Paying £2880 into pension when retired

Sea_Shell

Just came across this thread, and have subscribed, thanks.

Just a quick question (sorry I haven't read ALL the pages)...just want to check i'm understanding things correctly.

- This plan only works for those over 55, as they are able to access their pension pots, correct?
- It works best if you are a non-taxpayer, or low earner?
- When can you start? Can you open a SIPP at any time and put the money in....but can you only then draw it out in the tax year AFTER you've turned 55, once the tax rebate has been made?

Thanks folks.

Dazed_and_confused

It works best if you are a non-taxpayer, or low earner?

Not necessarily, it actually works best (using a realistic scenario) if you contribute when you are a high earner and can get 40% tax relief on the contribution and then have a tax year (or years) when you are a non taxpayer even with the taxable withdrawls from the SIPP as part of your income.

But the basis principle is you could be a low earner/non taxpayer and still get the 20% relief when you make the payment and not necessarily have any tax to pay when you take the pension as income.

skycatcher

jerrysimon wrote: »

From what I recall I had to move the money from my wifes cash only SIPP into a draw down account/facility 1/4/17 and that was when I was told that if I emptied all of that within 12 months there would be a £250 charge. To avoid the charge I needed to leave at least £1000 in the draw down account for at least 12 months after which I could empty it without charge.

The cash SIPP was then closed without charge, but I asked them to reopen it as I plan like you to keep putting the £2880 in to gain the £720 tax refund. We do in fact still have 4K left in the draw down account as I needed to leave that there as I drew out the max including the 25% so as not to go over her personal allowance. I will draw this out after 1/4/18 but of course that will be beyond the 12 months, then do the same again with the money I put in before the end of this tax year leaving £1000 in beyond 1/4/19 to avoid any charges.

I will probably need to double check with HL to make sure I have that correct. As I said their advice line is excellent and they are patient and very helpful for us amateurs i.e. I only found out about this 2 years ago when I came on this forum.

Thanks for this...I think the penny has just about dropped! So if I understand correctly....I opened the sipp on 1/2/18, they say I'll get the £720 on 21/3/18 so I can start to drawdown then and still add in another £2880 in say 30/4/18 (next tax year) keeping the £1000 float and have the whole lot out by say 30/3/19 without the close down charge.

peteduk

Thanks to everyone for the contributions above.
I have long believed this scenario existed but could find no-one who would advise - found this thread today by chance. The difference is I thought it was something to do with the "Triviality rule"
I am sorry I became more confused the more I read - I should have stopped at about half way through...... To get to the point:
My wife is 70 this year and receives ~£5K state pension with insignificant other savings.
I will gift her the monies and act on her behalf as she refuses to have anything to do with computers and on line accounts - she will not want to claim any tax back. So the plan is:
Open a HL SIPP
Deposit £2880 in FY17 - 18 (before April this year)
HL apply and receive Tax rebate of £720
Apply to HL to transfer to drawdown
Fill in risk assessment
Withdraw £960
Withdraw £10
Wait for HL to receive tax code
Withdraw remaining less £1,000
Add next £2,880 in FY18 -19 (before April '19)
HL apply and receive tax rebate of £720
Withdraw remaining less £1,000

If that's it, it feels straight forward - are there any steps I've missed, or potential mis-steps?

Another question or should I go to another thread for this one?:
I am 57, still working and have a Final Salary pension that my employer is wishing to reduce the benefits of. Can I open a SIPP too? (I have some cash savings but no other investments)

Thank you for your help

jerrysimon

skycatcher wrote: »

Thanks for this...I think the penny has just about dropped! So if I understand correctly....I opened the sipp on 1/2/18, they say I'll get the £720 on 21/3/18 so I can start to drawdown then and still add in another £2880 in say 30/4/18 (next tax year) keeping the £1000 float and have the whole lot out by say 30/3/19 without the close down charge.

Correct

jerrysimon

peteduk wrote: »

If that's it, it feels straight forward - are there any steps I've missed, or potential mis-steps?

Another question or should I go to another thread for this one?:
I am 57, still working and have a Final Salary pension that my employer is wishing to reduce the benefits of. Can I open a SIPP too? (I have some cash savings but no other investments)

Thank you for your help

Seems correct.

Re your pension I dont think they can reduce benefits on an existing pension but would need to close it and restart a new one which you may be required to move to. That was my case though it was a PS DB pension which they closed and made everyone join a new pension . That said as I was over 50 and less than 10 years away from drawing my pension I remained in the old pension scheme which I withdrew early anyway having retired last year at 56.

Suggest you confirm with your pension provider.

You can open a SIPP whenever you want, as per this thread, and if working can only put in as much as you earn in a year less any other pension payments made elsewhere. There are cases where you can carry over unused earnings from the previous year (i.e. pay in more that you earn in one year) but suggest you read through the threads here/speak to you SIPP provider.

caveman38

peteduk wrote: »

Thanks to everyone for the contributions above.
I have long believed this scenario existed but could find no-one who would advise - found this thread today by chance. The difference is I thought it was something to do with the "Triviality rule"
I am sorry I became more confused the more I read - I should have stopped at about half way through...... To get to the point:
My wife is 70 this year and receives ~£5K state pension with insignificant other savings.
I will gift her the monies and act on her behalf as she refuses to have anything to do with computers and on line accounts - she will not want to claim any tax back. So the plan is:
Open a HL SIPP
Deposit £2880 in FY17 - 18 (before April this year)
HL apply and receive Tax rebate of £720
Apply to HL to transfer to drawdown
Fill in risk assessment
Withdraw £960
Withdraw £10
Wait for HL to receive tax code
Withdraw remaining less £1,000
Add next £2,880 in FY18 -19 (before April '19)
HL apply and receive tax rebate of £720
Withdraw remaining less £1,000

If that's it, it feels straight forward - are there any steps I've missed, or potential mis-steps?

Another question or should I go to another thread for this one?:
I am 57, still working and have a Final Salary pension that my employer is wishing to reduce the benefits of. Can I open a SIPP too? (I have some cash savings but no other investments)

Thank you for your help

Could you please explain the significance of withdrawing the exact figures of £960 and then £10. Is it a strategy or just personal?

ProDave

caveman38 wrote: »

Could you please explain the significance of withdrawing the exact figures of £960 and then £10. Is it a strategy or just personal?

The £960 is the 25% tax free lump sum.

the £10 is a trivial taxable payment but will trigger getting a tax code for future payments.

The next payment is defered until the tax code is sorted out so can be taxed correctly at the correct rate, not emergency rate.

Mnd

And repeat until she's 75

caveman38

ProDave wrote: »

The £960 is the 25% tax free lump sum.

the £10 is a trivial taxable payment but will trigger getting a tax code for future payments.

The next payment is defered until the tax code is sorted out so can be taxed correctly at the correct rate, not emergency rate.

Thanks for the explanation, but why £960 and not £900?