£2880>£3600

uk1

missile wrote: »

Not as beneficial. Do you and OH both have income in excess of tax allowance?

Thanks. I have excess income my wife has some spare allowance.


Jeff

jamesd

HL's charge for closing the account within twelve months unless you use the sort of approach that I described for missile. That approach has relatively low maintenance because you can set up regular direct debit contributions and regular income.

If you want to do it in a single lump sum Virgin is one of the better options because they don't have any charges for it. for that reason they are the provider I'd normally suggest but there are others. Cavendish wouldn't normally be a great provider for this because they have a fixed fee.

This pay in and take out provides a gain for both tax payers and those who are not tax payers but the level of gain is different. If any personal allowance is unused there's some enhancement to the gain.

At basic rate income tax with all personal allowance used:

Pay in £2880, take out 25% tax free, £900, take out £2700 taxed at 20% net, £2160. Net gain £900 + £2160 - £2880 = £180

With at least £2,700 of personal allowance still unused:

Pay in £2880, take out 25% tax free, £900, take out £2700 nil tax due, £2700, £2700. Net gain £900 + £2700 - £2880 = £720

AnotherJoe

If you take it out monthly as suggested in post 6 then you have the big benefit that next year you dont have to open another SIPP and jump through all the hoops to do that.

LXdaddy

So does the following "thought" make sense?


Open a SIPP and deposit £2880 this tax year.
During each tax year from next year until age 75... withdraw 25% (£900) and deposit £2880. In any year where some tax free allowance is available withdraw as much as possible.


We use Fidelity for our S&S ISAs. Would it be reasonable to use them for this plan?


(Apologies if this looks like a thread diversion)

jerrysimon

Yep I did this in Mar following the excellent advice from folk on here. Put in 6K for my wife and now paying in £250 a month. Its aleady got 7.5K (tax man added the 20%) in it which I have left as cash (not invested) because she is 55 in Oct and we plan to draw 25% then monthly after this tax year

Thinking of doping one for myself as well though I have a DB pension and plan to start drawing that next April so will be paying tax on my pension then

People moan about paying tax on their pensions, but I guess if you are you should count your blessings that you have enough pension to attract tax!

PS can you do this if when already draw your pension ? I guess not as you would be recyling though I think I read somewhere that you can up to 7.5K ?


Jerry

brewerdave

jerrysimon wrote: »

Yep I did this in Mar following the excellent advice from folk on here. Put in 6K for my wife and now paying in £250 a month. Its aleady got 7.5K (tax man added the 20%) in it which I have left as cash (not invested) because she is 55 in Oct and we plan to draw 25% then monthly after this tax year

Thinking of doping one for myself as well though I have a DB pension and plan to start drawing that next April so will be paying tax on my pension then

People moan about paying tax on their pensions, but I guess if you are you should count your blessings that you have enough pension to attract tax!

PS can you do this if when already draw your pension ? I guess not as you would be recyling though I think I read somewhere that you can up to 7.5K ?


Jerry

Pension is not counted as earned income so the max. contribution is £2880 for a basic rate tax payer or non tax payer.:(

uk1

Thanks for all the helpful replies. I'd spent some time searching believing it would have been covered before, but couldn't find it so I appreciate posters repeating things for me.

I plan to open one each for us and then make regular fresh payments just after the start of each tax year and withdraw the 25% with the balance taken straight away. in our case it will be £900 extra between us so worthwhile.

Do I simply keep a £1 balance in Virgin to "keep it open"?

Thanks again,

Jeff

Goldiegirl

I've also found this thread helpful.

I'm a non tax payer, and I'm unlikely to pay any tax for the next 10 years, so I've been considering a Sipp.

Just a couple of questions from me.

If I deposited the £2880, is a lump sum just added to bring the amount up to £3600? I assume there's a question in the application process, so they'd know I was a non tax payer?

I'm in receipt of a pension, but have some unused tax allowance. If I wanted to do a draw down, would anything in in excess of the 25% be paid to me with tax deducted and I'd have to claim it back from HMRC?

Would be grateful for any comment.

uk1

Goldiegirl,

My understanding is that you open a personal pensions account with one of the providers and deposit £2880. "Shortly afterwards" the account is credited with the tax element to make your total balance £3600. As a non tax payer you will receive the first 25% tax free and the balance taxed automatically at the basic rate which you will then reclaim via a tax return. If you haven't used the online system it is surprisingly easy to use.

Jeff

Goldiegirl

uk1 wrote: »

Goldiegirl,

My understanding is that you open a personal pensions account with one of the providers and deposit £2880. "Shortly afterwards" the account is credited with the tax element to make your total balance £3600. As a non tax payer you will receive the first 25% tax free and the balance taxed automatically at the basic rate which you will then reclaim via a tax return. If you haven't used the online system it is surprisingly easy to use.

Jeff

Thank you, that is exactly what I wanted to know