SIPP Question

sanfairyanne

I’m hoping to properly understand the SIPP process when I retire. Please let me know if I am correct here:

As I understand things currently if I retired today at 65 I could earn £12,500 before I was due to pay income tax.
The current state pension is £168.60 which works out as £8767.20 per year. Once you’ve received this you are left with £3732.80. So if your SIPP paid out £71.78 per week this would take you right up to the £12,500 bracket. Anything over this and you pay tax at 20% (up to £50,000) up to a max of 45% on figures over £150,000.

Also, if for example you had a SIPP pot of £100,000 you could (upon turning 55) take out £25,000 in tax free cash. Leaving £75,000 that would be eligible for tax. Assuming you had no other income as a 55 year old you could take out £12,500 per year tax free from your SIPP.

Many thanks and i hope I’m not being too confusing here.

BoxerfanUK

That is correct. :beer:

sanfairyanne

Thanks, it’s rare that I understand something correctly.

Dazed_and_confused

With a few caveats.

Have you actually checked your State Pension forecast, or more importantly your current entitlement and likely future contributions? The theory is correct but your own State Pension may well be more or less than £168.60.

Anything over this and you pay tax at 20% (up to £50,000)

May be just the way you've put this but it's tax at 20% upto £37,500 (plus the Personal Allowance = £50,000).

And that is dependent where you are resident for tax purposes. If Scottish resident it is currently significantly less than £50k.

And the £12,500 Personal Allowance assumes you have haven't applied for Marriage Allowance.

sanfairyanne

Thanks Dazed and Confused.
I haven’t checked my state pension forecast. Currently I have 12 years left to pay before I have paid in 35 years. Clearly one would hope that when I retire the state pension would be considerably more. Thanks for clarifying everything.

Audaxer

sanfairyanne wrote: »

Thanks Dazed and Confused.
I haven’t checked my state pension forecast. Currently I have 12 years left to pay before I have paid in 35 years. Clearly one would hope that when I retire the state pension would be considerably more. Thanks for clarifying everything.

Not everyone who has paid in for 35 years gets the full state pension. I am retired with over 40 years of NI contributions, but still have another 5 years to make voluntary contributions if I want to get the full state pension. So it is worth checking your forecast.

sanfairyanne

Audaxer, I’m out of the UK at present and for a number of reasons cannot check my forecast. Can you please explain why you need to pay more? I thought if you had 35 full years you would get the full state pension.
You’ve got me a bit worried now.

Dazed_and_confused

I thought if you had 35 full years you would get the full state pension

You've misunderstood how the new State Pension works. The 35 years is only for youngsters, those already in the system like yourself are under transitional rules where 35 years is irrelevant.

You may already have more than £168.60. in which case you cannot increase it any more (other than any inflation increases).

But most likely you have a lower amount and need some additional years National Insurance contributions to reach £168.60. This may be 12 years, more years or fewer years.

You can check your forecast on gov.uk but it's important you ignore the headline figure (most likely £168.60) and look at what you have earned to date. If this is less than £168.60 it should also say how many more years contributions you need to get to £168.60.

https://www.gov.uk/new-state-pension/how-its-calculated

sanfairyanne

Dazed and Confused

I may be misunderstanding the way the state pension works but I’m only going by what I was told when spending literally hours on the phone talking to those retards at HMRC. I probably shouldn’t use words like that but I had a nightmare sorting out my troubles with them, I thought I had it under control.
I’m currently trying to access the Gateway website but as I’m in a third world hell hole country the wifi is next to useless - either that or the app is useless! Probably a mix of both. Darned thing keeps giving me access codes yet input of correct code keeps giving ‘false code message’.
I’ll keep trying.

I just tried everything with the stupid app including giving passport details to refresh etc. No joy. Will try again tomorrow.
Thanks for the link.

Dazed_and_confused

To be honest I'm not sure why you would need to be on the phone for ages regarding your State Pension when it isn't due to be paid for at least 12 years

And to save you the trouble of asking later, if your State Pension forecast refers to a COPE figure no you don't deduct that from your forecast. If your forecast is say something like this,

£168.60 is your forecast this is the most you can get. Providing you have another 8 years contributions.

Your entitlement accrued to 5th April 2019 is £132.50.

Your COPE amount is £42

Then you are entitled to £132.50. Plus future inflation increases. Plus any additional pension earned by future contributions.

TriathNanEilean

sanfairyanne wrote: »

I’m currently trying to access the Gateway website but as I’m in a third world hell hole country the wifi is next to useless - either that or the app is useless! Probably a mix of both.

A pain. If you have to give up, you can print a form BR19 from gov.uk, fill it in and post it to them:


https://www.gov.uk/government/publications/application-for-a-state-pension-statement