Cash ISA to SIPP?

pantaiema

Brynsam wrote: »

You can't 'maximise employer contribution' in a DB scheme - what the employer contributes is determined at each triennial valuation. As for topping up your AVC - do you mean you top it up BY (not OF) £4,500 a year?

Given your earnings of £55,000 you appear to have scope to pay more than £2,800 a year to a SIPP without having Annual Allowance issues. Why do you think you are limited to £2,800?

What I mean here is that in my workplace pension, I have contributed maximum where my employers also contribute. So even I contribute more my employer cannot contribute anymore.

For that reason I do AVC of £4,500 pa. What is BY (OF) could you elaborate more?

In post #2 and 3 it said I could only put my cash ISA to SIPP maximum of £2880?

robber2

You have misunderstood the SIPP contribution rules.
Read this from #2 again slowly;

"you can only pay in what you earn or £3600, whichever is higher (subject to an annual limit - avoiding caveats for simplicity at this stage ). What earnings do you have? (probably none if you are retired). If none, then you can only pay £3600 into a pension."

rob

pantaiema

robber2 wrote: »

You have misunderstood the SIPP contribution rules.
Read this from #2 again slowly;

"you can only pay in what you earn or £3600, whichever is higher (subject to an annual limit - avoiding caveats for simplicity at this stage ). What earnings do you have? (probably none if you are retired). If none, then you can only pay £3600 into a pension."

rob

Thanks. I see it now.
I do not have SIPP at the moment. I am earning £55k
Does it mean I could open a SIPP and then transfer all my cash ISA to SIPP. my cash ISA is currently about 40k.

I currently have enough cash in my higher interest current account. Also I am still working. So I do not anticipate to use this cash for a foreseeable future.

Putting it to SIIP I understand it will automatically get topped up by 20% from HMRC?

Apart from access to cash is there any other disadvantages of moving a cash ISA into SIIP?

Thanks

Dazed_and_confused

If the £55k is your taxable salary (your P60 pay amount) then you are likely to be able to claim some additional tax relief from HMRC on any SIPP contributions.

These pension payments increase the amount of 20% tax you pay which in turn reduces the 40% tax charged.

xylophone

OP, are you saying that your "relevant earnings" are £55,000 per annum?

https://www.rossmartin.co.uk/private-client-a-estate-planning/income-losses-claims-reliefs/1034-relevant-earnings-for-pensions-purposes

See https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/pensions-and-tax/tax-relief-and-contributions

How much are you currently contributing to your workplace pension (gross)?

What is the employer contributing?

What kind of scheme is the workplace scheme? (Defined benefit/Defined Contribution).

Is the "AVC" of £4500 a year gross or net?

Have you obtained a new state pension statement?

https://www.gov.uk/check-state-pension

Have you signed up for a personal tax account?

https://www.gov.uk/personal-tax-account

ukdw

pantaiema wrote: »

Yes. I am working at the moment and I am earning £55,000. I am still want to work until my NPA 67.

I have A DB pension in the workplace pension and have maximised employer contribution. I have also top up my AVC of £4500 a year.

I would be tempted to concentrate on reducing your top tax rate from 40% to 20% rather than tying up the whole £40k into a SIPP now. Because any withdrawals from the SIPP above the 25% tax free lump sum will invoke the Money Purchase Annual Allowance (MPAA) £4k contribution limit.

This tax year you will still be paying 40% on £5.5k of your £55k after you take off the £4.5k AVC. So I would contribute £5.5k gross to a SIPP in the next few days to get into this years tax year. To contribute £5.5k gross that would cost you £4.4k out of your ISA.

You could then after a few months get £1,375 of this back via a 25% tax free withdrawal and a further 25% back as 40% tax relief. So the total cost to you would be about £1,650. I would then leave the remaining £4,125 in your SIPP until after you stop working at 67 to avoid invoking the MPAA.

If your AVCs are being done via salary sacrifice then due to the additional NI savings I would consider boosting your AVCs up to about £8700 to drop your £55k salary down to below next years £46,300 40% rate band. The extra £3300 AVCs would only actually cost you about £1900 due to the 40% tax and 2% NI savings - and this could be funded out of your ISA if you are short of cash.

I would then leave the rest of the money in your ISA until a couple of years before you decide to stop working due to the greater flexibility this would give you.