Paying £2880 into pension when retired

missile

Crabby wrote: »

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

I did it online easy :j

AnotherJoe

MoneySaving_ExNOT wrote: »

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.

You dont have to open a new SIPP every year you can just pay into the existing one.

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?

Yes

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?

Yes

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)

If you mean, take it out before you are liable to pay tax (eg once SP and EP kicks in), so you can spend it down later when you are paying tax, yes. I'll be doing the same for the next 4 years till my SP starts.

plumduff55

I'd just like to thank everyone who has contributed to this thread. Ive read all 29 pages twice just to make sure I'd understood it properly. Yesterday I applied for a cash SIPP online from HL. It took under 5 minutes and all I needed was my NI number and bank details. Very simple to do.

I retired in October 2015, aged 60 with a small final salary annual pension of £5,280 and am not a tax payer. I am using my pension lump sum to fund my retirement till October 2021 when I will receive my state pension. An extra £720 a year is great for me and will give me a short annual holiday without touching any more of my savings.

I just wish I'd known about this in 2015. Im sure there's many others out there in my situation who would benefit from this extra money. Thanks again to all the posters who have explained about SIPPs.

twiglet98

I have recently taken redundancy and have to make alternative arrangements for my meagre company pension plan. I had assumed it would transfer to a new employer's scheme but I have not found a new job and I'm now looking at very part-time or casual work, which may not offer a pension scheme at all.

It is a 'money purchase' scheme which I joined in 2000, the annual statement at 31/12/2017 shows the plan value as about £34k and the projected monthly pension of a paltry £180 assumes retirement at age 75.

I am nearly 62, female, divorced, my only other pension is a small DB one with L&G which would be about £3k a year, or £18k cash and a smaller regular payment, this could have been paid from age 60 but I haven't really explored options other than looking at the Benpal modeller.

Now I presently have no income at all, £8k left of my redundancy settlement, no other investments and the end of the tax year is looming. My earnings, on my P45, were just over £18k, and I doubt I'll ever earn that much again.

Is it insane to follow the steps outlined in this thread, sinking £2880 into it next week (or before 5 April) to gain the top-up payment which can then be withdrawn, or is it insane not to do so?

xylophone

Have you obtained a new state pension statement? What does it say? https://www.gov.uk/check-state-pension


It is possible to obtain tax relief on 100% of your relevant earnings subject to the annual allowance.

Your relevant earnings for the current tax year are (say) £18,000.


This would mean that in the current tax year, a maximum of £14.400 could be contributed to a personal pension/SIPP and up to £3,600 claimed in tax relief.

It seems that you have already made some contribution to your DC pension in this tax year but it seems likely that you have room to contribute more than the £2880 permitted for those with no relevant earnings.

You would have time to open a SIPP with eg Hargreaves Lansdown and make your contribution.

You could also consider transferring in the DC pension to which your refer.

HL are helpful on the phone so that you could give them a ring.

There is a lot of information on their site which you can read.

You could also consider an appointment with Pension Wise to discuss your DC pension options.

https://www.pensionwise.gov.uk/en?gclid=EAIaIQobChMIqq6gj6CF2gIVpBXTCh2-qQg1EAAYASAAEgLBOvD_BwE

If you are unlikely to obtain employment or anticipate earning low amounts on a casual basis, is it now time to consider drawing the small deferred DB pension?

twiglet98

Thank you so much for sharing some ideas and giving me lots to ponder.

The state pension forecast is £159.55/week if I contribute for another two years before 5 April 2022 (my SPA is 66). I have paid full N.I. contributions for 45 years with no gaps.

A former colleague who was made redundant at the same time said he has applied for Contribution-Based JSA and apparently if this is awarded it covers N.I. payments when out of work. I think my lump sum payment was higher as I had been there longer, but it's something to look into.

When employees were invited to join the works pension scheme the suggestion was to pay 10% of wages into it. I was then working during school hours, 20 hours a week at £5/hour, and the £10/week that I started paying has never changed despite increasing to 30 and then 40 hours. We didn't get pensions advice and I realise rather too late that I should have asked. My weekly payslip show an EE deduction of £10.26 and an ER amount of £9.00, the respective totals at leaving date were EE £451.44 and ER £396.00.

