Paying £2880 into pension when retired

zagfles

wannaretireearly said:

Zagfels, I pay 5.5% of my gross wage into LGPS. I earned £8656.57 but my payslip shows the taxable amount quoted which i assumed would be the maximum I could pay in. For future reference if i divide the taxable amount by 125 x 100 that should give me the net figure i can pay in .... to get the gross amount in total after HMRC add 25% to it?
Thank you for replying. 
..... Just opened the H & L SIPP, it was so easy to do!

Yes, that's right. The LGPS isn't a RAS scheme, it's what HMRC confusing called "net pay", which means your contributions are already deducted in the taxable pay figure. So you can simply use the taxable pay figure for max gross pension contributions, so as you say divide this by 1.25 (or more intuatively, multiply by 0.8, it's the same thing) for the net amount you can pay in, ie £6544.

Devonjem

Hello, last year I opened a SIPP with HL and put in £2880 which was grossed up by the Government to £3600.  I withdrew everything except £50 to keep the SIPP open.  Can I simply add £2880 into my SIPP again and wait for the Government to gross up again next year?  Is there any paper work or anything I need to do - or just add the cash to the SIPP then wait?  thanks

Mick-H

You can only put £2880 once per financial year.

DairyQueen

Mick-H said:

You can only put £2880 once per financial year.

I think you mean 'tax year'.

Also, this doesn't have to be contributed as a single ('once') lump sum. Providing that the total contributions into any scheme during a single tax year don't sum to more than £2880 you can contribute in as many transactions as you wish.

@Devonjem. The tax year in which you contribute is the important criteria. If by 'last year' you mean tax year 2020-21 then you are able to add another £2880 this tax year (21-22), and again next tax year (22-23). You can rinse and repeat in every tax year until you are 75.

Most schemes credit your account with the HMRC top-up within weeks. You are then free to drawdown the grossed-up amount (£3,600 less whatever is required to keep the account open) as/when you wish. You do not have to drawdown in the same tax year but may wish to do so. 

The process is as easy as you describe. You simply contribute and some weeks later that contribution will be grossed-up.

Devonjem

Thanks very much for the replies.  In January 2021 I opened the SIPP and in the same month paid into it £2880.  Government added the tax in March 2021 and I then withdrew all but £50.  So I will pay a further £2880 in the next few weeks.   Is there any benefit in doing this early in the tax year or later in the tax year?  Thanks

MallyGirl

probably not if you are leaving it in cash

molerat

Devonjem said:

Thanks very much for the replies.  In January 2021 I opened the SIPP and in the same month paid into it £2880.  Government added the tax in March 2021 and I then withdrew all but £50.  So I will pay a further £2880 in the next few weeks.   Is there any benefit in doing this early in the tax year or later in the tax year?  Thanks

The biggest consideration is the tax treatment of the withdrawal.  I pay mine in April and withdraw as soon as the tax credit is added as it is taxed at BR so it doesn't matter when it is done, MrsM pays in late Jan and withdraws early March as she has a numbered tax code and that is the easiest timing tax wise.

where_are_we

Devonjem said:

Thanks very much for the replies.  In January 2021 I opened the SIPP and in the same month paid into it £2880.  Government added the tax in March 2021 and I then withdrew all but £50.  So I will pay a further £2880 in the next few weeks.   Is there any benefit in doing this early in the tax year or later in the tax year?  Thanks

There is a very small benefit in paying £2880 into your HL SIPP as soon as the tax year starts compared to paying it in at the end, assuming you have no earned income and are between 55 and 75. You get an uplift of £180 if you are a basic rate taxpayer. HL do not pay interest on cash in SIPPs, so withdraw your £3600 (leaving your original £50) as soon as the £720 HMRC top up is added to your £2880. Then your £180 gain is compounded for longer in the tax year in an interest bearing account. I realise the advantage is just slightly more than a pound and depends on HMRC not deducting excess tax on your withdrawal.

Audaxer

molerat said:

Devonjem said:

Thanks very much for the replies.  In January 2021 I opened the SIPP and in the same month paid into it £2880.  Government added the tax in March 2021 and I then withdrew all but £50.  So I will pay a further £2880 in the next few weeks.   Is there any benefit in doing this early in the tax year or later in the tax year?  Thanks

The biggest consideration is the tax treatment of the withdrawal.  I pay mine in April and withdraw as soon as the tax credit is added as it is taxed at BR so it doesn't matter when it is done, 

So just to clarify, if I have a BR tax code on my HL SIPP, does that definitely mean my £3,600 withdrawal will not be hit with excess tax if drawn out early in the tax year? 

Bobinyorkshire

Apologies in advance. Can I also ask a quick question which is probable already covered, but I can’t easily see? My wife has a 10k pension per annum and adds £2880 to a HL cash SIPP. Could she withdraw £2570 without incurring a tax bill (personal allowance) per year or more if taking into account TFLS? Could she do this every year too, reducing the withdrawal amount to take into account her increasing DB pension and static personal allowance?