Am I doing this right?

Rodders2409

Hello All,

Having recently become interested in my own financial future, and thinking I know a little bit more than I did before, can anyone advise if I'm doing the right thing with a SIPP for my better half...thanks.

She non working and has no other income.
In Feb 2018 I set up a H&L SIPP in her name and placed £2880 as a lump sum, about 6 weeks later (I think) the GOV added £720 automatically.

I (she) was going to withdraw the full amount and pass it to me, to put into my pension fund which is set up as a Sal Sac and gain the 20%.

At the same time place another £2880 into the (or a different?) H&L SIPP....and repeat until we're too tired!

Is this OK or am I missing something?

atush

the only thing is charges. Some sipps will charge more if you take everything out. but wont if you leavr 100 quid behind so it is open andready for next year.

Rodders2409

Thanks atush,

Good to know I'm on the right track.

We'll leave a few quid in the H&L SIPP i think, and then just top it up every year.

I've not really ever understood if it's better for her to withdraw the money and start another SIPP elsewhere, or invest in an ISA etc...or if it's better for me to take the monies and put into my Pension?

What's the difference in keeping the monies in the first SIPP and add £2880 to it every year rather than move it out?...is it because there are better investments to put the monies into?

dunstonh

Probably best not to use a SIPP but a stakeholder pension when doing this sort of thing. Stakeholders cant charge for drawing the money.

Rodders2409

thanks dunston,

Do you mean that setting up a SIPP with H&L as a vehicle to get the GOV's input is better managed through a stakeholder pension?...or do you mean it would be better for us to set up a stakeholder pension for her to transfer he monies into every year and leave the H&L SIPP as the moneymaker?

dunstonh

Do you mean that setting up a SIPP with H&L as a vehicle to get the GOV's input is better managed through a stakeholder pension?.

Stakeholder pensions will have two main advantages.

1 - they prefund the tax free cash. No need to wait 6 weeks.
2 - no initial charge. No exit charge. You can use small pots rule or UFPLS quickly and without cost other than the AMC just for the period you are in it.

Using a SIPP with exit charges is more costly.

Rodders2409

Is this how most people manage the process...through a stakeholder pension?

Because my better half has a smallish Prudential pension (approx £27,000) and we were looking to take it out as it's been dormant for decades. It will allow us to transfer to something else, so is it worth doing this at the same time?

Rodders2409

Hi....any takers...all help will be loudly applauded by me.. ;-)

Judwin

1) How old is your wife? She must be at least 55 before she can withdraw the £2880/3600 and give it to you. Same for the £27K with the Pru.


2) How many years NI does your wife have towards her state pension? Less than 10 and she won't get one. If she has 35 then she should be able to get the full new State Pension. The Maximum SP is about £8.5K p/a.


3) Your wife has/will have a tax free income amount of about £11.5K p/a in retirement. Assuming she will qualify for the full SP, then she will have about £3K of tax free allowance remaining. To draw £3K from a person pension, you probably need a pot approaching £100K. She currently has a pot of £27K + £3.6K, so a bit more than £30K.


From what you've written I'd be more inclined to be leaving your wifes pensions alone (in her name), and keep paying in the 2880/3600 to boost her income in retirement.

Triumph13

If you've moved your rental income to her name then the key priority is getting those pension funds out tax efficiently. That means withdrawing enough from her pensions, old and new, to fully use her personal allowance for the years until her SP and any other pensions kick in.

xylophone

Your wife ( you are now married as you previously indicated?) is now around 58 and does not have any relevant earnings?

Have you both obtained State Pension Statements?

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

You mentioned before that your OH has been diagnosed with a progressive illness - presumably you have looked into any benefits to which she may be entitled?

It would be possible for Pru pension to be transferred into your wife's SIPP.

HL do not charge for holding cash or for withdrawals.

However, they do make a high charge for closing the SIPP within the first year (although it does not appear that you are looking to do this).

They require a certain amount of cash to be left in the SIPP to keep it open.

Once a SIPP is crystallised she simply needs to advise them in the following tax year that she wishes to make a fresh contribution - it is then possible to take another 25% PCLS with the balance taxed as income in the year of receipt.

If your wife transferred the Pru pension to the SIPP, she would be able to draw 25% of the whole tax free and then draw as much of the remainder as kept her tax free (after taking into account the rental income) for the current year.

She could contribute £2880 in the new tax year to the SIPP.

She could take income from the crystallised SIPP and from the "new " SIPP after taking the fresh PCLS.

Hargreaves Lansdown are helpful on the phone and would explain the various options.