Paying £2880 into pension when retired

vixen1500

Thanks for everyone's help, much appreciated 

vixen1500

Hiya, might seem daft, but do you pay tax on the tax relief when withdrawn?

Dazed_and_C0nfused

vixen1500 said:

Hiya, might seem daft, but do you pay tax on the tax relief when withdrawn?

No.  You pay tax on the taxable part of the pension.

For example if you pay £2,880 now the pension company adds £720 in tax relief giving you a fund of £3,600.

Say you leave that as cash in the SIPP and decide to withdraw it on a couple of years.

£900 is a TFLS and £2,700 is taxable income.  The tax ultimately payable on that £2,700 is dependent on your other taxable income in that tax year.

If it doesn't make you liable to tax you get the whole £2,700 (+£900 TFLS) with no tax to pay = £720 profit.

If you need to pay basic rate tax on it then the £2,700 becomes £2,160 net of tax so the total return is £3,060 (£2,160 +£900 TFLS) = £180 profit.

If you have to pay higher rate tax on it you are worse off overall.

MallyGirl

zagfles said:

MallyGirl said:

vixen1500 said:

Can you only make the one payment?  Or could I make another to top it up?

you can make multiple payments - it is just a pension. You just need to monitor the total contribution within the tax year and not leave the final payment too close to end of March in case the tax relief doesn't get applied until the following tax year

It doesn't matter if the tax relief gets applied in the next tax year, the whole gross contribution counts in the tax year the net contributions is paid, eg £2880 paid in on 31 March 2023, that's £3600 gross in the 2022/23 tax year even if the £720 tax relief isn't received till May.

Every day is a school day - thanks for the correction. I thought I had seen someone complain about this as an issue in the past. 

molerat

It only really becomes an issue in the annual pay £2880 in take £3600 out scenario where everything generally needs to be completed in the same tax year for effective tax management purposes.

sheslookinhot

molerat said:

It only really becomes an issue in the annual pay £2880 in take £3600 out scenario where everything generally needs to be completed in the same tax year for effective tax management purposes.

In what circumstances does it become an issue ?

Audaxer

sheslookinhot said:

molerat said:

It only really becomes an issue in the annual pay £2880 in take £3600 out scenario where everything generally needs to be completed in the same tax year for effective tax management purposes.

In what circumstances does it become an issue ?

If you want to take out the whole £3,600 in the same tax year, you need to ensure you allow time for the tax relief to be added to your SIPP, it usually takes about 8 weeks, and then ensure you get the UFPLS processed in time to withdraw the £3,600 before the end of the tax year.

sparky0138

molerat said:

molerat said:

WBCPB said:

I have just opened my first cash SIPP with H & L, i spoke to customer service via telephone before i did the deposit and was also advised that the minimum funding requirement needed to keep the account open in year 1 and going forward would be £50.
Regards

Would be nice if they put that in writing somewhere.  All their documentation still states £1K.

Thank you for your email.
I can confirm the minimum amount required to keep your HL SIPP open is £50.
I have raised the fact that our documentation still states the previous figure of £1,000 to the relevant team and have asked that this be looked into as a priority.
I apologise for any confusion this may have caused you.
If you have any other questions, please get back to me.
Kindest Regards
xxxxx

Hargreaves Lansdown

Their documentation (UFPLS Illustration) is still saying that £1000 needs to be left in otherwise they'll close the account.

where_are_we

It was £50 minimum to keep HL SIPP open the last time my OH did a UPFLS - this was just over a year ago. OH had a reply to a message asking them to confirm the £50 minimum.

dealyboy

Apologies if this has been discussed before but it came as a bit of a shock to me when I added £2,880 to my SIPP with AJ Bell Youinvest earlier this year. People need to be aware.

After the tax relief of £720 had been added I fully expected to be able to access £3,600 from the Manage My SIPP page, however the amount available for a UFPLS was only about £3,500. In addition the amount varied on a daily basis down to £3,400 and up to £3,900, currently £3,545.

Apparently the reason is that AJ Bell Youinvest maintain a percentage split between the crystallized and uncrystallized SIPP value rather than holding separate pots. The percentage is recalculated whenever cash is added, drawdown is performed, UFPLS taken, or PCLS taken. The 'accessed' figures are updated at 06:00 GMT each day and in a falling market invested crystallized funds value will decrease and therefore the uncrystallized value will decrease proportionately according to the split percentage. However in a rising market the accessible uncrystallized value increases, therefore a higher PCLS or UFPLS can be taken.

I should point a strong proviso out that I am no expert, that this is as I understand it and that I am currently in discussions with AJB regarding the accuracy of the figures displayed.