Saving in SIPP to pay off mortgage

saucer

This question has been prompted by something suggested in another thread about the advantages of paying into a pension instead of paying down the mortgage. It has made me realise (thank you OP) that I am missing a trick. I wanted to double check that I am on the right lines before taking the plunge.

Our situation is that both I and my wife are in DB schemes, me as a HR tax payer. She is unlikely to become HR before retirement. I pay a lot of extra into my pension, both the DB scheme and a SIPP, and am skirting close to the point where the lifetime allowance would make me paying any more not viable. We currently have a flexible mortgage (135k) on a very low interest rate for term (0.49%) which needs to be paid off in 6 years or so, when my wife will be 58. We save for this in a couple of Cash ISAs, with a spreadsheet worked out to ensure that there will be enough to cover it, but clearly making a very poor level of interest.

My question therefore is, whether there is any good reason why we shouldnt instead move some or all of the money in the ISAs to a SIPP in my wife's name, and pay all future savings for the mortgage there? I am assuming that it is pretty certain that she will be able to access the fund from age 55 (in 3 years), and that 25% of this would be tax free, the rest subject to income tax at her marginal rate. The next question would be whether to 'risk' a stocks and shares sipp or keep it as cash, but that is a side issue. I know one issue is that the money is more tied up for a few years, but we could keep some aside in the ISAs. Is there anything obviously flawed with this as an idea?

Many thanks for your thoughts :-)

MoneySavingUser

Does your wife have enough relevant earnings for you to do this?

i.e. if her earnings per year are £10,000 she can pay in £8,000 gross/year max. etc.

Does she have a workplace pension which offers salary sacrifice? This might be a bit better to save NICs aswell.

Once she accesses her SIPP flexibly she will have an annual allowance each year of £4,000 probably if the amount changes this April.

saucer

Thanks
She has. She is grossing about 28k so that won't be a problem. What I have realised though is that, having a BTL as well in her name, she would be pushed into HR tax when drawing the money down, even if we did it over the 3 years between her hitting 55 and the mortgage being due. That would seem to imply that we/she would effectively end up paying HR tax at that poing on most of the money, having only beneftted from LR tax relief on the way into the SIPP ( as well as the first 25% tax free). Am I being stupid here?