Paying £2880 into pension when retired

caro69

Dazed_and_C0nfused said:

As he is under transitional rules for the new State Pension it's impossible for us to know what he might receive unless you tell us.

You can check what he will get by looking at his forecast on gov.uk.  You must read it in full, not just the headline figure which makes certain assumptions.

He might get £55/week or £300/week.  More likely to be £150-£200 so even if has applied for Marriage Allowance he would have some unused Personal Allowance.

You cannot know how much spare Personal Allowance there will be without at least knowing what his State Pension will be.

It could be something like this,
Personal Allowance £11,310 less State Pension £9,627 = £1,683 unused allowances.

But irrespective of that even if he has a very high State Pension and was basic rate payer he would still be making a 6.25% profit (ignoring any inflation aspect and provider fees).

He pays £2,880.  The pension company adds £720, courtesy of HMRC, so he has a fund of £3,600.

He takes £900 as the 25% TFLS leaving £2,700 in taxable pension income.  He has to pay 20% tax on that meaning he comes out with £900 + £2,160 = £3,060.  Which is £180 more than the £2,880 he paid in in the first place.

Thank you for replying.  We have done a pension forecast and it says he is entitled to a full pension at £185 per week. He has a full contribution record.  I can see now that it can still be beneficial even with paying the tax.

Have you any thoughts about whether we'd be OK to transfer his pension to HL and then use this to top up each year, or should this be done in a separate SIPP, or does it make no difference.

Audaxer

caro69 said:

Hubby is 64 and not working. He wont' work again. I am a few years younger and still working and happily supporting us.
He has a modest non-flexible pension with Zurich which we are about to move to a HL Sipp.  We have no plans on taking anything from it at this stage and use it later in life to top up his state pension to keep him under the tax threshold.  I now realise that he could be contributing £2880 as a non earner to take advantage of the tax relief

If we move the pension to HL can we then use it to contribute £2880 into cash and then withdraw the £3660.  Or would we be better to open a SIPP with a different provider and keep things separate?  

I am also confused as to the benefits of contributing each year until the age of 75.  Surely once the state pension kicks in there won't be enough personal allowance left to get the whole amount out.  I am probably missing something I'm sure.

@caro69, once your husband's Zurich pension is transferred into an HL SIPP, I would consider taking up to the maximum sum from the HL SIPP  up to his personal tax allowance of £12,570, plus the 25% tax free, and reinvesting that amount in similar funds in an S&S ISA in his name. As he is 64 he only has a couple of years to get as much as he can out of his SIPP tax free and transferred into an S&S ISA, because after he takes his State Pension most of the withdrawals he takes from the SIPP will be taxable. 

However also bear in mind that the annual withdrawal amount above will have to be reduced by £3,600 if he is also contributing £2,880 each tax year into the SIPP and withdrawing the £3,600 cash after the tax relief is added. Still worth doing in my opinion.

Dazed_and_C0nfused

We have done a pension forecast and it says he is entitled to a full pension at £185 per week. He has a full contribution record

That really doesn't matter under the transitional rules.

Does it say he has already reached at least £185.15?

Most people's forecasts will say £185.15.  But further down that that is only obtained by adding additional years.

Are you 100% certain?

caro69

Audaxer said:

caro69 said:

Hubby is 64 and not working. He wont' work again. I am a few years younger and still working and happily supporting us.
He has a modest non-flexible pension with Zurich which we are about to move to a HL Sipp.  We have no plans on taking anything from it at this stage and use it later in life to top up his state pension to keep him under the tax threshold.  I now realise that he could be contributing £2880 as a non earner to take advantage of the tax relief

If we move the pension to HL can we then use it to contribute £2880 into cash and then withdraw the £3660.  Or would we be better to open a SIPP with a different provider and keep things separate?  

I am also confused as to the benefits of contributing each year until the age of 75.  Surely once the state pension kicks in there won't be enough personal allowance left to get the whole amount out.  I am probably missing something I'm sure.

@caro69, once your husband's Zurich pension is transferred into an HL SIPP, I would consider taking up to the maximum sum from the HL SIPP  up to his personal tax allowance of £12,570, plus the 25% tax free, and reinvesting that amount in similar funds in an S&S ISA in his name. As he is 64 he only has a couple of years to get as much as he can out of his SIPP tax free and transferred into an S&S ISA, because after he takes his State Pension most of the withdrawals he takes from the SIPP will be taxable. 

However also bear in mind that the annual withdrawal amount above will have to be reduced by £3,600 if he is also contributing £2,880 each tax year into the SIPP and withdrawing the £3,600 cash after the tax relief is added. Still worth doing in my opinion.

