25% tax free after state pension?

gibbo888

My wife has a modest sipp and we are trying to calculate her 25% tax free draw off it.
if she receives a full state pension, (assume 9k for ease) how much can she draw from her sipp to remain tax free?
is it simply. 12500 - 9000 = 3500 then 3500 x4/3= 4666.
so 9000 + 4666 = 13666.
where as previously she would be drawing 16666 from her sipp UFPLS. 12500 + 4166
Would she be better Crystallising the remaining balance of her sipp and take the 25% out, then use that to make up the loss until she has to eventually use the remainder and start paying tax?
thanks.

AlanP_2

I guess that depends on whether £13,666 income is enough or whether more is needed. If more then taking more of the 25% TFLS would make sense.

Linton

gibbo888 said:

My wife has a modest sipp and we are trying to calculate her 25% tax free draw off it.
if she receives a full state pension, (assume 9k for ease) how much can she draw from her sipp to remain tax free?
is it simply. 12500 - 9000 = 3500 then 3500 x4/3= 4666.
so 9000 + 4666 = 13666.
where as previously she would be drawing 16666 from her sipp UFPLS. 12500 + 4166
Would she be better Crystallising the remaining balance of her sipp and take the 25% out, then use that to make up the loss until she has to eventually use the remainder and start paying tax?
thanks.

Your maths for UFPLS whilst receiving SP is correct.  Both strategies you describe will lead to the same overall net income provided that if the full 25% TFLS is taken it is re-invested in an S&S ISA with the same return as in the SIPP until it is needed.  It may not be immediately obvious that this is true but the essential reason is that:

If you take UFPLS your tax free income is:   investment return whilst in SIPP X 25% tax free
If you take an initial TFLS your tax free income is:   25% tax free X investment return whilst in S&S ISA.