SIPP Withdrawl

jerrysimon

We have been building a cash SIPP for my wife during the last 18 months of her work mainly to get 20% cash back as she was below the tax threshhold. We did not invest it as planned to draw it out after 12 months.

We now have 12K in it. She had stopped working but found other very part time work but only earns £2880 per year.

She was 55 last October. She has a small local government pension she can draw at 60 of around 3K/year with a lump sum of 3K. I checked her SP and she is three years off max and up to £150/week but will not get that until she is 67. We may top it up with the 3 three years going forward as she wont be paying tax.

The SIPP will clear our mortgage completely and not sure if to use it for that or not. The mortgage costs us £50/month as I think we pay around 3%. I assume we could take out £25% lump sum of the SIPP and the rest of it without paying tax providing we dont go her tax allowance with her part time work.

Closing the SIPP account has a small charge of £25 but we had thought as a non tax payer we should continue to put in the £3600 gross/year for her getting back another £720/year with tax releif.

A few questions :

1. Should we close the account or keep it open to top it up each year by £3600.
2. Open a new account each year.
3. I need to speak to HL as we are not sure how you do this.

I am already retired and have a DB pension and my SP will be worth £122 in ten years time. Probably no point in me adding years to it going forward as I will pay tax.

Our net income is £1500/month but that will jump to £2700/month when her DB pension and our SPs kick in!

We also have 60K of savings. Also been thinking of ways to bring the £2700/month foward. We could transfer out her 3K DB pension as I have had quotes of around 60K which we could then draw over the next 10 years tax free but of course would need to invest it as it wont go up with inflation.

Jerry

xylophone

I am already retired and have a DB pension and my SP will be worth £122 in ten years time.

£122 was your NSP "starting amount"?

£150 was your wife's "starting amount"?

Have you/she considered making voluntary contributions to bring you up to the full amount?

Although your wife is still working, she is not earning enough for NI credits.



https://www.royallondon.com/Global/documents/GoodWithYourMoney/TOPPING-UP-YOUR-STATE-PENSION-GUIDE.pdf

If she is continuing to contribute to the SIPP ( and why not?), she does not need to close it - she can crystallise the existing and take 25% tax free with the balance taxed as income in the year of receipt - she need only pay any tax if the amount plus earnings takes her above her PA.

jerrysimon

Sorry updated post. They are our starting points checked yesterday and we had planned making voluntary contributions for her yes but probably not me as I would pay tax on my SP. As you say she now does not earn enough for NI credits. I have read that guide before it is excellent!

I need to check with HL as I dont understand crystallisation. We would draw it over two years if need be, to ensure she does not pay tax.

Jerry

jamesperrett

I can't quite work out why it isn't a good idea for you to pay voluntary NIC's. Yes, you'll pay basic rate tax but they will still pay for themselves after about 4 years of drawing the state pension as I'm fairly sure that the state pension won't put you into the higher rate band.

Congratulations on the recent retirement by the way!

jerrysimon

jamesperrett wrote: »

Congratulations on the recent retirement by the way!

Thanks James it was a huge decision but now its done I am gald I made it.

I may buy added years for my SP but at £720 for each year, my wife's three years will be a priority given she will not pay tax on her small DB pension and SP which will still be below the threshold.

Jerry

Thrugelmir

jerrysimon wrote: »

Our net income is £1500/month but that will jump to £2700/month when her DB pension and our SPs kick in!

A lot can happen in 10 plus years.

jerrysimon

Indeed. We may need it then I guess.

Jerry