Sipp or Isa

thebullsback

I am male 60 and I have Retired and Returned to work Full time in my previous job with the NHS.
I intend to Retire fully at 62.
My salary is £20500pa and I have a NHS pension of £5925 pa.
Due to also receiving a Pension Lump sum courtesy of the NHS I find I have £10000 to Invest for the future .
I'm thinking Sipp......Is this a good Idea or could my money work better for me? I cant see me needing the £10000 for the next 5 year.

BoGoF

£10,000 into a SIPP would immediately become £12,500 with tax relief. A no brainer and you could invest in the similar funds as you would a S & S ISA.

Albermarle

Usually the only negative thing about investing in a pension compared to a SIPP , is that you can not access the money until your 55. In your case this is not relevant so as said SIPP is the obvious choice due to the added tax relief.
Of course in either you will have to choose your investments carefully.

crv1963

thebullsback wrote: »

I am male 60 and I have Retired and Returned to work Full time in my previous job with the NHS.
I intend to Retire fully at 62.
My salary is £20500pa and I have a NHS pension of £5925 pa.
Due to also receiving a Pension Lump sum courtesy of the NHS I find I have £10000 to Invest for the future .
I'm thinking Sipp......Is this a good Idea or could my money work better for me? I cant see me needing the £10000 for the next 5 year.

I don't want to rain on your parade but is retiring and returning full time to the same job could exceed your earnings allowance. NHS Pension and NHS earnings combined after claiming NHS Pension cannot exceed your final or finishing salary or the NHS will claim the pension payments back.

The alternative is to return to the role as an agency worker- if your Trust allows this. Be careful not to fall foul of the rules.

thebullsback

There or many members of Staff in my Trust who have retired and Returned to work just as I am doing and it has NO effect on either there salary or NHS pension.

jamesd

Personal pension seems like a good idea, possibly the SIPP subtype. Makes you 6.25% in tax gain at basic rate on the way in and out. Looks as though between retiring and state pension claiming you'll have personal allowance available and do better than that.

You're allowed to pay gross pension contributions up to your salary each year, so £20500 this year. Not a big deal to undo some if your pay is less than expected. It'd be a good use for savings.

You're allowed to pay money into a pension and take out the tax free lump sum immediately. So you could pay in gross £20500 and take out £5125 as a tax free lump sum, leaving £15375 untouched in a drawdown account until you retire.

There are two reasons not to touch the taxable 75% until retiring:

1. you will have the MPAA cap of £4000 a year of pension contributions a year imposed
2. you might be able to use your income tax personal allowance to get the money out without tax to pay if you wait until you're no longer working

There are rules to limit the recycling of pension tax free lump sums into new pension contributions. One lets you take up to £7500 of tax free lump sum per rolling 12 month period, not tax year. The 10000 should not count against this but if you pay money in then take out the tax free lump sum you shouldn't go over the £7500 for those lump sums.

Until age 75 you're allowed to pay up to £3600 gross into a pension in a year when not working or if pay is less than this.