Golly never thought of this.  That is very interesting.  His pot is small, around £31000.  So he could take his 25% (£7750) plus his personal allowance £12570, total £20320, leaving only £10000 in his actual pension.   His state pension starts in January 2024 so we could pretty much get the vast majority of it out of the pension and into a S&S Isa.  

If he does that this year, is it OK to contribute £2880 back in to the pension, keep it as cash and take it back out once tax relief received?  I keep seeing references to pension recycling which spooks me a little.  

When he eventually withdraws money from his S&S isa to top up his state pension, this money is tax free?  

caro69

Dazed_and_C0nfused said:

We have done a pension forecast and it says he is entitled to a full pension at £185 per week. He has a full contribution record

That really doesn't matter under the transitional rules.

Does it say he has already reached at least £185.15?

Most people's forecasts will say £185.15.  But further down that that is only obtained by adding additional years.

Are you 100% certain?

There was a section that mentioned something along the lines of is there anything you can do to increase the pension but it says there wasn't.  Assume therefore that the £185 is correct.

Audaxer

caro69 said:

Audaxer said:

caro69 said:

Hubby is 64 and not working. He wont' work again. I am a few years younger and still working and happily supporting us.
He has a modest non-flexible pension with Zurich which we are about to move to a HL Sipp.  We have no plans on taking anything from it at this stage and use it later in life to top up his state pension to keep him under the tax threshold.  I now realise that he could be contributing £2880 as a non earner to take advantage of the tax relief

If we move the pension to HL can we then use it to contribute £2880 into cash and then withdraw the £3660.  Or would we be better to open a SIPP with a different provider and keep things separate?  

I am also confused as to the benefits of contributing each year until the age of 75.  Surely once the state pension kicks in there won't be enough personal allowance left to get the whole amount out.  I am probably missing something I'm sure.

@caro69, once your husband's Zurich pension is transferred into an HL SIPP, I would consider taking up to the maximum sum from the HL SIPP  up to his personal tax allowance of £12,570, plus the 25% tax free, and reinvesting that amount in similar funds in an S&S ISA in his name. As he is 64 he only has a couple of years to get as much as he can out of his SIPP tax free and transferred into an S&S ISA, because after he takes his State Pension most of the withdrawals he takes from the SIPP will be taxable. 

However also bear in mind that the annual withdrawal amount above will have to be reduced by £3,600 if he is also contributing £2,880 each tax year into the SIPP and withdrawing the £3,600 cash after the tax relief is added. Still worth doing in my opinion.

Golly never thought of this.  That is very interesting.  His pot is small, around £31000.  So he could take his 25% (£7750) plus his personal allowance £12570, total £20320, leaving only £10000 in his actual pension.   His state pension starts in January 2024 so we could pretty much get the vast majority of it out of the pension and into a S&S Isa.  

If he does that this year, is it OK to contribute £2880 back in to the pension, keep it as cash and take it back out once tax relief received?  I keep seeing references to pension recycling which spooks me a little.  

When he eventually withdraws money from his S&S isa to top up his state pension, this money is tax free?  

If he takes out the £3,600 after the tax relief is added, that is fine, but will use up £2,880 of his personal tax allowance, so he could only take out the difference up to a total of £12,570 each year, without being liable to pay any tax on it. 

However as his pot is only around £31k, I think he would be able to get all of it out this tax year and next tax year, before he gets his State Pension in Jan 2024. If he did that he would still be able to contribute the £2,880 in these two tax years, but would be subject to tax when taking it back out if he had already used up his personal allowance taking the rest of his main pension out.

However I'm just thinking that if he left the two years gross contributions of £3,600 each year, in the SIPP until after he gets his State Pension, he could still get that out tax free over subsequent years, as he will still have a bit of tax free allowance after he starts receiving his State Pension. 

Yes, once the money is in the S&S ISA it will definitely be tax free.

caro69

Audaxer said:

caro69 said:

Audaxer said:

caro69 said:

Hubby is 64 and not working. He wont' work again. I am a few years younger and still working and happily supporting us.
He has a modest non-flexible pension with Zurich which we are about to move to a HL Sipp.  We have no plans on taking anything from it at this stage and use it later in life to top up his state pension to keep him under the tax threshold.  I now realise that he could be contributing £2880 as a non earner to take advantage of the tax relief

If we move the pension to HL can we then use it to contribute £2880 into cash and then withdraw the £3660.  Or would we be better to open a SIPP with a different provider and keep things separate?  

