Starting a pension just to make £720pa

Chris.R

I am technically self-employed though I've just about stopped, let's say earning £1kpa.

I understand that if I start a pension I can pay £2880 pa into it, and HMGov make that up to £3600.
I can then withdraw that amount each year (after one year??).
It wouldn't be enough to take me into paying tax.


Is it as simple as starting a SIPP with someone cheap like HL and setting up a standing order?
I assume I could take it (or most of it, leaving enough to keep the "account" open) whenever I wanted, - just being sure the withdrawal didn't take me into paying tax.
I can on current regs do this every year until I'm 75.
From 62, that would be about £10k for not doing very much.


What am I missing?? :think::think:

BoGoF

The fact that your state pension is also taxable?

That having a private pension may affect means tested benefits?

Chris.R

Thanks. No state pension for a few years yet, & not on benefits.

Mnd

That's right, you don't even have to wait a year. The tax relief will be added in approximately 6 weeks, then you can take it (HL require £1000 left in to keep the account open, and I seem to remember that they will charge if you withdraw all in the first year, but that bit may be wrong!)

BoGoF

So what age are you now and state pension age? Any other pension provision?

Have you got a state pension forecast?

Chris.R

@Mnd, thanks, I'll check.
@BoGoF, errm, 61, 66 and yes but I have no particular plan to draw from it.


(It's OK, I need to lose weight ... )


And yes - I'll get a full state pension.

Mnd

If you phone HL they are very helpful

AnotherJoe

Chris.R wrote: »

I am technically self-employed though I've just about stopped, let's say earning £1kpa.

I understand that if I start a pension I can pay £2880 pa into it, and HMGov make that up to £3600.
I can then withdraw that amount each year (after one year??).
It wouldn't be enough to take me into paying tax.


Is it as simple as starting a SIPP with someone cheap like HL and setting up a standing order?
I assume I could take it (or most of it, leaving enough to keep the "account" open) whenever I wanted, - just being sure the withdrawal didn't take me into paying tax.
I can on current regs do this every year until I'm 75.
From 62, that would be about £10k for not doing very much.


What am I missing?? :think::think:

Whatever pension you dont take to enable you to get the full tax free allowance.

Sibbers123

Once you start to receive your state pension, any excess over and above your personal allowance will be taxed at 20%.

You won't receive the full £720. There will undoubtedly be fees when you put the money in, annual fees and fees when you take the money out.

You will be caught by the money purchase annual allowance once you take out your first 'lump' which will severely impact you if you wish to make more than £4,000 gross contributions in the future.

There is probably some money to be made, but it certainly won't be the £720 you suggest.

You will have to read the individuals pension provider T&Cs I suspect as well.

kidmugsy

Sibbers123 wrote: »

Once you start to receive your state pension, any excess over and above your personal allowance will be taxed at 20%.

For 19/20 the PA will be £12,500 and the new-style state pension will be (I assume) a bit less than £9k. There's a lovely gap for £2,700 to drop into.

Sibbers123 wrote: »

You won't receive the full £720. There will undoubtedly be fees when you put the money in, annual fees and fees when you take the money out.

No such fees if you pick the right provider, keep the money as cash, and honour the T&Cs.

Sibbers123 wrote: »

You will be caught by the money purchase annual allowance once you take out your first 'lump' which will severely impact you if you wish to make more than £4,000 gross contributions in the future.

And not if you don't.

Sibbers123 wrote: »

There is probably some money to be made, but it certainly won't be the £720 you suggest.

Plenty of other people have made the £720; why must poor old Chris.R be denied?

Chris.R

The fees at HL look pretty small, unless you take the sum out before a year (£295 + vat).
If your investment makes a percent or two those should be +/- covered. I'll give them a ring. I didn't see "withdrawal fees" as such.



Obviously it's 3k6 of taxable income but at 20% on the full amount that's £180, less fees.(25% of 25% of 2880.) . £180 pa on 2880 is 6.25% - show me another?



State P is 8k5 so for someone earning nuffink taxable, there's still about 3k of headroom.