Already have DB pension,should i open a SIPP?

C_Mababejive

I have a DB pension into which i have been paying for about 35 years. The current CETV is approx 670k. I pay 6% contribution and employer pays in.

With my annual salary, savings interest and divi income, i am just inside the higher rate tax band though by how far, im not sure.

1) Can anyone recommend a decent tax calc which allows input of all the above elements ?

Should i open a SIPP and either put new money in it or maybe bed and sipp existing holdings?

Obviously id like to minimise the amount of tax i have to pay.

I was pondering a DB > Sipp transfer .

Some friends are considering DB to pension co transfers via IFAs and are being quoted maybe 6k for "advice/services" plus 1% IFA AMC ,,i presume the pension co also charges an AMC? Seems like a lot going out in fees ?

I

all advice appreciated

atush

What age do you want to retire? At Scheme age or before?

As a pure tax saver, putting some into Sipp (be it new money or bed and sipp) is a good idea.

It becomes a Great idea if you are of sound health, and expect t live long to usee a Sipp to retire before scheme age rather than reducing your DB pension.

ermine

C_Mababejive wrote: »

1) Can anyone recommend a decent tax calc which allows input of all the above elements ?

I used the £30 version of taxcalc plus the £6 extra dividend database add-on when I did this for my mother - it absolutely did my head in to even guess otherwise. Also meant I could print out the result, get her to sign and then send it off for SA, which I considered as £36 well spent. Damn Osborne and his blasted changes to dividend taxation to bring an 80 year old getting well below the personal allowance into Self Assessment !!!!!!

As atush says, a SIPP is a great way to fund yourself retiring before Scheme pension age - run the SIPP down to zero between your desired early retirement age and you DB pension retirement age and you avoid taking the actuarial reduction.

C_Mababejive

My DB scheme says i can retire at 55 ,so not so far away,,but having said that, im not the jumping at the door to retire,,my main aim at the moment is to pay less tax,,

By the way can someone who is already retired open a sipp and get free tax relief money every year or has that loophole been closed?

AnotherJoe

Yes, to a maximum of 2,880 paid in.

ermine

C_Mababejive wrote: »

My DB scheme says i can retire at 55 ,so not so far away,

Anyone can retire at 55 at the moment, it is funding yourself that is the challenge. You need to find out how much your DB pension will be actuarially reduced for the fact they are paying it out for longer if you start to draw it at 55. Most are predicated on a retiree at NRA living an average of 20 years so the actuarial reduction is roughly 5% p.a. Retire at 55 on a scheme with a NRA of 65 and you're looking at a 50% reduction...

That is the reason for using a SIPP to front-run your DB pension. Defer it, rather than draw early. It will be lower because you have accrued fewer years, but not then the extra hit of actuarial reduction.

By the way can someone who is already retired open a sipp and get free tax relief money every year or has that loophole been closed?

Yes. I am doing just that and intend to continue. Note the maximum you can put into a pension is £3600 p.a. grossed up (£2880 in) or your annual earnings (up to about 40k). I don't have any earnings since earnings are counted as selling your time for money. The maximum tax relief on that amount is £720 (if pension+earnings are less than the personal allowance), but it's free money, rude not to. Even if you are a BR tax payer as a pensioner, the 25% tax-free part gives you a win of £180 for a modicum of money shuffling.

In addition the loophole has partially been closed inasmuch as even if you are earning, if you have accessed a DC pension flexibly (ie taken one penny more than the tax-free pension commencement lump sum) the amount you can put into a pension is limited to ~4k p.a.

That doesn't clobber the early retiree as such, but it can hit the sort of people that don't really retire but part retire to earn part-time and draw their (DC) pension

C_Mababejive

#6 ,Thanks, i guess sipp charges can also nibble at it a bit more thus potentially negating the value if thats all you open the sipp for?

ermine

C_Mababejive wrote: »

#6 ,Thanks, i guess sipp charges can also nibble at it a bit more thus potentially negating the value if thats all you open the sipp for?

Provided you keep the account open longer than a year, Hargreaves Lansdown charge you now't for cash and admin, and £25 + VAT to close the account. I don't intend to close mine, just run the cycle each year. There's no point in investing in anything other than cash if you are going for the putting in just before TY end, take tax bung and extract, taking out about a month later and rinse, repeat each year. You have an 'investment horizon' of about two months, cash is king for that. HL aren't usually the cheapest show in town but you can't really argue with those costs Probably worth asking them what the minimum amount you have to keep in to avoid closing the SIPP - I'm still using mine as a SIPP but will run it into the ground in the next couple of years and just use it for that purpsoe. Hammond willing, of course...