Paying £2880 into pension when retired

bargainqueen8

I opened a sipp a couple of months ago which hmrc has now topped up.I was thinking of using the rinse and repeat method for this year's contributions but was wondering with the election looming if it would be advisable just to deposit the full amount now ahead of any possible tax changes.would be interested in anyone's advice on this.

AnotherJoe

I presume you are asking about staging the £2880 in instalments rather than as a lump sum ?
Any tax changes are almost certainly going to impact at the high end not the low so I dont think it makes any difference.

bargainqueen8

AnotherJoe wrote: »

I presume you are asking about staging the £2880 in instalments rather than as a lump sum ?
Any tax changes are almost certainly going to impact at the high end not the low so I dont think it makes any difference.

Yes,take lump sum then smaller payments to be put back in for this year.before the budget I read a article in the press that suggested the government had this double dipping as they called it in their sights to put a close to.

AnotherJoe

bargainqueen8 wrote: »

Yes,take lump sum then smaller payments to be put back in for this year.before the budget I read a article in the press that suggested the government had this double dipping as they called it in their sights to put a close to.

They might aspire to stop it but it would be a nightmare to work out how to, and would require systems to be updated at providers to track it, so that would be years away. They'd have to say something like, if you take any money out of a pension, you can't put the same amount or less back in again, unless you are earning maybe, but you could still do that on an every other year basis, eg I take out £3,600 this tax year, put in £2,880 next tax year. So instead of £720 a year you'd get £360 (effectively). What a mess that woudl give rise to.

I think they are more likely to focus on the high end, why 40% tax relief to high tax rate payers? They could give a sop to the low rate, lets say 25% instead of 20% and make that a flat rate for all, overall that would probably bring in FAR more than fiddling around with £720 for non earners most of whom probably dont use it anyway. (Indeed a couple years ago it was "leaked" that there would be a 30% flat rate, but that never happened)

Unless of course they stopped the £720 completely, but then that would raise a riot if high rate was not changed. I can imagine the headlines in The Daily Fail.

SeeMe

Dazed_and_confused wrote: »

ISA interest can be ignored providing you adhere to the rules for ISA's but all other interest is taxable income.

From your figures let's assume £500 of the interest is taxable.

If you have total income of £10500 this year it is less than Personal allowance so no tax to pay.

If you have £12000 made up of £11500 pension and £500 savings then the pension income is covered by your personal allowance and the savings income is to be taxed. In this situation though the savings rate band comes into play and the £500 is taxed at the savings rate of 0% so still no tax to pay.

My tax code last year was 1100L and should change next month to the new allowance increase.
Will a sipp provider still need an emergency tax code from HMRC? what if i just let the £2880 + £720 x 2 years sit in cash for a couple of years

xylophone

Will a sipp provider still need an emergency tax code from HMRC? what if i just let the £2880 + £720 x 2 years sit in cash for a couple of years

If you are not making any withdrawals, a tax code won't be necessary.

Is your idea now to open a SIPP with HL and contribute the £2880 for this tax year and simply leave it and the tax refund in cash? This is perfectly possible and you will incur no charges.

You can do the same in subsequent tax years if you wish.

SeeMe

xylophone wrote: »

Is your idea now to open a SIPP with HL and contribute the £2880 for this tax year and simply leave it and the tax refund in cash? This is perfectly possible and you will incur no charges.

You can do the same in subsequent tax years if you wish.

Yes thats exactly what i was thinking of with HL, if i did this for say 3 years could i then draw some money out tax free? i am just never sure if this is a worthwile plan anyway, not clued up like others on this forum.

AnotherJoe

SeeMe wrote: »

Yes thats exactly what i was thinking of with HL, if i did this for say 3 years could i then draw some money out tax free?

Yes. All of it if you had no other income.

SeeMe wrote: »

i am just never sure if this is a worthwhile plan anyway, not clued up like others on this forum.

You are unsure if its worthwhile to get £720 free money every year?

You are Bill Gates and I claim my £5.

xylophone

Yes thats exactly what i was thinking of with HL, if i did this for say 3 years could i then draw some money out tax free?

After three years you would have £10,800 and (assuming rules remain the same), could take 25% as a tax free lump sum - if you withdrew the balance, it would be taxable as income in the year of receipt.

SeeMe

Ok thanks,
Also would the savings tax come into play on the balance for me, is it £5000?