Opening a SIPP when already retired....???

VXman

Sorry - maybe a stupid question. Please humor me. As I have been enrolled in the Teachers Pension all my life I have not really looked into SIPP's and don't know a lot about them and how they work.

I'm just trying to decide on a tax efficient way of investing/saving money when retired other than S&S/cash ISA.

Is it possible to open a SIPP after retirement? If it is can they be flexible in terms of when and how to withdraw/access the money put in?

jamesd

Yes to all questions as long as you're 55 or older.

Paul_Herring

Is it possible to open a SIPP after retirement?

Yes, up until you're 75.

I'm just trying to decide on a tax efficient way of investing/saving money when retired other than S&S/cash ISA.

If you have no earned income (pensions don't count,) you're going to be restricted to £2,880 net (£3,600 gross) per year in contributions. (Edit - numbers corrected.)

 If it is can they be flexible in terms of when and how to withdraw/access the money put in?

They can be, yes.

Albermarle

If you have no earned income (pensions don't count,) you're going to be restricted to £2,800 net (£3,000 gross) per year in contributions.

Small typo I think . It is £3,600 gross. You add £2880 and £720 tax relief is added.

If you have some relevant earnings ( such as a part time job) you could add more depending on the amount earned,

Note that any pension income from any source ( including state pension ) is taxable , after the tax free part is taken .

If you have to pay tax on earnings from this SIPP then you in fact only gain £180 and not £720.

Paul_Herring

Ugh - not enough coffee yet...

macman

If you are a non-taxpayer, you can simply pay in the net £2.88K annually, withdraw the gross £3.6K once the tax relief is added, and recycle it every year until you are 75. 

VXman

Albermarle said:

If you have no earned income (pensions don't count,) you're going to be restricted to £2,800 net (£3,000 gross) per year in contributions.

Small typo I think . It is £3,600 gross. You add £2880 and £720 tax relief is added.

If you have some relevant earnings ( such as a part time job) you could add more depending on the amount earned,

Note that any pension income from any source ( including state pension ) is taxable , after the tax free part is taken .

If you have to pay tax on earnings from this SIPP then you in fact only gain £180 and not £720.

Ah...so what is the benefit of doing it through a SIPP over a S &S ISA given that you won’t be taxed on taking money from an ISA ? 

Paul_Herring

Ah...so what is the benefit of doing it through a SIPP over a S &S ISA given that you won’t be taxed on taking money from an ISA ? 

Postulation: You have £80 in your bank account. You decide to do 'stuff' with it.

SIPP -> £80 in, uplifted by (tax relief) £20 -> £100 there. Upon withdrawal, £25 tax free + £75 @ 0% or 20% income tax, total -> £100/£85 out
ISA -> £80 in, £80 out.

VXman

Paul_Herring said:

Ah...so what is the benefit of doing it through a SIPP over a S &S ISA given that you won’t be taxed on taking money from an ISA ? 

Postulation: You have £80 in your bank account. You decide to do 'stuff' with it.

SIPP -> £80 in, uplifted by (tax relief) £20 -> £100 there. Upon withdrawal, £25 tax free + £75 @ 0% or 20% income tax, total -> £100/£85 out
ISA -> £80 in, £80 out.

So, £5. Thanks. That’s what I wanted. Just struggled with the maths.

Audaxer

VXman said:

Paul_Herring said:

Ah...so what is the benefit of doing it through a SIPP over a S &S ISA given that you won’t be taxed on taking money from an ISA ? 

Postulation: You have £80 in your bank account. You decide to do 'stuff' with it.

SIPP -> £80 in, uplifted by (tax relief) £20 -> £100 there. Upon withdrawal, £25 tax free + £75 @ 0% or 20% income tax, total -> £100/£85 out
ISA -> £80 in, £80 out.

So, £5. Thanks. That’s what I wanted. Just struggled with the maths.

If you have only pension income you can contribute up to £2,880 per year and get tax relief of £720 added by HMRC each year. If you were for example to leave in cash and draw out the full amount each year, you would profit by the whole £720 if your other pension income left you well under your personal tax allowance, but if your pension income was subject to basic rate tax, you could still net £180 per year after payment of £540 tax. There is a very long thread on this subject on this forum that it is worth having a look at.

Albermarle

VXman said:

Paul_Herring said:

Ah...so what is the benefit of doing it through a SIPP over a S &S ISA given that you won’t be taxed on taking money from an ISA ? 

Postulation: You have £80 in your bank account. You decide to do 'stuff' with it.

SIPP -> £80 in, uplifted by (tax relief) £20 -> £100 there. Upon withdrawal, £25 tax free + £75 @ 0% or 20% income tax, total -> £100/£85 out
ISA -> £80 in, £80 out.

So, £5. Thanks. That’s what I wanted. Just struggled with the maths.

£5 = minimum benefit of 6.25% ( 5/80) of pension over ISA . This still applies for larger sums as well.