I am also confused as to the benefits of contributing each year until the age of 75.  Surely once the state pension kicks in there won't be enough personal allowance left to get the whole amount out.  I am probably missing something I'm sure.

@caro69, once your husband's Zurich pension is transferred into an HL SIPP, I would consider taking up to the maximum sum from the HL SIPP  up to his personal tax allowance of £12,570, plus the 25% tax free, and reinvesting that amount in similar funds in an S&S ISA in his name. As he is 64 he only has a couple of years to get as much as he can out of his SIPP tax free and transferred into an S&S ISA, because after he takes his State Pension most of the withdrawals he takes from the SIPP will be taxable. 

However also bear in mind that the annual withdrawal amount above will have to be reduced by £3,600 if he is also contributing £2,880 each tax year into the SIPP and withdrawing the £3,600 cash after the tax relief is added. Still worth doing in my opinion.

Golly never thought of this.  That is very interesting.  His pot is small, around £31000.  So he could take his 25% (£7750) plus his personal allowance £12570, total £20320, leaving only £10000 in his actual pension.   His state pension starts in January 2024 so we could pretty much get the vast majority of it out of the pension and into a S&S Isa.  

If he does that this year, is it OK to contribute £2880 back in to the pension, keep it as cash and take it back out once tax relief received?  I keep seeing references to pension recycling which spooks me a little.  

When he eventually withdraws money from his S&S isa to top up his state pension, this money is tax free?  

If he takes out the £3,600 after the tax relief is added, that is fine, but will use up £2,880 of his personal tax allowance, so he could only take out the difference up to a total of £12,570 each year, without being liable to pay any tax on it. 

However as his pot is only around £31k, I think he would be able to get all of it out this tax year and next tax year, before he gets his State Pension in Jan 2024. If he did that he would still be able to contribute the £2,880 in these two tax years, but would be subject to tax when taking it back out if he had already used up his personal allowance taking the rest of his main pension out.

However I'm just thinking that if he left the two years gross contributions of £3,600 each year, in the SIPP until after he gets his State Pension, he could still get that out tax free over subsequent years, as he will still have a bit of tax free allowance after he starts receiving his State Pension. 

Yes, once the money is in the S&S ISA it will definitely be tax free.

I'm really grateful for your thoughts on this.  We would never have thought of getting the money out and putting it in a S&S Isa to cut down his tax liability in future years.  I'll have a play around with the figures.  

With regard to the future pension contributions, yes that would work.  

Many thanks once again.

tempus_fugit

Audaxer said:

caro69 said:

Audaxer said:

caro69 said:

Hubby is 64 and not working. He wont' work again. I am a few years younger and still working and happily supporting us.
He has a modest non-flexible pension with Zurich which we are about to move to a HL Sipp.  We have no plans on taking anything from it at this stage and use it later in life to top up his state pension to keep him under the tax threshold.  I now realise that he could be contributing £2880 as a non earner to take advantage of the tax relief

If we move the pension to HL can we then use it to contribute £2880 into cash and then withdraw the £3660.  Or would we be better to open a SIPP with a different provider and keep things separate?  

I am also confused as to the benefits of contributing each year until the age of 75.  Surely once the state pension kicks in there won't be enough personal allowance left to get the whole amount out.  I am probably missing something I'm sure.

@caro69, once your husband's Zurich pension is transferred into an HL SIPP, I would consider taking up to the maximum sum from the HL SIPP  up to his personal tax allowance of £12,570, plus the 25% tax free, and reinvesting that amount in similar funds in an S&S ISA in his name. As he is 64 he only has a couple of years to get as much as he can out of his SIPP tax free and transferred into an S&S ISA, because after he takes his State Pension most of the withdrawals he takes from the SIPP will be taxable. 

However also bear in mind that the annual withdrawal amount above will have to be reduced by £3,600 if he is also contributing £2,880 each tax year into the SIPP and withdrawing the £3,600 cash after the tax relief is added. Still worth doing in my opinion.

Golly never thought of this.  That is very interesting.  His pot is small, around £31000.  So he could take his 25% (£7750) plus his personal allowance £12570, total £20320, leaving only £10000 in his actual pension.   His state pension starts in January 2024 so we could pretty much get the vast majority of it out of the pension and into a S&S Isa.  

If he does that this year, is it OK to contribute £2880 back in to the pension, keep it as cash and take it back out once tax relief received?  I keep seeing references to pension recycling which spooks me a little.  

When he eventually withdraws money from his S&S isa to top up his state pension, this money is tax free?  

