SIPP While Not Working

barnstar2077

Just double checking my facts for a relative.

My relative isn't working at the moment and is in her late fifties. She is married and they are living on his income and presumably some savings. They have not started to withdraw from any pensions yet.

I told her recently that she could deposit £2,880 a year into a SIPP and have the government top it up to £3600. My thought being that she could drop the money into something boring that wouldn't be very volatile, like Vanguard's Lifestrategy 20 fund etc.

She could do this for a few years, then before she starts taking her real pensions she could withdraw the lot in one or two years without paying any tax.

The only complication being that she will probably have to fill in a tax form when she claims the money so they don't tax her incorrectly.

Is this a reasonable plan? Am I missing anything obvious?

Dazed_and_confused

The only complication being that she will probably have to fill in a tax form when she claims the money so they don't tax her incorrectly.

Currently there is no form you can complete to prevent tax being deducted if the first payment is more than £1,042.

Tax deductions can be avoided by taking £1,042 (or less) as the first payment. Once the first payment has been made HMRC will send the pension company a tax code to be used thereafter.

It may be a reasonable plan but it's impossible to know for certain without knowledge of her other taxable income in any tax year she takes taxable money out of the SIPP.

She may be able to take it all with no tax to pay or she could have to pay tax on all the taxable element.

Thrugelmir

barnstar2077 wrote: »

The only complication being that she will probably have to fill in a tax form when she claims the money so they don't tax her incorrectly.

Nothing complex. Everything is online these days.