Is it true? What is a large SIPP?

Barry_Bear

In the news an article saying that for those with a large personal SIPP it's usually better to take income gradually to reduce income tax. But taking it out as a lump sum may be OK for a smaller SIPP.

Is that right? What counts as a large SIPP? It offers no guidence.

 

NottinghamKnight

Doesn't make much sense though you could put interpretation on those limited facts, just poor journalism filling space probably.

HappyHarry

There is no formal definition of a large or small SIPP 

Aside from the 25% tax free cash, any other monies you take from a SIPP are taxed as income.

E.g. if you had £400,000 in a SIPP, and withdrew it all in one go, then you would pay income tax on £300,000. That would be a lot of tax.

Whether that SIPP is large or small, and how large and small are defined is irrelevant. The optimum withdrawal strategy will depend on your personal and financial circumstances, including your tax situation.

Dazed_and_C0nfused

There is no set figure for things like that.

I'm assuming that they mean you could take £11,250 or £12,500 taxable income and pay no tax so if you have a fund worth that you can take it all in one tax year and pay no tax.  If you have no other pension or earnings in that tax year.

Whereas if you had say £600k you might want to take £15,000 or £16,666 each year on a permanent basis and still pay no tax (25% of each payment tax free, remainder within Personal Allowance of £11,250 or £12,500).

As ever with these things it is really down to the individuals overall situation which is important, not some generalisation in the media.

kinger101

Barry_Bear said:

What counts as a large SIPP?

A large SIPP is one just under the GULPP threshold.

Prism

kinger101 said:

Barry_Bear said:

What counts as a large SIPP?

A large SIPP is one just under the GULPP threshold.

Red card!

garmeg

Prism said:

kinger101 said:

Barry_Bear said:

What counts as a large SIPP?

A large SIPP is one just under the GULPP threshold.

Red card!

What is GULPP?

LHW99

I suppose if you had a large SIPP and crystallised it all in one go, you would get the initial 25%, whereas if you took it by crystallising gradually you could end up receiving a larger tax-free amount, because you get 25% of each uncrystallised bit when you crystallise it. since you hope the pot remains invested and grows in between times.

It would happen with a small Sipp, but to a lesser extent, and if the SIPP was small enough. and you had no other income, you could take it in year 1 with no tax

jamesd

Since you can take £50,000 taxable each year without paying more than basic rate income tax, this top of  the basic rate band point is where the story seems most relevant.

The £12,500 income tax personal allowance also matters and many people will be able to avoid even basic rate tax by withdrawing no faster than this allows.

So no one definition because there are several thresholds and opportunities.

Albermarle

Probably to the average person , anything over £100K would be seen as large . Whilst in fact it would only produce a modest income.

coyrls

garmeg said:

Prism said:

kinger101 said:

Barry_Bear said:

What counts as a large SIPP?

A large SIPP is one just under the GULPP threshold.

Red card!

What is GULPP?

A large sip can quite easily be seen as a small gulp.