Paying £2880 into pension when retired

zagfles

tg99 said:

Retired, 72 yrs old, 2016 fixed protection £1.25m with benefits crystallising events of £1.235m (all of which has had 25% cash taken as tax free lump sum) thus leaving c£15k headroom for the age 75 test for any drawdown portfolio increase (should fall just within this thus avoiding any LTA charge on any of the pension assets).

No £2,880 annual contributions have been made given the fixed protection taken but we are now looking into this given the scrapping of the LTA. My conclusion is:

- not an option for 22/23 since LTA still in place along with the LTA charge hence don’t want to make a contribution and lose protection 

- for 23/24, no LTA charge but the tax free amount is capped at £268,275. Assuming the £1.25m protection also protects 25% of this as a tax free lump sum (£312,500) then making any further contributions even in 23/24 would void the fixed protection and thus lose the higher level of protected tax free cash. Hence no sense in making any £2,880 contributions esp as added factor of Labour saying will reintroduce the LTA and then the uncertainty over how that would be applied to ppl who have lost their fixed protection.

The above just my initial thoughts without having seen all the finer detail (think some aspects still tbc when I checked last week) but just wondering if the above conclusions sound correct or if I’m missing anything that would mean the £2,880 contributions are viable. Thks.

What did you think you might gain by doing this? Even without LTA protection and ignoring what Labour might do, there's virtually no benefit to anyone retired and above the LTA paying £2880 into a pension. If they have pension savings above the LTA they are presumably using up their personal allowance, there's no additional PCLS from the extra contributions, so what benefit is there? Other than perhaps equivalent to a bit extra ISA allowance. Or perhaps if they think tax rates might drop.

tg99

zagfles said:

tg99 said:

Retired, 72 yrs old, 2016 fixed protection £1.25m with benefits crystallising events of £1.235m (all of which has had 25% cash taken as tax free lump sum) thus leaving c£15k headroom for the age 75 test for any drawdown portfolio increase (should fall just within this thus avoiding any LTA charge on any of the pension assets).

No £2,880 annual contributions have been made given the fixed protection taken but we are now looking into this given the scrapping of the LTA. My conclusion is:

- not an option for 22/23 since LTA still in place along with the LTA charge hence don’t want to make a contribution and lose protection 

- for 23/24, no LTA charge but the tax free amount is capped at £268,275. Assuming the £1.25m protection also protects 25% of this as a tax free lump sum (£312,500) then making any further contributions even in 23/24 would void the fixed protection and thus lose the higher level of protected tax free cash. Hence no sense in making any £2,880 contributions esp as added factor of Labour saying will reintroduce the LTA and then the uncertainty over how that would be applied to ppl who have lost their fixed protection.

The above just my initial thoughts without having seen all the finer detail (think some aspects still tbc when I checked last week) but just wondering if the above conclusions sound correct or if I’m missing anything that would mean the £2,880 contributions are viable. Thks.

What did you think you might gain by doing this? Even without LTA protection and ignoring what Labour might do, there's virtually no benefit to anyone retired and above the LTA paying £2880 into a pension. If they have pension savings above the LTA they are presumably using up their personal allowance, there's no additional PCLS from the extra contributions, so what benefit is there? Other than perhaps equivalent to a bit extra ISA allowance. Or perhaps if they think tax rates might drop.

The benefit would be the 25% tax free cash to take from the gross £3.6k contribution but my conclusion above is that would not work because of the loss of the higher protected fixed 25% tax free amount by making further contributions. Hence no benefit but basically just posting the above to check if I was missing anything.

MK62

HMRC have, apparently, confirmed that holders of LTA protections prior to the budget will be able to keep their higher TFC and start benefit accrual again.

https://www.gov.uk/government/publications/pension-schemes-newsletter-148-march-2023/pensions-schemes-newsletter-148-march-2023

dealyboy

sevenhills said:

fifeken said:

When I read this:

"The maximum annual tax-free amount you can save into a pension once you've taken money out of it will rise from £4,000 to £10,000 from 6 April."

I immediately thought it increased the £3,600 figure discussed here. Reading the above replies I suspect now that you need to still be earning at least £10,000 to do this. Is that correct?

It could help me, as I used a pension as a deposit for a house purchase when I was 56. You would need to be rich to contribute £10k to a pension, I may be able to do it in my last year of work.

