What to do with cash?

bigadaj

Ganga wrote: »

Open one then you can put into it what you are allowed to and take out of it what you are allowed to. If you open one up, dump some money in and take it all out you'll (rightly IMO) get a big charge for all the admin you've caused them.

So, find a SIP provider, transfer the money, add in each year to the same SIPP what you are allowed to each year, and take out what works for you.

Thanks for info AnotherJoe,i can strart a new sipp for both my wife and myself and do what you say but here is another question,if the money we put in is savings and not earnings will we be taxed on it when we draw it out? as technically the original money has allready been taxed,

Ganga:beer:

You can only contribute earnings into a pension to get the tax relief, apart from the first £2880 grossed up to £3600 with tax relief for non earners or those earning less than that figure.

Ganga

Thanks Bigadaj, i know we can only put in £2880.0 from our savings but when this is uplifted to £3600.0 after tax relief can we draw the £3600 tax free as we have allready paid tax on the orginal £2880?

bigadaj

Ganga wrote: »

Thanks Bigadaj, i know we can only put in £2880.0 from our savings but when this is uplifted to £3600.0 after tax relief can we draw the £3600 tax free as we have allready paid tax on the orginal £2880?

Depends on your other income.

Like any pension you get 25% tax free and the rest is exposed to tax at your marginal rate, well considered as income in that year. So you get £2700 of potentially taxable income, so would pay tax on anything that takes you over the personal allowance, so assuming your other taxable earnings, be that from work, pension, dividends or interest above the relevant allowances etc etc don't exceed £8300 ( I think) there's no tax to pay, if your other income exceeds £11k then you pay 20% tax on it all, same above £43k and so on.

You don't need to have paid any tax on the money that has gone in, this is the basic allowance that has been allocated to those who have no earnings.

Ganga

Thanks for the reply bigadaj,what i was wanting to know was:

Suppose you put £20000 of your hard earned money which you have allready paid tax on into a sipp,you then get 20% uplift thru tax £24000 total.
If you draw the total the whole amount after say 12 months and say it has had lost 10% ( hypothetical i know ) will the tax man tax you on the full £21600 at say 20% -£4320 so infact you have been taxed twice on your original sum!

Ganga

bigadaj

Ganga wrote: »

Thanks for the reply bigadaj,what i was wanting to know was:

Suppose you put £20000 of your hard earned money which you have allready paid tax on into a sipp,you then get 20% uplift thru tax £24000 total.
If you draw the total the whole amount after say 12 months and say it has had lost 10% ( hypothetical i know ) will the tax man tax you on the full £21600 at say 20% -£4320 so infact you have been taxed twice on your original sum!

Ganga

Right assuming you earned £25k minimum in that tax year, put £20k into a pension and get the £5k uplift from tax relief (20% of the gross amount is 25% of the net contribution).

If you draw that out in the following tax year and had no other income then you would be taxed on the amount taken out, less the 25% tax free lump sum. Ignoring profit and loss on the investment to make it simple you'd then get £6250 tax free with the remainder taxed, assuming no other income then you would have your personal allowance to offset, say £11k, so,you would be exposed to basic rate tax on £7750, at 20% then that would be £1550 in tax.

So you would have put in £20k and extracted a net £23,450 in the following tax year, the difference being profit.

If you earn income by working, other pensions etc then it obviously complicates these numbers, and for those sums you might need to be careful with recycling if you repeat it but the principle is sound.

atush

Will have about £8800.00 from defered state pension in july

I agree with James, do not take this money as cash. Instead, take the higher income for life.

Ganga

I agree with James, do not take this money as cash. Instead, take the higher income for life.

Thanks for the advise atush but to get the £8800 thru added pension i would have to draw it for at least 9 and a half years to get the equivalent ( i know that the weekly payment will probably increase each year ) but this is just a general estimate

Thanks Ganga

jamesd

That's part of why it's a good deal. Men in normal good health at state pension age have a life expectancy to around age 87 or so and a quarter will live well into their 90s. The number who die within the first ten years is fairly low in comparison, though of course it does happen.

Ganga

That's part of why it's a good deal. Men in normal good health at state pension age have a life expectancy to around age 87 or so and a quarter will live well into their 90s. The number who die within the first ten years is fairly low in comparison, though of course it does happen.

Well i hope i am not one of the laterThanks Ganga