Tax and my Sipp

thebullsback

I have retired from work with no intention of working again and I  will be 63 in February 2022.
I have an income of £8400 from my ex works pension 
I am Married.
I have a Sipp with AJ Bell current value £40,645
As a Basic rate tax payer what would be the most Tax effective way for me to access my Sipp fund ?
I intend to move the money into my s/s isa as I see the Tax situation with a sipp been more difficult once I reach SPA. 

Dazed_and_C0nfused

If you haven't applied for and aren't in receipt of Marriage Allowance then you just need to confirm your earnings (P45 pay) till you retired and how much pension you will get in the remainder of the current tax year and it will be possible to say.

For next tax year you can take £4,170 and not be liable to tax.  £5,560 if you are taking the 25% tax free element as part of each payment instead of all upfront.

dunstonh

As a Basic rate tax payer what would be the most Tax effective way for me to access my Sipp fund ?

As you have an income of £8400 p.a. then what other income do you have that brings you into the basic rate band? (or are you just referring to this year and not the next three/four)

I intend to move the money into my s/s isa as I see the Tax situation with a sipp been more difficult once I reach SPA. 

Not if you defer the state pension.

xylophone

I have an income of £8400 from my ex works pension 

As a Basic rate tax payer

I seem to recall from older posts that you have other  income over and above the NHS(?) pension to which you refer?

thebullsback

I have £40645 in Sipp
I also have another ex works pension that comes into play at 65 ( 3years )
two small pots £19700 and £22340 with Aviva that I will have to deal with in about 5 years time
I also have Premium Bonds and cash in the Bank 
As you gather I am no Financial Wizz kid and I was wanting to remove as much cash from my Sipp into my Isa while I am on a low income Tax wise 

xylophone

while I am on a low income Tax wise

If the  income you currently receive is well under your Personal Allowance (s), it could well make sense to draw down from the SIPP tax free and move the cash into investments in your ISA.

Albermarle

two small pots £19700 and £22340 with Aviva that I will have to deal with in about 5 years time

Not quite clear what you mean by this . A typical DC pension pot is available for taking from age 55 and at any time after that ( or not even taken at all ) . So not sure what the significance of you reaching 68 is ?

Unless they have some special conditions attached - maybe some guaranteed income/enhanced annuity involved.

Secret2ndAccount

Your pensions (or 75% of them) are taxable income. Right now, you only appear to have income of 8400. Your tax free allowance is 12570. So there is a window there of 4170. Looks like this year and next year. After that, another pension kicks in. If that takes you to 12570/yr then you will become a taxpayer for the rest of your days. Otherwise that will happen when you reach State Pension Age. Here is what you could do:
Take £5560 out of your SIPP.  25% tax free (£1390) and 75% taxable (£4170). The £1390 is tax free. The £4170 adds to your £8400, making £12570. £12570 is your annual tax free allowance, so you pay no tax. Take out any more, and you start to pay tax on it.
You can do this again after April 6th as long as you won't have any other incomes next tax year. In the 3rd year, you will probably be paying tax due to your extra pension.
So, using this method, you can get about £11000 out of your SIPP and into your ISA.  If you do it this way, you will still have 25% tax free available on all the remaining money in your SIPP. If stocks do well, and your SIPP gets bigger, your 25% tax free part gets bigger with it. You can take that as a lump sum if you really need it some time, or bit-by-bit as you take the rest of your money out of the SIPP.

thebullsback

could this withdrawing method be used with other pension pots AT the Same Time or is it only allowed on one pension pot at a time?

Albermarle

thebullsback said:

could this withdrawing method be used with other pension pots AT the Same Time or is it only allowed on one pension pot at a time?

You can do it across multiple providers, as the rules apply to your overall pension pot and income , and ignores how the pension pot is split.
However it could be a bit of an administrative nightmare if you did it with multiple providers at the same time . You might find yourself hanging on the phone to HMRC at regular intervals trying to sort out your tax .

Normally it is easier just to drawdown from one pot at a time , if only to make your tax situation simpler.
Often people consolidate pensions at this point for this reason.

Secret2ndAccount

Yes, the limit is how much income you can get without paying tax. Where you choose to get the income from is up to you. Could be 1 pension, 2 pensions or more.
As Albermarle points out, you might know that there won't be any tax to pay, but the taxman might not initially realise this and you might have some tax deducted. You then get this back, either after the end of the tax year, or by calling HMRC to explain that you won't be taking any more income during the year.
SIPPS are normally pretty flexible about how much you can withdraw, when, how often, leaving the rest alone. The other pensions you mentioned might not be quite as user friendly. Some workplace pensions might, for example, only want to make a payment to you as part of starting to take your pension. It depends on the pension.
Seems administratively easier to go with just the SIPP, but it's up to you.