Paying £2880 into pension when retired

skycatcher

I queried this with HL and have emails stating that I only needed £1000 in drawdown until over a year of the initial sipp being opened to avoid the early closure fee.

Snowbelle

skycatcher wrote: »

I queried this with HL and have emails stating that I only needed £1000 in drawdown until over a year of the initial sipp being opened to avoid the early closure fee.

Thanks - think I will either ring or email to see what they say.

enthusiasticsaver

i Have sent off my payment of £2880 to go into my SIPP today so hopefully that will arrive early next week. I am assuming there will not be enough time for the £720 tax payment to go in before the end of the current tax year. Does anyone know if this will be a problem bearing in mind I intend to pay in another £2880 in April for 2019/20 tax year? In other words there will be two lots of £720 in one tax year. In previous years I have always made the payment well before the end of the tax year.

missile

Not a problem

missile

Snowbelle wrote: »

HL advised me that I needed to keep £1000 in the SIPP (not drawdown account) to avoid closure and the £25 charge even though the account had been set up for over 12mths. So to avoid any closure charges £1000 is needed in both the SIPP and drawdown account?

Who advised you that?
I transfer balance from SIPP to draw down as soon as every year and have never been charged.

jamesd

Snowbelle wrote: »

Thanks - think I will either ring or email to see what they say.

This post explains.

They won't close the uncrystallised SIPP when you have ongoing direct debit contributions going in. They won't close the drawdown SIPP when a regular income instruction is active. It's part of why I suggest taking the tax free lump sum as a lump then regular income and contributions each month if using HL.

jamesd

enthusiasticsaver wrote: »

Does anyone know if this will be a problem bearing in mind I intend to pay in another £2880 in April for 2019/20 tax year? In other words there will be two lots of £720 in one tax year.

No problem at all. You can also wait and take both at the same time as one payment if you like.

enthusiasticsaver

jamesd wrote: »

No problem at all. You can also wait and take both at the same time as one payment if you like.

That is useful to know. Am still planning whether to start drawing down on it in near future. As I am currently a non tax payer and will be until 2026 when my state pension pays out it makes sense to drawdown before then. Presumably those who do drawdown almost immediately keep the money in the SIPP in cash rather than buy into a fund? The SIPP is uncrystallized.

ukdw

jamesd wrote: »

This post explains.

They won't close the uncrystallised SIPP when you have ongoing direct debit contributions going in. They won't close the drawdown SIPP when a regular income instruction is active. It's part of why I suggest taking the tax free lump sum as a lump then regular income and contributions each month if using HL.

Interesting earlier post about direct debits in and out potentially working round the £1k minimum balance requirement.

I see that the HL minimum monthly SIPP contribution is £25. I could presumably setup a matching £25 monthly drawdown too. To fund the drawdowns I would need to do an annual £400 crystalisation. This approach would therefore effectively reduce the minimum permanent balance that needs to be left in the SIPP to £300.

Seperately to the monthly contribution/drawdown cycle I could then once per tax year make a one off £2,580 contribution and a £3,200 UFPLS drawdown.

So the question then is - is the effort involved in the extra initial setup and extra annual £400 crystallisation worth it for the access for up to 20 years (age 55-75) of an extra £700. If I assumed an annual compound interest rate of an additional 2% on the £700, the total benefit over 20 years would only add up to about £350 - so maybe not.

jamesd

I suggest spreading the withdrawing over a year and the same for the taxable income. Then the monthly income almost covers the monthly direct debit and the only annual work is taking the tax free lump sum. A bit less taken first year to create a few months of extra payments before running out of money in the drawdown account. Removes the time pressure around the start of the new tax year, making an easier life.