Clearly there is room to pay a lot more into pension savings but I need to keep some money in the bank as that's what I'm living on for now. If I take £2880 out of the bank now, just before the end of this tax year, to start a SIPP it wouldn't make sense to withdraw anything from it in this same tax year as I've already earned more than the Personal Allowance. If I do start one next week, paying it out of my redundancy payment, I assume I can then repeat it at any time in the 2018-19 tax year. It does look as if moving the former company pension (Clerical Medical) would be better than just leaving it with them.

Legal and General (or JLT, their administrators) sent me a booklet from Pension Wise just before my 60th birthday but I seem to remember getting something about the Pensions Advisory Service too, maybe from Clerical Medical or Scottish Widows - what's the difference? Do they both give recommendations about small investments? What might it cost me to move the DC scheme into a SIPP with HL?

Monday is diaried for a day on the phone, oh the luxury of NOT being at work during office hours!!

twiglet98

xylophone wrote: »

If you are unlikely to obtain employment or anticipate earning low amounts on a casual basis, is it now time to consider drawing the small deferred DB pension?

I'm confused about the L&G pension. The Benpal modeller is stuck on a retirement age of 60 but I've had a letter from L&G in February which says they are writing because I have previously decided to defer payment from the scheme which would otherwise have been paid from my normal retirement date, my 60th birthday. I didn't actually tell them to do, or not do, anything, so my inaction led to this.

It says until now, the late retirement factor has been 9% per year applied on a compound basis for the first eight years and then on a simple basis for any years beyond that. It is changing to 6% per year compund from 1 March 2018.

It goes on to say if I decide to proceed with retirement now or in the near future I can request a retirement quote, the quote cannot be retrospective or quoted more than 12 months in advance.

I think the Benpal modeller is not compatible with my old computer so it isn't updating properly. I'll try on my daughter's computer next week.

kidmugsy

twiglet98 wrote: »

It is a 'money purchase' scheme which I joined in 2000, the annual statement at 31/12/2017 shows the plan value as about £34k.

I am nearly 62, female, divorced, my only other pension is a small DB one with L&G which would be about £3k a year, or £18k cash and a smaller regular payment, this could have been paid from age 60 but I haven't really explored options other than looking at the Benpal modeller.

Now I presently have no income at all, £8k left of my redundancy settlement, no other investments and the end of the tax year is looming. My earnings, on my P45, were just over £18k, and I doubt I'll ever earn that much again.

Is it insane to follow the steps outlined in this thread, sinking £2880 into it next week (or before 5 April) to gain the top-up payment which can then be withdrawn, or is it insane not to do so?

The maximum gross amount you can contribute to a pension in this tax year is your earnings minus any contributions you made on your work pension. So if you can stomach the risk of having very little cash for a few weeks you could contribute more than £3,600 gross/£2,880 net.

How quickly could your work pension get the TFLS to you? Can you take the TFLS without their trying to pay you an annuity?

xylophone

Pension Wise offers guidance on DC pensions.

The PAS offers help with matters relating to pensions.

https://www.pensionsadvisoryservice.org.uk/?utm_expid=.Luj1oalXTTyNdDX8FdnnpA.0&utm_referrer=https%3A%2F%2Fwww.google.co.uk%2F

With regard to your DB pension, it appears that payment of your pension has been deferred by default because you did not contact the administrator when you were about to reach Scheme Pension Age.

If you make a large a payment as possible into a SIPP with HL before 6 April, you should find that the tax relief is added in May.

You could also ask them about a transfer in of the DC pension.

You could then commence drawdown as suits you best - you can read about it or book an appointment with Pension Wise.

You might have say a PCLS of around £10,000 from a combination of your transfer in and your contribution and in addition to this a lump sum from your DB pension.

It seems that you have been managing on a salary of £18000 a year - the above lump sums together with your DB pension could keep you going for a couple of years.

You could then draw down your SIPP as suited your tax position up to state pension age.

Even if you do not start earning again, you can continue to contribute up to £2880 a year to the SIPP up to age 75 and receive the £720 tax relief.

Don't forget that if you are job searching, you can apply for JSA.

xylophone

work pension get the TFLS to you? Can you take the TFLS without their trying to pay you an annuity?

The work scheme just left was a DC pension - the OP has a deferred DB pension from the time she worked for L&G - if she brings this into payment (she has passed SRA) she will receive a lump sum/scheme pension.