SIPP for my wife

missile

Hi and many thanks for reading my post.


My wife is 55 and has retired. We would like to arrange a SIPP for £3600 to take advantage of the government contribution. She would pay in £2880 prior to April 5th. Take 25% tax free and draw down the balance after April 05th. Her total income is below £11,000p.a.


I note:
HL have a charge 0.45%, plus £295 + VAT if she closes the account within 12 months.
Virgin charge 1% but no early closure fee. Thus her total charges would be much lower = £36 or have I missed something?


I understand HMRC can issue provider with a TAX code on request. In my wife's case this would avoid the inconvenience of paying tax and then reclaiming it? How does one arrange this?


Assuming Osborne does not change the rules, we would intend doing this in future years.

jamesd

Why not set up HL to make regular payments of income and make regular monthly direct debit contributions of 2880/12 after the first year?

First year I assume she pays in a lump sum in of 2880. Wait until tax relief has increased that to 3600 then take out 25%, 900, tax free lump sum.
Set up an income instruction to pay out 2700/12 = £225 a month to extract over a year the taxable part.
Set up DD from April to pay in 240.60 a month. That'll take care of almost all of the 2880 net contributions. Top up the difference between 225 a month income and 240.60 spending from other income.

Alternatively set up the DD for contributions to be the after tax value of the 225 a month and top up more from the lump sum when you initially get it, so it's a self-sustaining arrangement with just taking lump sum and moving into drawdown then topping up required once a year. This is cleaner since you only have to interact once a year in say late May or June once the final tax relief bit has arrived and you take out the lump sum on the past year of contributions and put it into drawdown.

xylophone

HL have no charge for holding cash.

missile

jamesd wrote: »

Why not set up HL to make regular payments of income and make regular monthly direct debit contributions of 2880/12 after the first year?

First year I assume she pays in a lump sum in of 2880. Wait until tax relief has increased that to 3600 then take out 25%, 900, tax free lump sum.
Set up an income instruction to pay out 2700/12 = £225 a month to extract over a year the taxable part.
Set up DD from April to pay in 240.60 a month. That'll take care of almost all of the 2880 net contributions. Top up the difference between 225 a month income and 240.60 spending from other income.
.

I have done as you suggested. Many thanks.