Help & Advice with Pension / SIPP

LoopySnooker

Hi everyone, would very much appreciate a bit of advice on the following.

Current situation. My wife is 58 and planning to stop working in around 2 years. Current earnings just under 10k. In 2 years, she will have qualified for the maximum £155/wk state pension, which she can start taking at 66 if required. She also has an old DB pension currently worth approx. £140k, which has not been touched. Not paying into any other pension except a minimum contribution auto-enrolment.

What we would like to do is put away as much as we can over the next few years into some sort of pension (SIPP ?) to maximise tax relief. I have read on here about opening a Hargreaves Landown one and leaving it as cash, then taking 25% tax free and drawing down the rest on a monthly basis. We are in no immediate rush to start taking out of the pensions as we can currently manage on my earnings.

Many thanks in advance for any help offered.

dunstonh

I have read on here about opening a Hargreaves Landown one and leaving it as cash, then taking 25% tax free and drawing down the rest on a monthly basis.

That is one of the methods but it may not be the optimal method. Indeed, leaving it as cash increases risks, not reduce them and the costs of that method have to be factored in as well. HL are not that cheap.

We are in no immediate rush to start taking out of the pensions as we can currently manage on my earnings.

Which suggests that method you describe is not likely to the best one to use and the use of cash is likely to be unsuitable given the timescales involved.

xylophone

That is one of the methods but it may not be the optimal method. Indeed, leaving it as cash increases risks, not reduce them and the costs of that method have to be factored in as well. HL are not that cheap.

For this particular scenario HL is very cheap........free even.

No charge to hold cash, no charge for drawdown.

No interest on cash of course, but as the tax rebate could be regarded as "interest."....

https://forums.moneysavingexpert.com/discussion/5477605

post 6.

dunstonh

For this particular scenario HL is very cheap........free even.

What about their platform charge and their drawdown charge?

xylophone

She also has an old DB pension currently worth approx. £140k,

What are the actual benefits offered at scheme pension age?

Has your wife obtained a new state pension statement?

https://www.gov.uk/check-state-pension

If you do not need your wife's income, she could choose to pay as much as possible into the SIPP before she stops working - once she has no "relevant income" she will be confined to a maximum of £2880 net/£3,600 gross.

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

Is she paying the maximum into the auto enrolment scheme that attracts a matching contribution?

Is the auto enrolment scheme relief at source?

xylophone

What about their platform charge and their drawdown charge?

No platform charge for cash - no charge for drawdown.

xylophone

See http://www.hl.co.uk/pensions/sipp/charges-and-interest-rates

LoopySnooker

Thanks all for the help so far. In reply to the questions:

xylophone wrote: »

What are the actual benefits offered at scheme pension age?

Not sure to be completely honest, will need to dig out the documents and check.

xylophone wrote: »

Has your wife obtained a new state pension statement?

Yes, got one this week and it says it will be £155.65 a week after a couple more years of contributing.

xylophone wrote: »

Is she paying the maximum into the auto enrolment scheme that attracts a matching contribution?

Yes, the company are only paying the minimum 1% required so this is being matched.

xylophone wrote: »

Is the auto enrolment scheme relief at source?

No, it's with Now pensions which I believe is a net pay arrangement.

xylophone wrote: »

If you do not need your wife's income, she could choose to pay as much as possible into the SIPP before she stops working - once she has no "relevant income" she will be confined to a maximum of £2880 net/£3,600 gross.

That's sounds like what I was thinking of, maybe paying in £7200 net/£9000 gross in 2016-17, 17-18 & 18-19, leaving a pot of £27k which can then be used for a small income for a few years until the state pension kicks in and we take the DB pension.

bigadaj

OP - the £140k pension is this defined benefit or defined contribution. It sounds more like the latter, rather than the former which is a final salary or career average scheme, that sum could be a transfer value but worth checking as it will make a difference.

LoopySnooker

bigadaj wrote: »

OP - the £140k pension is this defined benefit or defined contribution. It sounds more like the latter, rather than the former which is a final salary or career average scheme, that sum could be a transfer value but worth checking as it will make a difference.

Just checked again, definitely defined benefit. The figure I quoted (£140k) is roughly what it works out at based on the 25% lump sum value if it was taken now.

neilvw

Is the £35k-odd lump sum definitely 25% of the notional capitalised value, and not a standard or automatic lump sum which is usually less?

Do you have a benefit statement showing the annual pension you can expect / have accrued? A DB statement would definitely have those figures, not just the lump sum.