Pension contribution before 55th birthday

animox

Hi
I'm 55 in June and plan to retire at 65.

I'm thinking would it make sense to put 15K into my sipp (currently 42K), so topping it up to 60K, then taking my 25% 15K at 55?

So technically gaining 3K, I realise I will have new limits on contributions going forward but I'm happy with that.

any thoughts greatly appreciated

Mnd

No change to limits if you only take the tax free part, just watch out for recycling rules

p00hsticks

animox wrote: »

Hi
So technically gaining 3K, I realise I will have new limits on contributions going forward but I'm happy with that.

I'm no expert, but I think future contributions are only limited if and when you take more than the 25% TFLS

DT2001

More information would be helpful, such as
why £15k?
are your total contributions for the tax year below your earnings?
why take the 25% now? Why not get some growth and get more at 65?

Your calculation assumes 20% relief on £15k however the £15k is the net figure so need to divide by 80 and multiply by 100 to get the gross figure, £18750. So your pot has slightly more.
However unless you pay no tax on the residual pot your ‘technical’ gain is lower
£42k gives £10.5 tax free plus £31.5 @ 20% = 25.2 total £35700
£60.875 gives £15218 tax free plus £45657 @ 20% = 36525 total £51743
Difference £16043
The £3k in your original question includes £2k already ‘in’ your £42k pot.

animox

Thanks DT2001,
I have 15000 available for while but need it back later in the year.
Total contributions for any year are well below.

I think I get your calculations, but I had assumed that my small pot would be drawn down at such a small rate after I retire that wouldn't attract tax .

i.e state pension, other earning and drawdown sums would be below tax free limits

thanks again

westv

Mnd wrote: »

No change to limits if you only take the tax free part, just watch out for recycling rules

There is no recycling involved with what the OP intends to do.

DT2001

animox wrote: »

Thanks DT2001,
I have 15000 available for while but need it back later in the year.
Total contributions for any year are well below.

I think I get your calculations, but I had assumed that my small pot would be drawn down at such a small rate after I retire that wouldn't attract tax .

i.e state pension, other earning and drawdown sums would be below tax free limits

thanks again

If draw down is tax free, over time, you’ll gain all of the tax relief after costs. Looks like a very sensible plan.