Paying £2880 into pension when retired

Dazed_and_confused

I think £960 is probably a typo (or dodgy calculator!)

The £10 uses a very cautious approach. The emergency tax code allows a pension provider or employer to make a payment (of taxable income) of upto £958 without needing to deduct any tax (using a monthly payroll).

From 6 April 2018 this increases to £987.

peteduk

Thank you all for taking an interest and helping.
For clarification:
- The £960 is a typo - of course 25% of £3,600 is £900, sorry for the confusion
- The £10 is so HL get a tax code and my wife doesn't have to bother the taxman with a refund - I didn't know about the higher limit quoted by 'Dazed and Confused'. I'll stay with the £10 though
- Yes we'll repeat until she's 75 (sorry meant to add that)
I will start to put this into effect this week

Re: My pension
They wish to change it so it is no longer Final Salary but based on average earnings (each year is treated as a stand alone) and increase my % payment levels. Entitlement to date would be treated as if I retired at current salary. Not the worst change compared to others but significant enough.
I'll probably see how the above pans out but a SIPP seems like a good idea as I have no other investments.
Thanks again
Pete

Jakey30$

Hi All,
I've just seen this on the thread I subscribe to. I took out a H&L sipp for the wife( She is now 65 and been retired for 3 years with only State pension as income) she has 3 years x £2880 in plus 20% Tax relief we haven't done anything with it so far (Still a little confused as to best route to take)
I will be 67 in July and still working 40% tax payer and still paying into a company pension scheme, I'm, drawing a final salary pension from previous owners of the company I still work for
(taxed @ 40%) and also drawing a state pension.
My Question is: Can I also open a sipp with H&L for myself and take advantage of the tax relief

dunroving

As peteduk brought up the Triviality Rule, thought I'd throw that issue out there. The thread title says "When retired", but retirement is a state of mind, not a specific event or age. ;-)

So ... considering retirement is a fluid concept, it is possible that some people in this scenario do take up work again, through choice/boredom or necessity, either FT or PT. In the current scenario, you'd be hit by the MPAA rule and pension contributions would be restricted to £4,000.

To avoid that, would it make sense to maybe contribute to one SIPP for a couple of years, and then open another SIPP, and so on, to keep all the SIPP pots below £10k?

MallyGirl

I thought triviality rule was applied to total of all pots - could be wrong though

xylophone

https://www.pensionsadvisoryservice.org.uk/about-pensions/retirement-choices/the-right-choice-for-me/taking-a-small-pension-as-a-cash-lump-sum

https://www.pensionsadvisoryservice.org.uk/content/publications-files/uploads/Taking_small_pensions_Detailed_SPOT008_V1.5.pdf

Dazed_and_confused

Jakey30$

You will need to consider your current pension contributions as there are limits to how much you can contribute but in theory yes however based on your post you will potentially be eligible for double the tax relief your wife gets.

20% at source (like your wife) but you can then advise HMRC of the gross contribution and that increases the amount of 20% tax you can pay which in turn reduces the amount of 40% tax you have to pay.

Using the £3600 amount for simplicity and assuming you pay 40% tax on at least £3600 then you could pay £2880 into a SIPP and the pension company adds £720 basic rate tax relief. You notify HMRC of the gross pension contribution of £3600 and they adjust your tax so you pay more 20% and less 40% tax, a potential saving of £720 (£3600 x 20%). Depending on when you tell HMRC you either get a tax refund or pay less tax as you go along.

So ultimately you have a pension pot of £3600 but the real cost to you could be as low as £2160.

jamesd

dunroving wrote: »

considering retirement is a fluid concept, it is possible that some people in this scenario do take up work again, through choice/boredom or necessity, either FT or PT. In the current scenario, you'd be hit by the MPAA rule and pension contributions would be restricted to £4,000.

To avoid that, would it make sense to maybe contribute to one SIPP for a couple of years, and then open another SIPP, and so on, to keep all the SIPP pots below £10k?

It's the defined contribution small pots rule that you seem to be thinking of. Taking money using the small pots rule doesn't trigger the MPAA so you don't need to wait if you don't want to. You can transfer an uncrystallised pot so it's OK to go over 10k. Your base idea is good.

Dorian1958

Humble apologies if this question has been asked before:


Someone has taxable income (not from employment, but from pensions, rental income, benefits etc) £14,000 which takes them over the personal allowance by just a few thousand and therefore they are required to pay tax at the basic rate on the marginal amount. If they then pay £2880 into a personal pension is this then declared gross £3660 during self assessment and could this in theory take them under the personal allowance threshold? Or does this only work if paying into an occupational pension?


Thank you for you looking and please say if this should have been asked on the Cutting Tax board.


Cheers Dorian

Dazed_and_confused

Dorian1958

Assuming you are referring to a personal pension or SIPP then it should be declared on the self assessment return but it will not make any difference to the self assessment tax bill.

The basic rate tax relief of £720 would still be claimed by the pension company and added to the pension fund but there is no personal tax savings in this situation.