Paying £2880 into pension when retired

skycatcher

Thanks...I understand the £10 is taxable just wanted to make sure that the rest in the drawdown account isn't until it's actually withdrawn which is what I think is you are saying... Cheers

westv

The money is in drawdown but it's only taxable if it's drawn down.

MoneySaving_ExNOT

As you can see from my username I'm a 'newbie' here......
Hypothetical situation: The reason I ask this question is because when I retire (formally) I expect to have the max state pension of approx £8300 and a small employers pension of around £3700 pa. Assume I'm 51 living on savings, (ISAs, so I pay no tax - have no other taxable income, claim no benefits). For sake of simplicity in the calculations below I assume a personal allowance of £12000.
I understand that each year I can open a SIPP pay in £2880 & the taxman will top this up by £720 to £3600 After the age of 55 I can withdraw this - might keep small amount in SIPP so a/c is open.

QUESTION 1. Supposing at age of 55 my total 'pot' was (say) £16000 (4 years of gross contributions of £3600 pa = £14400 plus 'growth' of £1600. So I could withdraw 25% (£4000) tax free and the other £12000 tax free because my personal allowance covered it, is this correct?

QUESTION 2. Supposing my fund grew to (say) £20000 could I withdraw £16000 as above at age 55 and the remaining £4000 in the following year both withdrawals without tax?


The reason I ask this is because it seems (given that my state & employers pension equal the P.A) that I am better off putting money into a SIPP, getting the tax back and then withdrawing it & putting the money back into a cash ISA (so interest is free)

cloud_dog

Yes, to both/all questions is the simple answer.

The only caveat is that on the very first withdrawal you will be taxed and will need to reclaim the tax from HMRC. It is not difficult to do, simply ringing them and explaining the situation should be sufficient.

MoneySaving_ExNOT

cloud_dog wrote: »

Yes, to both/all questions is the simple answer.

The only caveat is that on the very first withdrawal you will be taxed and will need to reclaim the tax from HMRC. It is not difficult to do, simply ringing them and explaining the situation should be sufficient.

Thanks for your prompt answer.

jerrysimon

Put my £2880 in earlier this month. Free money

Crabby

cloud_dog wrote: »

Yes, to both/all questions is the simple answer.

The only caveat is that on the very first withdrawal you will be taxed and will need to reclaim the tax from HMRC. It is not difficult to do, simply ringing them and explaining the situation should be sufficient.

I rang them and was told to fill in a form to reclaim.

Mnd

I might have misunderstood. .when you you be taking the employers pension..if it's after your senario then ignore me..if it's during then you will be liable for some tax

cloud_dog

Crabby wrote: »

I rang them and was told to fill in a form to reclaim.

Others who have undertaken this seem to have found HMRC more accommodating. Perhaps the person was having a carpy day, or perhaps HMRC have changed / reinforced appropriate protocols.

Others who have gone through this process have suggested making a small withdrawal, i.e. £10 so as to get an appropriate PAYE code for HMRC before commencing the full draw down (all assuming you draw down in a single event rather than equal monthly withdrawals; which is what PAYE is designed primarily for).

I might have misunderstood. .when you you be taking the employers pension..if it's after your senario then ignore me..if it's during then you will be liable for some tax

Based on how it was written my assumption was that the enquiry was for pre-normal / work / state pension payments. And, yes I know what 'assume' makes

AlwaysLearnin

This form might be useful for anyone in the 2nd (or subsequent) year with HL, i.e. already got the SIPP and drawdown accounts in place and just want to move further funds in to drawdown:

http://www.hl.co.uk/__data/assets/pdf_file/0011/9196130/moving-further-funds-into-drawdown.pdf

Believe address is:

FREEPOST: HARGREAVES LANSDOWN
Bristol
BS1 5HL