Paying £2880 into pension when retired

Aiki

Gocat
My understanding of HL SIPP charges is that if you close the account in the first year the costs are £295+VAT (wow) but this cost drops to £25+VAT when closed after the first year. I presume withdrawing all money counts as closing the account but I may be wrong so I would suggest you do not withdraw it all but leave a small amount say £40 to cover future costs i.e closure costs.



Note you will only be able to withdraw from a SIPP after age 55.


I did not see any costs that directly related to an online withdrawal request of cash to your nominated account but if you transfer money to another provider there are costs and there is the closure cost noted above if the account is closed.



I did not set a nominated bank account up when I opened my SIPP yesterday. I assumed my existing nominated account for my ISA would suffice but I will tackle this issue when it arises.

regards

AnotherJoe

gocat wrote: »

ok I have been trying to get my head around this but seem to be failing.
I have £3600 in cash in HL. I dont earn enough to pay tax. So can I withdraw all the £3600 and not pay tax (this amount still wouldnt take me over the tax allowance).
Also, when I click "deal" on my account it mentions a "nominated bank account" is this something we did when we set up the account. When I try to click on "withdraw money" it doesnt let me click on it and when I click on "nominated bank account" it says Nominated bank account for withdrawals and income
"deal" is for buying and selling investments not withdrawing money. You will have to fill out a form to go into drawdown. PITA but you only need to do it once.


To amend the bank account details for your Vantage SIPP / Vantage SIPP Income Drawdown Account, please download a change to bank account details form and return it to us at our freepost address shown on the form.
So getting all confused with this.
Will there be charges if I withdraw the whole amount.
Can I put in £2880 in the next tax year and get it topped up by £720

tia for any answers.

Don't do that ! The account would be closed and you'd have to pay the closure charge and then you'd open a new one next year anyway and redo the whole palaver!
Take out £2600 leaving £1,000.

Next tax year add in £2880 to the existing SIPP which you kept open.

When its been bumped up to £3600 you'll now have £4600 in there.
Take out £3600 leaving £1000. Keep doing that until you are aged 75 then take it all out.

(all this assumes you are aged over 55 BTW otherwise you cannot take it out anyway)


So, going back to the bit in red above, you need to go into drawdown which involves filling in a form most of which is irrelevant to you but its a government necessity,

Do you have any other income at present? This affects your tax situation and best way to take out the £3600.

gocat

Thanks for all your answers. Yes I am over 55. Sounds like the best thing is to nominate an account and then set up drawdown leaving in £1000, then put in £2880 every year and repeat till Im 75. Is that right?
No dont have much other income so wont reach £11,500 in a year

Aiki

The only fact that I know is that you can claim tax relief either up to the amount of tax you have paid or upto £720 ,whichever is the greater. This allows people even on 'low income' to save into a pension and claim tax relief. This £720 tax relief is only available up to the age of 75.

With this idea you receive £720 is tax relief for a contribution of £2880.

How much of this you withdraw is up to you. You don't want to remove it all, if taking the balance of the pension to zero results in charges. Anything you withdraw is counted as taxable income so once your total taxable income is above your personal allowance you pay tax.

There is nothing that says you only remove £2600/year. This was just an example in the discussion and I think was to avoid charges. I will not be doing this, I will take £3550 in year 1 and after that it depends on the tax situation. I have now been corrected by others posters that there is a min balance of £1000 to avoid SIPP being classed as closed so in first year I could only withdraw upto £2600 without causing problems

If you follow the suggestion to put in £2880/yr from 55 to 75 and only remove £2600/yr and the balance gains no interest and there are no charges, at 75 the balance will be £20000. Removing this in a lump sum at 75 will almost certainly be over the personal allowance especially with the state pension so you will pay tax.

In my case this idea is really only of benefit until I recieve my company pension since once I take it, combined with taking £3550 a year will mean I will pay tax on the balance above my PA and so the benefit is reduced to around £180. Still better in my pocket than somebody elses but not as nice as £720.

Ganga

If you use Virgin Money there is no charge to close the account,or there was not over the last three years,therefor you can invest £2880 ,draw £3600 less the tax paid to HM tax office then claim the tax back if you are a non tax payer,result £720 tax free cash.

DeepSporran

Aiki wrote: »

....


You don't want to remove it all, if taking the balance of the pension to zero results in charges. Anything you withdraw is counted as taxable income so once your total taxable income is above your personal allowance you pay tax.


That's not quite correct - you can take out up to 25% (i.e. £900) tax free, but anything more may be taxed, depending on whether you have any personal allownace left to use.


There is nothing that says you only remove £2600/year. This was just an example in the discussion and I think was to avoid charges. I will not be doing this, I will take £3550 in year 1 and after that it depends on the tax situation.


Careful - if the balance in the SIPP drops below £1000 with HL, they may close it unilaterally and force the unwanted charges. However, HL in my experience will warn you if they plan to do this, so you can avoid making an expensive mistake.


If you follow the suggestion to put in £2880/yr from 55 to 75 and only remove £2600/yr and the balance gains no interest and there are no charges, at 75 the balance will be £20000.


You don't need to leave an extra £1000 every year - so you can remove £2600 in the first year, and then the full £3600 every subsequent year, still leaving that first £1000 in the account to satisfy the minimum balance requirement.

See my comments above. These details have been covered in earlier posts, though it's understandable if anyone has missed them. The thread is very long.

DeepSporran

Ganga wrote: »

If you use Virgin Money there is no charge to close the account,or there was not over the last three years,therefor you can invest £2880 ,draw £3600 less the tax paid to HM tax office then claim the tax back if you are a non tax payer,result £720 tax free cash.

You are quite correct that there is no charge, but with Virgin you are forced to put the investment into a fund rather than leave as cash. So you may find that you have lost (or gained) a few pounds in the interval between initial investment and withdrawal. If (as a non tax payer) you would otherwise expect to benefit by the full £720, then a movement of a few percent in the fund unit price may make little difference to you, but for anyone who is only looking to get the (usual) minimum of £180 it would only take a drop of 5% in the fund price to take £3600 down to £3420 and the £180 has been swallowed up. Of course, a rise in fund price would increase your £180, it works both ways.


It would take a 20% fall in the fund price to swallow up £720, so the risk for non taxpayers is less, though still present. You are exposed to the market for a few weeks between initial investment and withdrawal while you wait for the tax boost to be applied, so even if you choose the lowest risk fund that Virgin offer, you may see a significant price movement.

michaels

Aiki wrote: »

The only fact that I know is that you can claim tax relief either up to the amount of tax you have paid or upto £720 ,whichever is the greater.

Weirdly this is not correct. You can actually claim tax relief on all earned income up to the annual allowance, so earn 10k, pay no income tax as it is below the personal allowance but you can put 8k into a pension and get 2k relief added.

missile

Looking at my HL account

The suggested minimum cash balance helps ensure you have sufficient cash balance in your HL SIPP Income Drawdown to meet fees.

is £0.00.

bob_a_builder

My wife has a HL sipp, been paying in £2880 for last for 3 years so now have £10086 in

She is a non earner for last few years and only started to receive state pension in Nov18, so she has about £6880 tax free allowance left for this year

So plan was to take out 25% as tax free part (£2500) and then a further sum of £6880 to use up her tax free allowance this year

Contacted HL about how to do this but they rather confused by saying I have to choose whether to choose 'drawdown' or 'lump sum' method before they can send the right forms.
Whats difference does it make to us to choose one or the other ?

Which is the best way to achieve the end result of withdrawing £2500 + £6680 this year and for no tax to be payable ?

Thanks in advance..