transferring wife's tax allowance whilst drawing down from sipp

frugal90

When I hit 57 I plan to drawdown on my SIPP in three stages to get me to the point where I draw my public service pension un-reduced at age 60. My plan was to take the max personal allowance currently £10600 and 25% tax free with each drawdown. Now a chap a work who's wife doesn't work has just told me about the transfer of about £1000 to his personal allowance and he has been given a rebate. Now assuming this is still in place come 2019, would drawing down from my SIPP which is classed as income qualify for the extra personal allowance if my wife is not working- she will not have any income for 5 years until she starts her sipp drawdown? I know someone on here will have worked this one out?

thanks

frugal

saver861

Yes - if you transfer from wife to you it adds to your personal allowance. Currently 10600 + 10% wife allowance = £11660.

From next month it personal allowance will be £11,000 and and £1,100 from wifey makes total £12,100.

Wives come in useful at times .....

frugal90

seems like it -great -if this continues I'll be in that position for 4 or 5 years.

yippee!

thanks for that

frugal

westv

I suppose a couple of hundred pounds extra a year is better than nothing.

where_are_we

I am 64, retired, and £212 extra each and every tax year is a lot more than nothing! This tax year I have withdrawn a UFPLS from my SIPP which together with my occupational pension gets me up to my personal allowance of £11660 (using the gift of my wife`s transferred marriage allowance) and pay no income tax. My wife is also retired and a non taxpayer and contributed £2880 net grossed up to £3600 in each of the last 2 tax years into her SIPP ( kept in cash) and has withdrawn £7214 using the small pots rule and will pay no tax as her total income is less than her revised personal allowance of £9640. We plan to do this for as many tax years in the future by deferring my state pension at the 10.4% rate.

p00hsticks

You can apply for Marriage Allowance online here
https://www.gov.uk/marriage-allowance-guide/how-it-works

Note that it is the person transferring the allowance that needs to apply (i.e. the non-tax payer)

kidmugsy

where_are_we wrote: »

I am 64 ... by deferring my state pension at the 10.4% rate.

Your birthday is before April 6th, is it?

where_are_we

Yes - just before April 6th. I will not be in the new system so I will benefit from the 10.4% deferral rate and not the 5.2% rate which applies to people reaching 65 from April 6th. When the start date of the new system was announced a few years ago, I was initially dismayed at just missing out on what appeared to be a larger state pension. On closer inspection, I realised that I would have not have received the maximum if I had been born a few days later because, contributing for 37 years into the Royal Mail occupational pension scheme which was "contracted out" and paying a reduced national insurance rate, I would have hypothetically received the same amount in the new scheme as the old scheme. I think many people who are reaching state pension age in the next year are going to be very disappointed because they were contracted out like I was.

greenglide

Yes - just before April 6th

Because of that you benefit from:-

AP from deferring is the higher rate as you said and is also inheritable by a spouse, under nSP it isnt.

The GMP portion of your DB pension is inflation proofed with your State Pension, under nSP it isnt.

You can buy the State Pension Top-up is you wish. Equivalent to over 5% and this is inheritable as well.

With being contracted out for all that time nSP would have given you any more so you are a winner!

David.s_2

saver861 wrote: »

Yes - if you transfer from wife to you it adds to your personal allowance. Currently 10600 + 10% wife allowance = £11660.

From next month it personal allowance will be £11,000 and and £1,100 from wifey makes total £12,100.

Wives come in useful at times .....

Does this leave your wife with 90% of her personal allowance to use against a low income? Does anyone know please? Or does she lose it all?

greenglide

Only part of the allowance is transferred. The rest is left as is and is available for set off against income of the spouse as normal.

Can the allowance be transferred even if one of the couple pays the higher rate? Would it then be worthwhile even if the partner giving the allowance is a basic rate payer?