Paying £2880 into pension when retired

moneyfoolish

jamesd wrote: »

No. It means that once you have taken the initial tax free part the rest is moved into a drawdown account. You can't take another tax free lump sum from money in a drawdown account. You can from money in an account that isn't in drawdown and this is where newly paid in money goes.

I think it's starting to dawn at last! So whenever we draw a tax free amount, 3 times that value in the SIPP is moved into a drawdown account and the rest left in the SIPP account? So in my example when my wife's first 2 payments for 2016/17 and 2017/18 will still be in the SIPP account and after both the cash free amounts had been added in 2017/18, she could withdraw £1800 and the remaining £5400 would move into the drawdown account and any portion of that could be withdraw whenever we chose. In subsequent years when we added £2880 to SIPP account and the tax free £720 had been added then we could take the tax free £900 out and £2700 would be added to the drawdown account . Presumably, the £1000 required by HL would always be left in the drawdown account until closure?

happyhero

jamesd wrote: »

Put it into income drawdown, taking a 25% tax free lump sum. Take a £10 taxable lump sum from the new drawdown account that will be created by HL for her. If she is fortunate the tax code from HMRC will be received by HL this tax year. Either way, nearer to the end of the tax year take out enough to use the rest of her personal allowance.

If it turns out that the tax code doesn't arrive in time she can claim a refund using her online Personal Tax Account in the new year.

Apologies for cutting in here but I am still learning myself, and maybe its of interest. Can I ask if she is a non tax payer/non working and so has her full PA free why would she not use UFPLS and take up to £14,666 of the £18,000 (£14,666 = £3,666.50 is the 25% and the 75% taxed bit is £10999.50) as UFPLS, utillising this years PA fully, I assume with the tax man then taking tax on the 75% but then claiming it back as it is within her PA? Or have I got something wrong?

jamesd

UFPLS is always 25% tax free lump sum and 75% taxable so it doesn't let her get out the tax free lump sum on the whole pot.

jamesd

moneyfoolish wrote: »

I think it's starting to dawn at last! So whenever we draw a tax free amount, 3 times that value in the SIPP is moved into a drawdown account and the rest left in the SIPP account? So in my example when my wife's first 2 payments for 2016/17 and 2017/18 will still be in the SIPP account and after both the cash free amounts had been added in 2017/18, she could withdraw £1800 and the remaining £5400 would move into the drawdown account and any portion of that could be withdraw whenever we chose. In subsequent years when we added £2880 to SIPP account and the tax free £720 had been added then we could take the tax free £900 out and £2700 would be added to the drawdown account . Presumably, the £1000 required by HL would always be left in the drawdown account until closure?

Correct. Though HL aren't really likely to close either account if she's making regular monthly payments into the uncrystallised (no tax free lump sum taken yet) one.

happyhero

jamesd wrote: »

UFPLS is always 25% tax free lump sum and 75% taxable so it doesn't let her get out the tax free lump sum on the whole pot.

Are you saying she would pay tax on the 75% and not be able to claim it back even though there is room in her PA?

TBC15

I’ve just been looking for a button to press to get the show on the road at HL, there doesn’t seem to be one.

Do you have to go through the faf of requesting a draw down illustration before you can get the ball rolling?

xylophone

Do you have to go through the faf of requesting a draw down illustration before you can get the ball rolling?

For your wife to commence access? Yes, you do.

jamesd

happyhero wrote: »

Are you saying she would pay tax on the 75% and not be able to claim it back even though there is room in her PA?

No, she can reclaim it, there's a form to fill out online in the Personal Tax Account system.

TBC15

xylophone wrote: »

For your wife to commence access? Yes, you do.

Illustration promptly requested. New to all this, so learning all the time.

moneyfoolish

jamesd wrote: »

Correct. Though HL aren't really likely to close either account if she's making regular monthly payments into the uncrystallised (no tax free lump sum taken yet) one.

Thanks for all your help and patience, jamesd, which is really appreciated.