Paying mortgage with SIPP

ElephantBoy57 · 19 October 2020 at 9:55PM

I am 59 and I still have around seven years left on my mortgage.

Maybe around £30k left, I have shares to the value of £7k but no cash savings.

Can I decide to open a SIPP and put some of the funds from my salary in, that salary would then be used to pay my mortgage.

I would then benefit from tax relief, or does the money need to stay inside the SIPP for a minimum amount of time?

But in principle, I could do that? It just sounds wrong.

Marcon · 19 October 2020 at 10:38PM

No minimum investment time in the SIPP, but be aware of four things:

only 25% of the amount you withdraw is tax free. The rest is taxed at your marginal (highest) rate
if you 'flexibly access' even 1p more than the 25% tax free, then something called the Money Purchase Annual Allowance kicks in and any future contributions (yours + tax relief + any employer contribution) will be limited to £4K a year
you can avoid the MPAA if you cash in a SIPP with a value of under £10K, known as a 'small pot'. 25% will be tax free, the rest taxable, but taking the lot won't trigger the MPAA. You can do this up to 3 times with a personal pension
depending on the amounts involved (what sort of figure did you have in mind?), beware falling foul of pension recycling rules.

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