Tag: @sevenhills ...
... private sector 100 to 1 on. Do I win?

sevenhills

dealyboy said:

sevenhills said:

fifeken said:

When I read this:

"The maximum annual tax-free amount you can save into a pension once you've taken money out of it will rise from £4,000 to £10,000 from 6 April."

I immediately thought it increased the £3,600 figure discussed here. Reading the above replies I suspect now that you need to still be earning at least £10,000 to do this. Is that correct?

It could help me, as I used a pension as a deposit for a house purchase when I was 56. You would need to be rich to contribute £10k to a pension, I may be able to do it in my last year of work.

Tag: @sevenhills ...
... private sector 100 to 1 on. Do I win?

I work for my local authority, public sector 🤩

zagfles

tg99 said:

zagfles said:

tg99 said:

Retired, 72 yrs old, 2016 fixed protection £1.25m with benefits crystallising events of £1.235m (all of which has had 25% cash taken as tax free lump sum) thus leaving c£15k headroom for the age 75 test for any drawdown portfolio increase (should fall just within this thus avoiding any LTA charge on any of the pension assets).

No £2,880 annual contributions have been made given the fixed protection taken but we are now looking into this given the scrapping of the LTA. My conclusion is:

- not an option for 22/23 since LTA still in place along with the LTA charge hence don’t want to make a contribution and lose protection 

- for 23/24, no LTA charge but the tax free amount is capped at £268,275. Assuming the £1.25m protection also protects 25% of this as a tax free lump sum (£312,500) then making any further contributions even in 23/24 would void the fixed protection and thus lose the higher level of protected tax free cash. Hence no sense in making any £2,880 contributions esp as added factor of Labour saying will reintroduce the LTA and then the uncertainty over how that would be applied to ppl who have lost their fixed protection.

The above just my initial thoughts without having seen all the finer detail (think some aspects still tbc when I checked last week) but just wondering if the above conclusions sound correct or if I’m missing anything that would mean the £2,880 contributions are viable. Thks.

What did you think you might gain by doing this? Even without LTA protection and ignoring what Labour might do, there's virtually no benefit to anyone retired and above the LTA paying £2880 into a pension. If they have pension savings above the LTA they are presumably using up their personal allowance, there's no additional PCLS from the extra contributions, so what benefit is there? Other than perhaps equivalent to a bit extra ISA allowance. Or perhaps if they think tax rates might drop.

The benefit would be the 25% tax free cash to take from the gross £3.6k contribution but my conclusion above is that would not work because of the loss of the higher protected fixed 25% tax free amount by making further contributions. Hence no benefit but basically just posting the above to check if I was missing anything.

Yes, the PCLS is capped at £268,275 if unprotected, which is 25% of the current LTA, as you wrote above. So any contributions above the current LTA will not get you any more PCLS whether you have FP or not. If you have FP you lose it, if you haven't got protection you don't get any more PCLS because you're already at the cap.

The only strange circumstance I can see where you would get extra PCLS is if you had IP, not fully crystallised, and your uncrystallised pot had fallen since you got IP. It would have to have been very badly invested to have fallen since 2016!

tg99

zagfles said:

tg99 said:

zagfles said:

tg99 said:

Retired, 72 yrs old, 2016 fixed protection £1.25m with benefits crystallising events of £1.235m (all of which has had 25% cash taken as tax free lump sum) thus leaving c£15k headroom for the age 75 test for any drawdown portfolio increase (should fall just within this thus avoiding any LTA charge on any of the pension assets).

No £2,880 annual contributions have been made given the fixed protection taken but we are now looking into this given the scrapping of the LTA. My conclusion is:

- not an option for 22/23 since LTA still in place along with the LTA charge hence don’t want to make a contribution and lose protection 

- for 23/24, no LTA charge but the tax free amount is capped at £268,275. Assuming the £1.25m protection also protects 25% of this as a tax free lump sum (£312,500) then making any further contributions even in 23/24 would void the fixed protection and thus lose the higher level of protected tax free cash. Hence no sense in making any £2,880 contributions esp as added factor of Labour saying will reintroduce the LTA and then the uncertainty over how that would be applied to ppl who have lost their fixed protection.

The above just my initial thoughts without having seen all the finer detail (think some aspects still tbc when I checked last week) but just wondering if the above conclusions sound correct or if I’m missing anything that would mean the £2,880 contributions are viable. Thks.

What did you think you might gain by doing this? Even without LTA protection and ignoring what Labour might do, there's virtually no benefit to anyone retired and above the LTA paying £2880 into a pension. If they have pension savings above the LTA they are presumably using up their personal allowance, there's no additional PCLS from the extra contributions, so what benefit is there? Other than perhaps equivalent to a bit extra ISA allowance. Or perhaps if they think tax rates might drop.

