Paying £2880 into pension when retired

Snowbelle

missile wrote: »

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

HL did when I first moved my SIPP into drawdown. They said I needed to keep £1000 in the SIPP otherwise they would close it and I would have to pay £25. Now it looks like I also have to keep £1000 in the drawdown account to avoid any closure fee on that.

TBC15

Just to take thinks off at a tangent. If a person was currently drawing down his SIPP just under the personal tax allowance could he contribute the £2880 a year into a separate SIPP and once it reaches £10000 draw it out tax free under the small pots rule 3 times?

Dazed_and_confused

Could probably contribute but why do you think it would be tax free if virtually all Personal Allowance was being used by existing pension income??

TBC15

Small pots

You may be able to take the whole of your pension as a small pot if:

you’re aged at least 55, or you are retiring at an earlier age because of ill-health; and
the value of your pension arrangement does not exceed £10,000.
Unlike trivial commutation, you do not have to take into account any other pension benefits you may have, when giving up a pension for a small pot. The Government will allow you to give up three pension arrangements under the small pots rule.

Aiki

I am new at this, but I don't get this idea of a dropdown account within a SIPP. I thought, that the value of the SIPP is simply the value of the funds, cash, etc.. that are in the SIPP whether you are in drawdown mode, investment mode or doing both. So for HL SIPP the mininum value has to be above £1000 otherwise HL will close it (generally, not withstanding direct debits etc..). I haven't done it yet, but I presume that when I choose to withdraw money from SIPP, I will instruct HL which funds/cash I want the withdrawl to come from. Happy as always to be educated.

etienneg

TBC15: The small pots rule has no effect on taxation. Note that nothing in what you quoted mentions taxation. If you take a small pot, 25% is tax free and the rest is taxed as income according to your circumstances, just like any other income.

missile

Snowbelle wrote: »

HL did when I first moved my SIPP into drawdown. They said I needed to keep £1000 in the SIPP otherwise they would close it and I would have to pay £25. Now it looks like I also have to keep £1000 in the drawdown account to avoid any closure fee on that.

I can only tell you that has not been my experience. :A

missile

TBC15 wrote: »

Just to take thinks off at a tangent. If a person was currently drawing down his SIPP just under the personal tax allowance could he contribute the £2880 a year into a separate SIPP and once it reaches £10000 draw it out tax free under the small pots rule 3 times?

That would not work. :rotfl:

Only the tax free lump sum is tax free. Drawdown is subject to taxation at the appropriate rate if and when you exceed your personal allowance. HMRC will issue your pension provider(s) with the appropriate tax code.

missile

Aiki wrote: »

I am new at this, but I don't get this idea of a dropdown account within a SIPP. I thought, that the value of the SIPP is simply the value of the funds, cash, etc.. that are in the SIPP whether you are in drawdown mode, investment mode or doing both. So for HL SIPP the mininum value has to be above £1000 otherwise HL will close it (generally, not withstanding direct debits etc..). I haven't done it yet, but I presume that when I choose to withdraw money from SIPP, I will instruct HL which funds/cash I want the withdrawl to come from. Happy as always to be educated.

It is not that easy. HL will advise you on the options available and how to make investments and withdrawals.

bioboybill

My wife paid £2880 into a SIPP with HL end Jan. They said the £720 will be added 21st March, so she said she wants to withdraw £2600 end March and leave £1K in as cash. They sent her an illustration for taking uncrystallised funds pension lump sums, and a risk questionnaire. It says by doing this she will be limited to £4K per year future contributions into money purchase schemes. Is this the correct way to do it rather than drawdown? She doesn't want to invest, but just take the £720 tax relief each year, as her income is about £9.3K/year D.C. pension.

I assume she will have to get the money end of March to include as this tax year's income?