Paying £2880 into pension when retired

weezie7

61, not taking SP but taking 6k NHS pension, with small income from investments, non tax payer and wanting to be as tax efficient as possible.


Question is more about why money in SIPP should stay in cash as opposed to investments? Is it purely to do with volatility of stock market and fees that are charged?

dunstonh

Question is more about why money in SIPP should stay in cash as opposed to investments?

Its personal choice. There is nothing that says you have to stay in cash. Indeed, for longer term, staying in cash can be more risky as you are guaranteeing inflation risk and shortfall risk. Whereas investments are only possibly subject to those.

weezie7

Am I right in thinking that stay with cash might means no fees, whereas investing means fees, as buying and selling?

xylophone

If you open the SIPP with HL and choose to invest rather than stay in cash, then you will pay their fees.

Some people ( especially those who know that they will pay no tax) choose to stay in cash when using the "£2880 option" on the basis that they regard the TR as a form of interest- they take the PCLS and then draw down the balance, being careful not to close the account in the first year (for which there is a large fee).

Some choose to take the balance as monthly income thereby getting the correct tax code applied to the account - no hassle in having to do a reclaim through HMRC.

In the following tax year they pay in their £2880 and follow the same procedure.

This often suits eg older people who don't expect to pay any tax until they are drawing a state pension which increases their income to a level where they will pay tax.

weezie7

Thanks dustonh for that.


Does anyone know if AJBell offer option to stay in cash please?

scottiescott

Also reading this thread with interest. However it seems largely to benefit those whose income does not amount to the current Personal Allowance.
What benefit if any to a 20% tax payer, other than making £180 net with a bit of work?
Any way for a tax payer to preserve the £720 uplift?
My situation is;
Age 57, in receipt of a Company Pension. Paying 20% tax as it amounts to more than the PA. Not working. No other income other than cash deposits interest and dividends from shares in former employer.
Have put £10k in a Cash Isa already this year and I'm drip feeding £1k per month into a S/S Isa for the remaining £10k.
Don't want to expose any more this financial year to stock market based investments but would consider doing so after April next year.
Any options around SSIP?
Thanks in advance.

jamesd

Just the £180 for you. Try reading up on peer to peer lending and VCTs.

From P2P like Ablrate, MoneyThing and Collateral I'd expect to get something like £1,000 a year of interest after bad debt from £10,000 invested.

From the Albion VCT I expect 30% initial tax relief from HMRC, capped at the income tax actually due in the tax year of purchase, 7% of the purchase in annual tax exempt dividends and around 95% of the purchase price back if selling after the five year effective minimum holding period. Judicious VCT use may eliminate your income tax bill for the rest of your life and make you some nice extra income.

If the shares in your former area large percentage of your total investments that's a significant risk factor. Employees and former employees of tech companies and banks in particular lost huge amounts of money when their businesses had trouble in around 2000-2001 and 2008.

bigadaj

scottiescott wrote: »

Also reading this thread with interest. However it seems largely to benefit those whose income does not amount to the current Personal Allowance.
What benefit if any to a 20% tax payer, other than making £180 net with a bit of work?
Any way for a tax payer to preserve the £720 uplift?
My situation is;
Age 57, in receipt of a Company Pension. Paying 20% tax as it amounts to more than the PA. Not working. No other income other than cash deposits interest and dividends from shares in former employer.
Have put £10k in a Cash Isa already this year and I'm drip feeding £1k per month into a S/S Isa for the remaining £10k.
Don't want to expose any more this financial year to stock market based investments but would consider doing so after April next year.
Any options around SSIP?
Thanks in advance.

Little point in a cash isa, you'll need to diversify away from your former employers shares too if they represent a fair bit of your wealth, too risky to hold single company shares for most unless you are quite seriously wealthy.

scottiescott

Thanks for the pointers.
Will research VCT's. Know mothing about them but will research.
Quite comfortable with previous employers shares. Represents about 10% of my total "wealth". Big player in the drinks industry, pay good dividends and regularly outperform the CAC. Now there's a clue!
Thanks again.

jamesd

Perhaps a shame that wormwood spirit was banned, but anise seems to be a profitable substitute. Seems like a good company.