The benefit would be the 25% tax free cash to take from the gross £3.6k contribution but my conclusion above is that would not work because of the loss of the higher protected fixed 25% tax free amount by making further contributions. Hence no benefit but basically just posting the above to check if I was missing anything.

Yes, the PCLS is capped at £268,275 if unprotected, which is 25% of the current LTA, as you wrote above. So any contributions above the current LTA will not get you any more PCLS whether you have FP or not. If you have FP you lose it, if you haven't got protection you don't get any more PCLS because you're already at the cap.

The only strange circumstance I can see where you would get extra PCLS is if you had IP, not fully crystallised, and your uncrystallised pot had fallen since you got IP. It would have to have been very badly invested to have fallen since 2016!

But now reading the government doc provided by MK62 above it says that you can start accruing benefits again from 6 April 23, not lose your fixed protection and retain your higher protected PCLS. So with c£15k headroom to the £1.25m FP in my example above - and with the age 75 test no longer relevant - then this headroom could be filled with several years of £3600 gross contributions and taking 25% as tax free cash thus being profitable. 

That’s assuming Labour do not strip ppl of their fixed protections if they have since made further contributions (which would then lead to a sizeable tax bill at the age 75 test assuming this was reinstated too). But wouldn’t have thought this very likely given would be retrospectively changing the rules and penalising ppl for simply following the rules in place at the time.

zagfles

tg99 said:

zagfles said:

tg99 said:

zagfles said:

tg99 said:

Retired, 72 yrs old, 2016 fixed protection £1.25m with benefits crystallising events of £1.235m (all of which has had 25% cash taken as tax free lump sum) thus leaving c£15k headroom for the age 75 test for any drawdown portfolio increase (should fall just within this thus avoiding any LTA charge on any of the pension assets).

No £2,880 annual contributions have been made given the fixed protection taken but we are now looking into this given the scrapping of the LTA. My conclusion is:

- not an option for 22/23 since LTA still in place along with the LTA charge hence don’t want to make a contribution and lose protection 

- for 23/24, no LTA charge but the tax free amount is capped at £268,275. Assuming the £1.25m protection also protects 25% of this as a tax free lump sum (£312,500) then making any further contributions even in 23/24 would void the fixed protection and thus lose the higher level of protected tax free cash. Hence no sense in making any £2,880 contributions esp as added factor of Labour saying will reintroduce the LTA and then the uncertainty over how that would be applied to ppl who have lost their fixed protection.

The above just my initial thoughts without having seen all the finer detail (think some aspects still tbc when I checked last week) but just wondering if the above conclusions sound correct or if I’m missing anything that would mean the £2,880 contributions are viable. Thks.

What did you think you might gain by doing this? Even without LTA protection and ignoring what Labour might do, there's virtually no benefit to anyone retired and above the LTA paying £2880 into a pension. If they have pension savings above the LTA they are presumably using up their personal allowance, there's no additional PCLS from the extra contributions, so what benefit is there? Other than perhaps equivalent to a bit extra ISA allowance. Or perhaps if they think tax rates might drop.

The benefit would be the 25% tax free cash to take from the gross £3.6k contribution but my conclusion above is that would not work because of the loss of the higher protected fixed 25% tax free amount by making further contributions. Hence no benefit but basically just posting the above to check if I was missing anything.

Yes, the PCLS is capped at £268,275 if unprotected, which is 25% of the current LTA, as you wrote above. So any contributions above the current LTA will not get you any more PCLS whether you have FP or not. If you have FP you lose it, if you haven't got protection you don't get any more PCLS because you're already at the cap.

The only strange circumstance I can see where you would get extra PCLS is if you had IP, not fully crystallised, and your uncrystallised pot had fallen since you got IP. It would have to have been very badly invested to have fallen since 2016!

But now reading the government doc provided by MK62 above it says that you can start accruing benefits again from 6 April 23, not lose your fixed protection and retain your higher protected PCLS. So with c£15k headroom to the £1.25m FP in my example above - and with the age 75 test no longer relevant - then this headroom could be filled with several years of £3600 gross contributions and taking 25% as tax free cash thus being profitable. 

That’s assuming Labour do not strip ppl of their fixed protections if they have since made further contributions (which would then lead to a sizeable tax bill at the age 75 test assuming this was reinstated too). But wouldn’t have thought this very likely given would be retrospectively changing the rules and penalising ppl for simply following the rules in place at the time.

