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Paying £2880 into pension when retired
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You seem to have misunderstood....
4) Max OH could put in is annual earnings (less current pension contribution), or once not earning £2,880. Worst case would be paying basic rate tax on 75% of this on the way out (but benefit is 20% relief on 100% on the way in).
What have I missed?
AFIK, you cannot contribute to two schemes in one year.
There is no tax relief on payments into a SIPP if he has zero taxable earning.
Payment up to £2880 per annum, will attract 25% top up by the government."A nation's greatness is measured by how it treats its weakest members." ~ Mahatma Gandhi
Ride hard or stay home :iloveyou:0 -
I mention only withdraw £3550 in first year so that you leave the account open.
Each year thereafter, you can withdraw £3600 - the £2880 you put in plus the £720 HMRC puts in.
25% is tax free so that will not go towards your PA. The other 75% will - i.e. £2,700.
So, if your PA is £11,000 and your income is less than £8,300 then you will be able to withdraw the £2700 without reaching your PA. However it still does count towards PA so if your income is £8,300 and you withdraw the £2700 from the SIPP you have then used up your full PA for the year.
Thank you,as my pension is £7000 a year then the extra £2700 would not take me above my PA.
Will have to look it up but am assuming interest from various accounts of approx £1900 a year wouldn't count towards my PA ???
7000 + 2700 +1900 =11800 ?? Just above PA ??0 -
Will have to look it up but am assuming interest from various accounts of approx £1900 a year wouldn't count towards my PA ???
It would seem that your income is modest enough to qualify for the 0% band on savings income.
http://www.taxvol.org.uk/about-tax/entitled-10-band-savings-interest/
If your total non savings income would be £9,700
you would not owe any tax on the savings interest of £1900 as this would be covered by the PSA and the 0% band.0 -
AFIK, you cannot contribute to two schemes in one year.
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I think you can have an employers pension and another SIPP, so long as the total contributions in a tax year don't exceed your earnings (or £40k, whichever is the lower)?? Confused!"For every complicated problem, there is always a simple, wrong answer"0 -
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Nationwide8 wrote: »Thank you,as my pension is £7000 a year then the extra £2700 would not take me above my PA.
Will have to look it up but am assuming interest from various accounts of approx £1900 a year wouldn't count towards my PA ???
7000 + 2700 +1900 =11800 ?? Just above PA ??
As xlyophone says, your savings are covered for £1000 tax free. So, if the savings were not in any isa then at most only £900 would be taxable. So in total you would still be under the £11,000 threshold.
One point tho, if you are married and your OH is paying tax then you should transfer the 10% marriage allowance to OH. You would then need to relook at your totals to ensure tax efficiency.bob_a_builder wrote: »This POST suggests you may need to leave in more than £100 to avoid the charges ? ( with HL anyway )
No, I only suggested it as a nominal figure to keep in the account to keep it open. As far as I know, there is no minimum so it could be as little as £5. The main point is to ensure the account is not closed in the first year to avoid hefty charges.0 -
Yes.nxdmsandkaskdjaqd wrote: »I am correct that the above approach should be part of my strategy of being tax efficient?
None involved, given the income situation of the wife in that post. Later I linked to a more complete description with more examples.I think the gain of £720 is "over egging" it a bit
There may be no charges, as with Virgin. [STRIKE]With Hargreaves Lansdown there is a charge if closed within the first year including if the balance goes below 1k and they choose to close.[/STRIKE] The HL early account closure charge of £295 and account closure charge of £25, both plus VAT, were removed on 19 September 2019.Yes - tho take care not to close the account with the SIPP provider in the first year or you will incur hefty charges.
With HL one easy approach is to set up a regular monthly payment into a SIPP of 2880 / 12 take the 25% from the first year and set up a regular monthly payment to you of (3600 * 0.75 / 12) from the remaining 75% in the new crystallised SIPP account that they will create. The account wouldn't go below 1k and the regular payments give HMRC ample time to get them the right tax code and refund any excess tax.
You can use any permitted investment that the provider offers. Virgin always uses a FTSE tracker fund with no cash option. Cash guarantees the values, though, and some will like the low hassle delivered by that.PS You need to leave it in Cash in the SIPP platform rather than investing it into anything.
Correct, no relevant rules for that case.Sterlingtimes wrote: »Are there no limitations on this such as recycling? Is it the case that any pensioner can without earned income just keep recycling £2,880 per year until the age of 75?
More generally there are no rules banning recycling of pension income but if you take a penny of the taxable 75% using flexible drawdown your allowance for contributions to any defined contribution by anyone including an employer is reduced to 4k per year. Irrelevant to your case but it can matter to those still working. Once the 4k limit is triggered carry forward of unused annual allowance from the past three years is no longer permitted.
A workaround is use of the small pots rule which allows three whole pots of up to 10k each per human lifetime to be taken without triggering this. You can transfer to get close to but below the 10k if desired to make more efficient use of this.
Income from DB pensions, annuities or capped drawdown up to the GAD limit doesn't cause this reduced allowance.
The 75% part is normal taxable income and the pension firm's PAYE system will deduct income tax using the tax code sent to them by HMRC.Nationwide8 wrote: »Sorry if this is an obvious question but if you withdraw say £3550 in a tax year does that count towards your PA ?
Correct mostly but it is the gross - after tax relief - amount added to the pension has to be no higher than earnings or, if not earning or earning under 3600, the 3600 alternative. Be sure they don't trigger the 4k limit by taking any of the taxable 75% until ready not to pay in more than 4k gross any more. DB has no effect on that. Can use a work scheme and/or any number of others so long as the total gross going in is no more than those limits.4) Max OH could put in is annual earnings (less current pension contribution), or once not earning £2,880. Worst case would be paying basic rate tax on 75% of this on the way out (but benefit is 20% relief on 100% on the way in).0 -
A person can use an unlimited number of pensions in the same year. A person gets basic rate tax relief on personal contributions into a pension operating the usual Relief at Source system even if they are not earning or have no taxable income.AFIK, you cannot contribute to two schemes in one year.
There is no tax relief on payments into a SIPP if he has zero taxable earning.0 -
But right enough.I think you can have an employers pension and another SIPP, so long as the total contributions in a tax year don't exceed your earnings (or £40k, whichever is the lower)?? Confused!
Although you can pay into 500 if you like, including more than one from each employer in the uncommon situation that they offer more than one.
The 40k can be exceeded if you have unused 40k annual allowance from the last three years and were in any pension in the years you want to use. The income limit can't be exceeded and high earners have lower limits.0 -
So dad is just 61 and drawing his work pension of £10,000 per year and around £1,200 in savings interest estimate.
No other income so would he pay tax on the £2.880 + £720 if he withdrew it each year?:T0
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