Paying £2880 into pension when retired

Dazed_and_confused

Nationwide8 wrote: »

Thank you,so I shouldn't get taxed on any drawdown once HL have my tax code ?? As my income definitely will not go over PA 17-18.

Yes I did realise about leaving the £1000 in but only from this thread,the information is so helpful !!

Even if HL have the correct tax code tax might still need to be deducted if you take the income early in the tax year as the pension drawdown is just like any other income.

If you have tax code 1150L in the forthcoming tax year and take out taxable pension of 11500 in March 2018 (as the only payment that tax year) then no tax would be deducted.

Take the same 11500 in April 2017 and you would pay a lot of tax as HL would calculate PAYE tax on the basis you were drawing down £138000 (11500 x 12)

meantime

The online application for an HL SIPP asks for employment status and retirement age. What's the relevance of those questions to opening a SIPP?

jamesd

Almost none. It just lets them produce retirement income projections that are irrelevant for people who have already retired. They expect most new accounts to be opened by people who haven't retired yet.

parcival

Thanks to all the excellent advice on here I put the £2880 into a Virgin Pension about 6 months ago and was intending to do the same in the new tax year.


Also about 6 months ago I decided to put a very small Money Purchase Occupational Pension into a SIPP with HL because I can withdraw it over the next 5 years tax free.


I am withdrawing £500 per month from the HL SIPP which will be on going. HL have intimated that I can put in up to £10,000 a year into my SIPP in the tax year about to end but that that will drop to £4000 next tax year.


I have no actual earnings apart from the £500 per month pension.


Can I put in more this tax year (£10,000 less £3600)?

bowlhead99

parcival wrote: »

I am withdrawing £500 per month from the HL SIPP which will be on going. HL have intimated that I can put in up to £10,000 a year into my SIPP in the tax year about to end but that that will drop to £4000 next tax year.


I have no actual earnings apart from the £500 per month pension.


Can I put in more this tax year (£10,000 less £3600)?

With the £10000 (dropping to £4000) "limits" they are not saying you are actually allowed to do that much with no regard to your actual earned income.

They are merely pointing out / warning you that because you've started to draw your private pension income you are limited to putting those amounts in rather than the higher annual allowance of £40,000 that most people would be facing.

The amount you are really allowed to put on is limited not *just* by the £10k / £40k limits but by your relevant earned income. Where your earnings from a job or self employed business are below £3600 gross you can still put in £3600 gross/2880 net. But if your relevantearnings are - like yours - below the £3600, you're not going to be able to do £10,000 or £4000 because you don't have any earnings to support that.

If you got a job or started a profitable business, then those limits (£10k now / £4k in future) would come in to play and restrict you from doing the full £40k that a non-pensioner like I could do when earning a high wage. But they're *not* offering you an opportunity to top up your £3600 contributions to a bigger number without wages to support it.

parcival

Thanks Bowlhead for clearing that up.....

Uglymug

I've thought of a slightly different slant on this.
As a retired 20% paying taxpayer I could pay £240 a month (total £2880 a year) into my Sipp.
At the end of the year I'd have accumulated £900 tax Free and £2160 (after paying tax at 20% on £2700).
This gives a total of £3060 for the year - a profit of £180.
Isn't that a monthly saver rate of circa 10%, which is way better than what is currently being offered by any bank?
Obviously there's a crystallisation charge of about £25 to consider but as a monthly saver it still seems very good. Also the effect of this becomes less if you don't crystallise for 3 or 4 years.
Anything wrong with my cunning plan?

p00hsticks

Uglymug wrote: »

As a retired 20% paying taxpayer I could pay £240 a month (total £2880 a year) into my Sipp.
At the end of the year I'd have accumulated £900 tax Free and £2160 (after paying tax at 20% on £2700).

How do you get to £900 tax free ?
You pay in £2880 a month and get £720 tax relief added

Uglymug

p00hsticks wrote: »

How do you get to £900 tax free ?
You pay in £2880 a month and get £720 tax relief added

You pay in £2880 get £720 added making a total of £3600.
When you crystallise you get 25% tax free.
25% of £3600 is £900
You pay tax at your minimal rate on the other £2700.
My minimal rate is 20% so I pay £540 in tax.
So basically a 20% tax payer gets £720 added and £540 taken away.

madeinireland_2

Hi,

For the last 3 years my wife (under my guidance) has put the equivalent of her full earnings into a SIPP - I have actually contributed this from savings. She works part time in a school and is a mention of a pension scheme there. Unfortunately I suspect (not checked in detail yet) but we may have put in too much by not making an allowance for her existing pension contributions. It was a genuine mistake. We now have about £28k in the SIPP. HMRC don't seem to have mentioned it at all so,perhaps they have not spotted and I suspect it won't be a really large amount (if any as I may have made an allowance - I will be very careful now in future years). So what will happen now?

Thanks...