Paying £2880 into pension when retired

busybee100

cloud_dog wrote: »

I'm unsure what you mean?

Do you mean 3 small pension/SIPP pots of money? If so, why? What are you trying to achieve?

Flexibility. Wouldn't it would mean I could withdraw all three in one tax year with minimum impact?

ukdw

DeepSporran wrote: »

If you take it all out after March 2 2019 then (assuming we're talking about HL) the account may get closed, but the fee for closure will be £25 +VAT rather than the punitive £295 + VAT if you'd closed it in the first year. The suggested way round this is to only take out £2600 as early as you can (no need to wait 12 months), leaving £1000 in the account to prevent HL closing it.


Then you can subscribe with a further £2880 into the same account in the next year, and this time you can take out the full £3600 as soon as you can - the leftover £1000 from the previous year will still be there to keep the account open.

What I was thinking of doing was:
Year1 March pay in £2,880, year1 6th April pay in another £2,880. Wait until tax relief added bringing total up to £7,200 by about July. Then withdraw £6,200 - leaving £1k in.

Then in year2 6th April pay in another £2,880, wait for the tax relief to be added leaving a total of £4,600. Then in July withdraw the whole lot and pay the £25+vat (£30) closure fee.

Nothing to do in year3 - then repeat the whole cycle again in year4 March.

Whilst I appreciate this method costs an average of £10 a year in closure fees it does mean the £1000 isnt stuck in the pension for the whole time.

Dazed_and_confused

Are you mixing (calendar) years and tax years?

You have two contributions of £2,880 in "year1", whatever that actually means.

ukdw

Dazed_and_confused wrote: »

Are you mixing (calendar) years and tax years?

You have two contributions of £2,880 in "year1", whatever that actually means.

My year1,2 etc were calendar years - reworded for clarity.

What I was thinking of doing was: March 19 pay in £2,880, 6th April 19 pay in another £2,880. Wait until tax relief added bringing total up to £7,200 by about July 19. Then withdraw £6,200 - leaving £1k in.

Then on 6th April 20 pay in another £2,880, wait for the tax relief to be added leaving a total of £4,600. Then in July 20 withdraw the whole lot and pay the £25+vat (£30) closure fee.

Nothing to do in 2021 - then repeat the whole cycle again in March 22.

Whilst I appreciate this method costs an average of £10 a year in closure fees it does mean the £1000 isnt stuck in the pension for the whole time.

Dazed_and_confused

Ah, makes more sense now.

cloud_dog

busybee100 wrote: »

Flexibility. Wouldn't it would mean I could withdraw all three in one tax year with minimum impact?

I would think it overly complicated to withdraw from three accounts rather than one. At a simplistic level everything to do with pensions is about the amounts.

Perhaps you could give some examples of the amounts you are thinking about and why seperate pots may benefit your situation?

busybee100

Hi cloud_dog

I'm just thinking of using the sipp/s as a savings pot.

Three x 10k would be 30k with no tax to pay. 30k from one pot would be 7.5k free then 22.5 taxable.

There may be an occasion when it would be useful.

Dazed_and_confused

I think you're getting confused.

3 x £10k and 1 x £30k are the same tax wise.

The tax will all depend on how you take the taxable element.

£22.5k taken in one tax year is minimum of £2k tax for most people (2019:20 rates)

3 x £7.5k taken in one tax year is the same

You could spread the £22.5k out over several years if you need/want to.

busybee100

Hi Dazed and Confused

I must be confused. I thought there was a small pots rule where 3 individual pots under 10k could be cashed in without paying tax. I'll go do a search to see if I can find the correct terminology.

Dazed_and_confused

Does this help,

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