of it, provided that you get the money before the end of the tax year. I'm assuming that you take the other 25% as a tax free lump sum.

GTG

jamesd wrote: »

1) it is not earned income. No pension income is ever earned income.

2) yes, 75% of it, provided that you get the money before the end of the tax year. I'm assuming that you take the other 25% as a tax free lump sum.

Thanks for your reply James and yes, sorry I should have mentioned that I had previously taken the 25% tax free lump sum.

What is the date that the new rules come into force. In other words when is the earliest I can receive it assuming my SIPP administrator can put the cheque in the post by that date?

Thanks again

kidmugsy

If you want to use it against your 2014/15 allowance, find out how quickly your provider will let you take it under the "small pots provisions". You'll need to get it by 05/04/2015.

GTG

kidmugsy wrote: »

If you want to use it against your 2014/15 allowance, find out how quickly your provider will let you take it under the "small pots provisions". You'll need to get it by 05/04/2015.

So are you saying I can take it now if my SIPP administrator were prepared to write me a cheque today?

kidmugsy

GTG wrote: »

So are you saying I can take it now if my SIPP administrator were prepared to write me a cheque today?

Yes .... oh no - sorry, my mistake; you need to be 60 to use the small pots provisions. So at 57 you'd have to wait for the new tax year. In that case you wouldn't be able to use it against your 2014/15 income tax personal allowance.

Still, you can take out some this tax year. If you are in Flexible Drawdown you can take it all, if in Capped Drawdown a part of it, assuming that you haven't used all your annual entitlement already.

GTG

kidmugsy wrote: »

Yes .... oh no - sorry, my mistake; you need to be 60 to use the small pots provisions. So at 57 you'd have to wait for the new tax year. In that case you wouldn't be able to use it against your 2014/15 income tax personal allowance.

Still, you can take out some this tax year. If you are in Flexible Drawdown you can take it all, if in Capped Drawdown a part of it, assuming that you haven't used all your annual entitlement already.

Oh, I thought the 60 rule had been changed to over 55 for trivial amounts i.e. <£10k?

jamesd

GTG wrote: »

What is the date that the new rules come into force. In other words when is the earliest I can receive it assuming my SIPP administrator can put the cheque in the post by that date?

Initially you wrote that "I understand I can now cash it in". I just assumed that was correct because there are some cases where you could take it, like winding up a pension scheme by the scheme provider. I now think it is not correct.

You cannot take it this tax year using the new rules. The new rules start on 6 April 2015, next tax year. You cannot use the small pots rule because that rule only applies from age 60 at the moment. On 6 April that is reduced to 55.

You must wait until 6 April 2015 or later.

You could use capped income drawdown to take out the GAD limit amount but that's going to be around 7-8% of the pot and given the costs it's not worth doing. Just wait.