Paying £2880 into pension when retired

moneyfoolish

jamesd wrote: »

25% of the current value of the pot can be taken tax free. It's likely to take a couple of months for the tax relief to arrive and when it does 25% of that can be taken tax free as well.

If using HL it's neater to ask them to pay regular monthly income and that will get the tax back. You could start the income at £10 a month until HMRC issues a tax code to them, then increase it after she's told them about her expected annual income and they have issued a new code.

Thanks, jamesd. Does she really have to inform HMRC if she is a non-taxpayer under PAYE? I know this will seem ludicrous to you (and to me for that matter) but she will give up the £720 per year before she will want to get involved with having to fill in any tax forms!

where_are_we

The reason for keeping the SIPP in cash is because you are withdrawing cash annually and there are charges to invest and disinvest as well as fluctuations in the value of your investment. HL charge .45% on investments whereas there is no charge on cash. Of course if you wish to build up your SIPP over a number of years then you may wish to invest, but this thread is about non earners contributing £2880 annually to a SIPP and withdrawing cash annually which gives a very good, no risk annual return especially if you are a non taxpayer.

jamesd

She can just phone them. Or she can completely gnore it, pay the tax and HMRC will give a new tax code next year that corrects any overpyment. No real need for her to even talk to HMRC if she's content to wait. Definitely best to go with monthly income if she prefers to just let HMRC take care of it without contact.

All HMRC will do is just issue her a tax code with the usual personal allowance. No reason for them not to do that and it'll correct the overpayment if she's getting regular monthly payments.

moneyfoolish

jamesd wrote: »

She can just phone them. Or she can completely gnore it, pay the tax and HMRC will give a new tax code next year that corrects any overpyment. No real need for her to even talk to HMRC if she's content to wait. Definitely best to go with monthly income if she prefers to just let HMRC take care of it without contact.

All HMRC will do is just issue her a tax code with the usual personal allowance. No reason for them not to do that and it'll correct the overpayment if she's getting regular monthly payments.

Thanks. I might be able to get her to move in those circumstances! As she shouldn't pay any tax in any case what happens if they take tax off her initially? Does this mean they would actually credit her SIPP with the amount of tax they have taken initially at a later date?

Snowbelle

jamesd wrote: »

25% of the current value of the pot can be taken tax free. It's likely to take a couple of months for the tax relief to arrive and when it does 25% of that can be taken tax free as well.

If using HL it's neater to ask them to pay regular monthly income and that will get the tax back. You could start the income at £10 a month until HMRC issues a tax code to them, then increase it after she's told them about her expected annual income and they have issued a new code.

Hi jamesd thanks for sharing your considerable knowledge and sorry for another trivial question but by asking HL to pay £10 a month would they know whether or not you were only taking out the tax free portion of the pot?

jamesd

They would presumably use a "cumulative" tax code that would trigger a refund in the following pay run, so more money than usual paid to her that month.

You'd take the 25% tax free lump first and the income would all be coming from the taxable part. You could use UFPLS and do it a bit of each but there's little reason to.

moneyfoolish

jamesd wrote: »

They would presumably use a "cumulative" tax code that would trigger a refund in the following pay run, so more money than usual paid to her that month.

You'd take the 25% tax free lump first and the income would all be coming from the taxable part. You could use UFPLS and do it a bit of each but there's little reason to.

This marathon of postings is making me realise just how little I know about the workings of SIPP pensions even when they are explained. Luckily, jamesd you know a lot and are patient enough to keep explaining it to us lesser mortals! So, yet another question. If I now open this account for my wife and she puts in £2880, it seems almost certain that the £720 top up won't be added until the 2017/18 tax year. Can I take out £900 from the £2880 in tax year 2016/17 without HL taking off any tax or do I have to wait until the £720 is added in 2017/18? If I have to wait can I take out 2 payments of £900 in 2017/18 without HL taking off any tax because I will have added another £2880 at the start of the 2017/18 tax year? After the very late money input for 2016/17, my intention is to put in £2880 at the start of every year , take out the 25% tax free £900 (hopefully always without HL taking off any tax) and then just one final amount for the maximum possible tax free amount each year when HL have my wife's tax code for the year. I'm assuming that by working this way there will never be any tax taken by HL even though it means that money will remain in the SIPP longer than necessary. Obviously I always intend to leave £1000 in the account until closure after my wife's 75 birthday.

jamesd

You can only take a 25% tax free lump sum from the money actually in your pot at the time.

moneyfoolish

jamesd wrote: »

You can only take a 25% tax free lump sum from the money actually in your pot at the time.

I'm not sure what this actually means. Does it mean that if we put in £2880 in 2016/17 tax year but don't take anything out in that year and then after we put in £2880 in 2017/18 tax year that when both these amount are updated to £3600 leaving £7200 in the pot that we can then draw out £1800 (25% of £7200) totally tax free and then take another payment tax free later in 2017/18 as long as that payment falls within my wife's tax free allowance?

Sipowicz

This thread has been a real eye opener......money for nothing, what about the chicks for free?