Pension transfer/encashment - left a little late!

devondiver

Since starting to draw my (full) state pension at age 65 nearly six years ago I had refrained from touching my one remaining investment – a Royal London personal pension (no GAR) currently valued at c.£50k. Being no fan of annuities (or IFAs) I had intended to look into transferring the whole pot to a more accessible vehicle in a tax efficient way well before reaching age 75 - but am conscious that I may now be leaving it rather late. I have no debts or significant other income and had intended to be able to draw down this pot in maximum increments which keep me within my personal allowance as a non-taxpayer but would then become available for alternative purposes (savings, investments, campervan, etc.)

Following a previous (happy) experience using Hargreaves Lansdown I have just initiated transfer of the pension pot from RL to my HL SIPP.  I’m hoping the transfer will complete in time for me to make a first lump sum withdrawal within this tax year, possibly feeding this into an ISA of some sort - though I’m not at all up to speed on alternatives and would appreciate suggestions.

But the real question is - not having given this enough thought and having left things a bit late - does what I’m doing sound okay and am I perhaps missing some significant considerations? I’m happy to provide further info as required – and thanks for reading. 

Dazed_and_C0nfused

Since starting to draw my (full) state pension at age 65 nearly six years ago I had refrained from touching my one remaining investment – a Royal London personal pension (no GAR) currently valued at c.£50k.

I have just initiated transfer of the pension pot from RL to my HL SIPP

Is this a new SIPP for this purpose or an existing one with funds in it?

Sounds tax efficient.  You could make it even more so if you could afford to add £3,600 each year (£2,880 from you plus £720 tax relief that will be added).

That would make your initial £50k last longer.

Albermarle

Presumably the RL personal pension had some kind of limited flexibility on withdrawals ( often the case with older pensions) which is why you want to transfer it ? Or was there some other reason .

You say ' I had refrained from touching my one remaining investment – a Royal London personal pension '
But you also have a HL SIPP ? Is there no money /investments in it ?

 I’m hoping the transfer will complete in time for me to make a first lump sum withdrawal within this tax year, 
Presuming the transfer is in cash , then it should not take too long ( two weeks ?) , although HL are known to be slow on transfers out . Maybe transfers in is different . However starting the withdrawal process takes a certain amount of time, so overall could be a bit tight.

You will be aware that the state pension is taxable , so if you do not want to pay any tax , then you are going to be limited to withdrawing about £3600 pa ( of which 25% will be tax free and 75% taxable but within your personal allowance) 

devondiver

Dazed_and_C0nfused said:

Since starting to draw my (full) state pension at age 65 nearly six years ago I had refrained from touching my one remaining investment – a Royal London personal pension (no GAR) currently valued at c.£50k.

I have just initiated transfer of the pension pot from RL to my HL SIPP

Is this a new SIPP for this purpose or an existing one with funds in it?

Sounds tax efficient.  You could make it even more so if you could afford to add £3,600 each year (£2,880 from you plus £720 tax relief that will be added).

That would make your initial £50k last longer.

Existing SIPP emptied years ago.

Wouldn't I need to have earned income to get tax relief on anything added to it?

BTW - I'm in  good health and expect to be around for a good while yet!

Dazed_and_C0nfused

You will be aware that the state pension is taxable , so if you do not want to pay any tax , then you are going to be limited to withdrawing about £3600 pa ( of which 25% will be tax free and 75% taxable but within your personal allowance) 

You are probably correct but as we know from experience one posters definition of "full" State Pension doesn't necessarily mean it is exactly £179.60/week even though they retired in the new State Pension era.

Albermarle

Wouldn't I need to have earned income to get tax relief on anything added to it?

A non earner can add £3600 gross to a pension every tax year . That is £2880 from you and £720 tax relief.

It is just a coincidence that you can also take around £3600 from your personal pension without paying tax .

devondiver

Albermarle said:

Presumably the RL personal pension had some kind of limited flexibility on withdrawals ( often the case with older pensions) which is why you want to transfer it ?

Correct. 

Albermarle said:

But you also have a HL SIPP ? Is there no money /investments in it ?

Sadly not. 

Dazed_and_C0nfused

And you don't need to have paid any tax to get the £720, there is no link between relief at source pension tax relief and the tax you personally pay.

devondiver

So is there any way of accessing the bulk of the pot faster than drip feeding it to an ISA or alternative? (Thinking of house extension here.) Any way of using wife's personal allowance by gifting or something? As you can tell, I haven't given this a lot of thought. 

devondiver

Albermarle said:

Wouldn't I need to have earned income to get tax relief on anything added to it?

A non earner can add £3600 gross to a pension every tax year . That is £2880 from you and £720 tax relief.

It is just a coincidence that you can also take around £3600 from your personal pension without paying tax .

So as a non-earning non-taxpayer one could take out £3,600 from a pension pot, keep £720, return £2,880 and get £720 added by the IR? Every year? Sounds too good to be true!

Albermarle

So is there any way of accessing the bulk of the pot faster than drip feeding it to an ISA or alternative? (Thinking of house extension here.) Any way of using wife's personal allowance by gifting or something? As you can tell, I haven't given this a lot of thought. 

You can take out as much as you like , just that above a certain amount you will pay some tax .

So as a non-earning non-taxpayer one could take out £3,600 from a pension pot, keep £720, return £2,880 and get £720 added by the IR? Every year? Sounds too good to be true!

That is correct assuming you do not pay any tax on the withdrawals and only up to age 75.The amount of money involved for HMRC is small, compared to the overall huge cost of tax relief. If you think that higher earners can typically  get over £10K pa in tax relief if they add enough .