SIPP and Tax relief

hillabaloo

I am 64 and currently not working but receive a company pension.  I now have to decide what to do with an old company annuity plan.  I am thinking of transferring it a SIPP which I need to set-up.  The main reason for doing this is that it gives me access to the capital and will be outside of my estate when I die.
My question is that if I decide to make additional contributions out of savings or my current pension income, will I get tax relief on these contributions? 
Thanks in advance.

george4064

Yes, your SIPP provider should automatically reclaim from HMRC the basic 20% tax relief.

Info on contribution limits from ii.co.uk;

You can pay up to 100% of your earnings into your SIPP (subject to a maximum of the current Annual Allowance of £40,000 gross) and receive Tax Relief up to that level. 

Pension tax relief is given at a rate of 20% (higher rate taxpayers can claim higher levels of tax relief via self-assessment).

Your employer can make contributions to your SIPP, as well as or instead of a workplace pension. These contributions count towards your annual allowance, but are not limited by your income. 

If you do not have any earnings in the tax year, you can still contribute up to £3,600 gross into your SIPP.  If you have begun to drawdown incomefrom your SIPP, you can contribute up to £4,000 gross per tax year.

Marcon

hillabaloo said:

I am 64 and currently not working but receive a company pension.  I now have to decide what to do with an old company annuity plan.  I am thinking of transferring it a SIPP which I need to set-up.  The main reason for doing this is that it gives me access to the capital and will be outside of my estate when I die.
My question is that if I decide to make additional contributions out of savings or my current pension income, will I get tax relief on these contributions? 
Thanks in advance.

If you have no earned income, you can contribute up to £2,880 and the SIPP provider will claim basic rate relief on your behalf and add this to your SIPP.

Are you sure you can transfer your old company annuity plan? If so, check if you need to take advice (mandatory if the transfer value is £30,000+ and the plan has any sort of gauranteed benefits).

Linton

If you are not receiving earned income (pension income doesnt count) your contributions are limited to £3600/year gross=£2880 net.  So you pay £2880 into your SIPP, HMRC add in the tax relief making the total £3600.  You can then take 25%=£900 tax free and the rest is taxable as income.

hillabaloo

I thought as much.  I had been looking for reference to whether pension income counts.  It makes sense.

Albermarle

with an old company annuity plan. 

Can you clarify exactly what this means ?

As Marcon said if it is an annuity in payment , or some kind of guaranteed income when you do take it , then transferring it will not be easy .

If you mean that it is a DC pot that only offers an annuity option ( like a lot of old pensions ) then transferring it will be OK .

zagfles

hillabaloo said:

I thought as much.  I had been looking for reference to whether pension income counts.  It makes sense.

No pension income doesn't count. For a full list see here https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm044100#earnings

hillabaloo

Hi Albermarle, it is a pot.  I have to decide whether I buy an annuity or transfer to say a Sipp.

Albermarle

hillabaloo said:

Hi Albermarle, it is a pot.  I have to decide whether I buy an annuity or transfer to say a Sipp.

Whether to go down the annuity route or not is a personal decision. It depends on your overall family and financial position and if you can take a certain amount of risk rather than a guaranteed income .
I can only say ( if it helps ) that pension transfers nowadays are easy . You can set up a SIPP/pension and request a transfer of your old pension on line in less than 10 minutes.
The question is more what kind of new pension . Some are very simple to operate with very limited choice of investments, and some have a very wide range available + of course some inbetween.