Should I start a SIPP

paolo2

I am taking voluntary severance as of 1st April and will end up paying £16k tax on my severance payment.
This has been bugging me and I thought I would open a SIPP in order to get my tax back.
I would put in enough rom this years income and the severance to bring it up to £45k.
Is this sensible or should I just pay the tax.
I am 63 and have a final salary pension.

atush

It is very sensible to pay the taxed portion of your redundancy into a pension.

but it could be a Personal P instead of a Sipp (as these tend to be for more advanced investors).

In your case where to put it will depend on what you intend to do ie retire immediately or not.

dunstonh

What is it about a SIPP (a niche product aimed at experienced investors) that appeals to you compared to the more conventional stakeholder pension or personal pension?

Yes you can do it. yes it will reduce your tax bill. Whether it is sensible will depend on your overall finances and objectives.

kidmugsy

paolo2 wrote: »

I am taking voluntary severance as of 1st April and will end up paying £16k tax on my severance payment.
This has been bugging me and I thought I would open a SIPP in order to get my tax back.
I would put in enough rom this years income and the severance to bring it up to £45k.

Yep, as long as your 14-15 contribution allowance of £40k, less the increased value of your FS scheme, leaves you enough room, when you add on the £50k less the increased value of your FS scheme for all of 2011-12, 2012-13, and 2013-14. It seems pretty likely that you'll have bags of room. Just ask your employer's scheme for the "the increased value of your FS scheme" for all those years.

paolo2

Thanks for the replies. I am already taking my fs pension and basically I have retired unless my wife spends all the money on clothes etc.
I do have quite a few shares and want to spend more time investing.
(some good, some bad and some very bad).

I don't want an annuity as I have my fs pension but would like to use the cash drawdown of a SIPP.

So providing I follow good advice it looks to me that the SIPP would be a good route.

Chickereeeee

paolo2 wrote: »

I don't want an annuity as I have my fs pension but would like to use the cash drawdown of a SIPP.
.

A Personal pension can do that: could be cheaper as well..

C

Jerben

An associated question on this...
Kidmugsy mentions 'less the increased value of your FS scheme'.
How is this calculated?


Background is that my partner (age 58), is in the last throes of being made voluntarily redundant. She does not plan to work in future.
She has a FS pension she can take at 60.
We're trying to calculate the amount we can put into a PP this tax year (2014-15). Will likely take the money out in the next tax year to use the personal allowance.


Help / advice appreciated!

kidmugsy

https://www.gov.uk/tax-on-your-private-pension/annual-allowance

Jerben

Thanks for the link.
I've read that now, but there are things we don't quite understand.


Time is tight now, (to end of tax year), so we need to approximate.


The facts are she's in the NHS DB scheme. Has earned £22k this year, with pension contributions of £1.5k.
From her last pension statement this will earn an additional £250 per year pension + some extra lump sum, (can't remember exactly, but say £1k).


So, do we subtract all these numbers from the £22k ?

kidmugsy

Her NHS pension contribution doesn't matter; what matters is what she's bought with it. Scroll down here:
http://adviser.royallondon.com/technical-central/information-guidance/contributions-and-tax-relief/annual-allowance/

kidmugsy

Her NHS pension contribution doesn't matter; what matters is what she's bought with it. Scroll down here:

http://adviser.royallondon.com/technical-central/information-guidance/contributions-and-tax-relief/annual-allowance/

or try this

http://www.hmrc.gov.uk/tools/pension-allowance/index.htm