Paying £2880 into pension when retired

Rob749

solar_power said:

Hi all, I keep a buffer of £1000 in my SIPP and have just added the yearly £2880. Is it ok to pull out £3600 before the tax relief is added in June?

Hmmm...I wouldn't risk it, I always wait until cash is there. Although I can't see HL closing the account with money due to be paid in. There again you never know! Perhaps somebody else on here has done it that way before.

peteduk

Or you could ask HL?

Audaxer

Rob749 said:

solar_power said:

Hi all, I keep a buffer of £1000 in my SIPP and have just added the yearly £2880. Is it ok to pull out £3600 before the tax relief is added in June?

Hmmm...I wouldn't risk it, I always wait until cash is there. Although I can't see HL closing the account with money due to be paid in. There again you never know! Perhaps somebody else on here has done it that way before.

I think from reading a lot of the previous posts on this thread over the years, most people wait until the tax relief is received before taking out the £3,600. Once you have made the contribution of £2,880 you would have £3,880 in the account, so I suppose you could take out £3,600 immediately if the account balance left of £280 was allowed to remain open while awaiting the tax relief. However, somehow it doesn't seem right to me to pay in £2,880 one day and to be able to take out £3,600 the following day? 

sparky0138

My mum finished work in April and I'm trying to work out how much she can contribute this year so that the total comes to £3600 (gross)

Before the end of the tax year she'll be paying £180 into Fidelity to cover fees. This will earn £45 tax relief. (£225 gross)

She's also paid £75.22 in LGPS contributions. As this is a net pay arrangement, she hasn't received any tax relief for this.

Here is my working out:

£3600 - £225 - £75.22 = £3299.78
20% of £3299.78 = £824.94
£3299.78 - £824.94 = £2474.84

Therefore £2474.84 is the net amount she can still contribute so the total  comes to £2880. Can someone tell me if this is correct please?

It's the LGPS contribution that's tripping me up. If it had received tax relief, I don't think I'd have had any problems.

jamesd

£3,600 gross is for people earning less than £3,600 in the tax year of the pension contributions. Those earning more can usually pay inn their gross pay. She's making LGPS contributions, is she really being paid less than £3,600?

Those who make more than £40,00 or who've taken taxable pension income except from a final or average salary pension or annuity may have lower limits than gross pay.

AlwaysLearnin

Good to see you back jamesd. Hope you're well

peteduk

Hello,

I have taken early retirement and receive a company pension. In addition, for the 1st time this year, I have opened a (cash) SIPP with HL with a view to benefiting from the tax relief via draw down (I am a basic rate tax payer from my pension so £180).

Circumstances have now changed and I plan to get another job (possibly part time). If so it may include a defined benefit or defined contribution pension scheme.

Please can you advise on the following?

1). If I draw down I understand I can only contribute up to £4,000 each year to all money purchase pensions. How does this apply to a possible future pension from work? (I do not expect any work pension to be above £4,000 because that would imply a high salary but it may affect future SIPP contributions?)

2). Should I delay any draw down until I fully retire in case I exceed the £4,000?

Thank you for your help,

Peter

fred246

Just a quick question. I have been paying £3600 a year for my wife for a few years. She gets the emails about her account. I found her trying to pay 'fees' with her debit card. I explained that they take the fees off the pension. It got me wondering if you can pay in £3600 plus the fees separately or do the fees have to come out of the £3600?

sparky0138

jamesd said:

£3,600 gross is for people earning less than £3,600 in the tax year of the pension contributions. Those earning more can usually pay inn their gross pay. She's making LGPS contributions, is she really being paid less than £3,600?

Those who make more than £40,00 or who've taken taxable pension income except from a final or average salary pension or annuity may have lower limits than gross pay.

As I said in my post, she finished work in April. She'll only be earning around £900 this tax year.

Notepad_Phil

peteduk said:

Hello,

I have taken early retirement and receive a company pension. In addition, for the 1st time this year, I have opened a (cash) SIPP with HL with a view to benefiting from the tax relief via draw down (I am a basic rate tax payer from my pension so £180).

Circumstances have now changed and I plan to get another job (possibly part time). If so it may include a defined benefit or defined contribution pension scheme.

Please can you advise on the following?

1). If I draw down I understand I can only contribute up to £4,000 each year to all money purchase pensions. How does this apply to a possible future pension from work? (I do not expect any work pension to be above £4,000 because that would imply a high salary but it may affect future SIPP contributions?)

2). Should I delay any draw down until I fully retire in case I exceed the £4,000?

Thank you for your help,

Peter

I assume the company pension you're currently taking is a DB pension so the annual allowance is intact, therefore personally I'd only start any drawdown once I had taken the decision to fully retire - otherwise as you say, this will trigger the MPAA and limit the amounts you can put in total into your DC pension and any other SIPPs that you have. 

Though that could leave your cash SIPP losing to inflation if it's left for a few years, so you might want to consider how to deal with that.