Paying £2880 into pension when retired

Paul10000

My wife is 58 and only earns 1-2k pa. She opened a cash sipp with Fidelity and the tax relief soon appeared. She's now trying to cash it out but the Fidelity 'expert' says she can only do this 3 times as it's the small pots rule. From what I read this is wrong, does she need to be concerned with this or just go ahead and withdraw anyway? Thanks all.

Linton

She can cash it out without invoking the small pots rule. If she does this the Annual Allowance will be reduced from £40K to £4K - she will then be unable to pay more than £4K/year into her pension. This may not be a problem for her. The 3 small pots rule does not trigger the reduction in the Annual Allowance.

jamesd

As Linton wrote, she is not required to use the small pots rule if she doesn't want to. She can use the UFPLS method to take a 25% tax free and 75% taxable lump sum using the flexible drawing rules instead. The flexible drawing will trigger the money purchase annual allowance reduction from £40k to £4k a year so it's a bad idea for someone who is still working and might want more but irrelevant to someone who will never work again or who will stay on a low income.

If she might earn more than £4,000 she could pay in for two years then take out £7,200 with the small pots rule. Or she could pay in for three years and split the last year between two firms to stay within the £10k small pots limit. Or she could use flexi-access drawdown to take a 25% tax free lump sum each year and then put the remaining 75% into flexi-access drawdown but taking no money from it. When the combined 75% amounts from several rears gets close to £10,000 use the small pots rule .

Paul10000

That makes more sense - thanks for the replies and advice.:beer:

bioboybill

My wife will shortly be opening a SIPP and depositing £2880 for the tax relief as described in this thread. I have noticed that on here everybody pretty much talks about opening an account with HL for this, as they can leave as cash with no platform cost. Does this also apply to all the other platforms? The reason I ask is that we were thinking of leaving money in to keep the account from being closed and thought we might invest the £1K we are leaving in. With HL charging 0.45% when invested we were thinking of using Vanguard and going with VSL 60 for the low costs. In following years we might also leave money in depending on her tax situation.

pip895

HL work out pretty cheep for a small pension pot - many others have an annual or quarterly charge and or charge for transactions. Unless you are going to end up with high tens or hundreds of thousands in there the 0.45% is not going to be a big issue.

bioboybill

Actually, when I look at Vanguard it looks like they don't do a SIPP. Is that correct?

dunstonh

bioboybill wrote: »

Actually, when I look at Vanguard it looks like they don't do a SIPP. Is that correct?

Correct. No pension product available at this time. A SIPP would be pointless for them to offer as they only offer their own funds. A personal pension or master trust scheme would be more likely when it comes. Unless they decide to go whole of market (like a number of the other providers that have own fund ranges have)

pip895

dunstonh wrote: »

Correct. No pension product available at this time. A SIPP would be pointless for them to offer as they only offer their own funds. A personal pension or master trust scheme would be more likely when it comes. Unless they decide to go whole of market (like a number of the other providers that have own fund ranges have)

I'm sure I heard somewhere that they would be bringing out a SIPP? I'm slightly puzzled as to why you say that a SIPP would be pointless whilst they only offer their own funds. There must be loads of people on here that have only vanguard funds in there SIPP and plenty of people who would be perfectly happy to open a SIPP with them even if it is restricted in that way - if the price was right.

I have never been that clear about the distinction between a PP and a SIPP - I know in theory a SIPP can contain all sorts (Property etc.) but in practice most people go with a much more restrictive offering through whatever platform they chose. I suspect that there might be a significant marketing advantage to calling your pension offering a SIPP rather than a PP. Are there rules dictating the minimum diversity you have to offer in order to call it a SIPP rather than a PP?

pensionpawn

I've just spent an hour or so reading this thread with much interest. Mrs wife is presently around 2.5 years from getting hold of her personal pension(s) and so to make the sums easier let's assume by then that the personal allowance is £12k. She has a DC pension into which she currently dumps most of her salary via SS and a Sipp with HL she started (via a transfer from another pension) which has no regular contributions. Now the plan is, unless the experts on here spot a flaw in the cunning and deviousness, is to cut her hours dramatically to around the £3k6 pa that she can continue to completely dump into pension whilst simultaneously starting to draw from it. With no other income streams until SP, which is a long way away, I have reasoned that she can withdraw £16k pa tax free as £4k will be covered by the 25% tax free allowance and the remaining £12k is within the personal allowance. My only doubt is whether salary sacrificing affects my assumptions. Is it safe to assume that my logic is still sound even if the £3k6 annual pension contributions are not made via SS? Finally, when she decides that she wants to give up the part time work too, am I able to fund her £3k6 contributions from my pension withdrawals?