If he takes out the £3,600 after the tax relief is added, that is fine, but will use up £2,880 of his personal tax allowance, so he could only take out the difference up to a total of £12,570 each year, without being liable to pay any tax on it. 

However as his pot is only around £31k, I think he would be able to get all of it out this tax year and next tax year, before he gets his State Pension in Jan 2024. If he did that he would still be able to contribute the £2,880 in these two tax years, but would be subject to tax when taking it back out if he had already used up his personal allowance taking the rest of his main pension out.

However I'm just thinking that if he left the two years gross contributions of £3,600 each year, in the SIPP until after he gets his State Pension, he could still get that out tax free over subsequent years, as he will still have a bit of tax free allowance after he starts receiving his State Pension. 

Yes, once the money is in the S&S ISA it will definitely be tax free.

£2,700, surely? That's what happens with mine anyway.

Xbigman

tempus_fugit said:

Audaxer said:

caro69 said:

Audaxer said:

caro69 said:

Hubby is 64 and not working. He wont' work again. I am a few years younger and still working and happily supporting us.
He has a modest non-flexible pension with Zurich which we are about to move to a HL Sipp.  We have no plans on taking anything from it at this stage and use it later in life to top up his state pension to keep him under the tax threshold.  I now realise that he could be contributing £2880 as a non earner to take advantage of the tax relief

If we move the pension to HL can we then use it to contribute £2880 into cash and then withdraw the £3660.  Or would we be better to open a SIPP with a different provider and keep things separate?  

I am also confused as to the benefits of contributing each year until the age of 75.  Surely once the state pension kicks in there won't be enough personal allowance left to get the whole amount out.  I am probably missing something I'm sure.

@caro69, once your husband's Zurich pension is transferred into an HL SIPP, I would consider taking up to the maximum sum from the HL SIPP  up to his personal tax allowance of £12,570, plus the 25% tax free, and reinvesting that amount in similar funds in an S&S ISA in his name. As he is 64 he only has a couple of years to get as much as he can out of his SIPP tax free and transferred into an S&S ISA, because after he takes his State Pension most of the withdrawals he takes from the SIPP will be taxable. 

However also bear in mind that the annual withdrawal amount above will have to be reduced by £3,600 if he is also contributing £2,880 each tax year into the SIPP and withdrawing the £3,600 cash after the tax relief is added. Still worth doing in my opinion.

Golly never thought of this.  That is very interesting.  His pot is small, around £31000.  So he could take his 25% (£7750) plus his personal allowance £12570, total £20320, leaving only £10000 in his actual pension.   His state pension starts in January 2024 so we could pretty much get the vast majority of it out of the pension and into a S&S Isa.  

If he does that this year, is it OK to contribute £2880 back in to the pension, keep it as cash and take it back out once tax relief received?  I keep seeing references to pension recycling which spooks me a little.  

When he eventually withdraws money from his S&S isa to top up his state pension, this money is tax free?  

If he takes out the £3,600 after the tax relief is added, that is fine, but will use up £2,880 of his personal tax allowance, so he could only take out the difference up to a total of £12,570 each year, without being liable to pay any tax on it. 

However as his pot is only around £31k, I think he would be able to get all of it out this tax year and next tax year, before he gets his State Pension in Jan 2024. If he did that he would still be able to contribute the £2,880 in these two tax years, but would be subject to tax when taking it back out if he had already used up his personal allowance taking the rest of his main pension out.

However I'm just thinking that if he left the two years gross contributions of £3,600 each year, in the SIPP until after he gets his State Pension, he could still get that out tax free over subsequent years, as he will still have a bit of tax free allowance after he starts receiving his State Pension. 

Yes, once the money is in the S&S ISA it will definitely be tax free.

£2,700, surely? That's what happens with mine anyway.

You're thinking of a SIPP, the OP is moving the SIPP money into an S&S ISA.

Darren

Xbigman

I'm really grateful for your thoughts on this.  We would never have thought of getting the money out and putting it in a S&S Isa to cut down his tax liability in future years.  I'll have a play around with the figures.  

With regard to the future pension contributions, yes that would work.  

Many thanks once again.

You mentioned above taking the 25% tax free lump sum, I presume you mean all in one go. You might find it easier to organise the SIPP if you use UFPLS transfers instead. I find it easier to keep everything straight in my head (and on a spreadsheet) that way as I don't have to track Crystallised and uncrystallised portions with money going in and out, just one total.
And try not to think of the 2880/3600 as separate. Its one pension account that you pay into and withdraw from in the most tax efficient way you can.


Darren