Ah OK I'd missed that, so it might be worth it in very specific circumstances eg fully crystallised with FP with the protected LTA not fully used. Fairly trivial gain though, and the downside would be worse if the LTA was reintroduced.

tg99

zagfles said:

tg99 said:

zagfles said:

tg99 said:

zagfles said:

tg99 said:

Retired, 72 yrs old, 2016 fixed protection £1.25m with benefits crystallising events of £1.235m (all of which has had 25% cash taken as tax free lump sum) thus leaving c£15k headroom for the age 75 test for any drawdown portfolio increase (should fall just within this thus avoiding any LTA charge on any of the pension assets).

No £2,880 annual contributions have been made given the fixed protection taken but we are now looking into this given the scrapping of the LTA. My conclusion is:

- not an option for 22/23 since LTA still in place along with the LTA charge hence don’t want to make a contribution and lose protection 

- for 23/24, no LTA charge but the tax free amount is capped at £268,275. Assuming the £1.25m protection also protects 25% of this as a tax free lump sum (£312,500) then making any further contributions even in 23/24 would void the fixed protection and thus lose the higher level of protected tax free cash. Hence no sense in making any £2,880 contributions esp as added factor of Labour saying will reintroduce the LTA and then the uncertainty over how that would be applied to ppl who have lost their fixed protection.

The above just my initial thoughts without having seen all the finer detail (think some aspects still tbc when I checked last week) but just wondering if the above conclusions sound correct or if I’m missing anything that would mean the £2,880 contributions are viable. Thks.

What did you think you might gain by doing this? Even without LTA protection and ignoring what Labour might do, there's virtually no benefit to anyone retired and above the LTA paying £2880 into a pension. If they have pension savings above the LTA they are presumably using up their personal allowance, there's no additional PCLS from the extra contributions, so what benefit is there? Other than perhaps equivalent to a bit extra ISA allowance. Or perhaps if they think tax rates might drop.

The benefit would be the 25% tax free cash to take from the gross £3.6k contribution but my conclusion above is that would not work because of the loss of the higher protected fixed 25% tax free amount by making further contributions. Hence no benefit but basically just posting the above to check if I was missing anything.

Yes, the PCLS is capped at £268,275 if unprotected, which is 25% of the current LTA, as you wrote above. So any contributions above the current LTA will not get you any more PCLS whether you have FP or not. If you have FP you lose it, if you haven't got protection you don't get any more PCLS because you're already at the cap.

The only strange circumstance I can see where you would get extra PCLS is if you had IP, not fully crystallised, and your uncrystallised pot had fallen since you got IP. It would have to have been very badly invested to have fallen since 2016!

But now reading the government doc provided by MK62 above it says that you can start accruing benefits again from 6 April 23, not lose your fixed protection and retain your higher protected PCLS. So with c£15k headroom to the £1.25m FP in my example above - and with the age 75 test no longer relevant - then this headroom could be filled with several years of £3600 gross contributions and taking 25% as tax free cash thus being profitable. 

That’s assuming Labour do not strip ppl of their fixed protections if they have since made further contributions (which would then lead to a sizeable tax bill at the age 75 test assuming this was reinstated too). But wouldn’t have thought this very likely given would be retrospectively changing the rules and penalising ppl for simply following the rules in place at the time.

Ah OK I'd missed that, so it might be worth it in very specific circumstances eg fully crystallised with FP with the protected LTA not fully used. Fairly trivial gain though, and the downside would be worse if the LTA was reintroduced.

Yep though I would guess that if LTA was reintroduced it would come with rules to allow you to protect but who knows. So question of risk v reward.

Also, imagining for a second that the LTA was not being scrapped, am thinking that as the BCE were in 15/16 when LTA was £1.25m then even if didn’t have protection / lost protection there would at this stage be no hit as LTA % used 98.8% so could still use 1.2% of current LTA level to make further contributions, headroom for age 75 test etc. Not much diff between 1.2% of current LTA v £1.25m. That’s assuming tax free lump sum also calculated in same % way though. May do a separate post on this to check I’ve understood correctly!

vixen1500

Time to stop paying into SIPP?

Now savings interest rates are going up, is it nolonger worth paying into SIPP for tax relief?

The money withdrawn from the SIPP will count as income, so will reduce the amount of tax free interest I can receive.

Have I got this right???

Thanks