Pension recycling for non earner

UrbanAchiever

My wife has zero pensions.  No DB, no DC.  However will be eligible for the full SP.

Her minimum pension age is 57.

When she gets to 57 and will be a non-earner can we put £2,880 into a SIPP and immediately withdraw £3,600 once the govt contribution has been added?  And do this every year?

None of the examples of pension recycling I've seen cover this scenario.

woolly_wombat

Why wait until your wife is 57 before paying £2880 into a SIPP, which the government will top up to £3600?

Your wife will then have the opportunity to draw down more than £3600 pa when the time comes. Could come in very handy to cover the post 50 years when it can be particularly difficult to find fresh employment opportunities.

Linton

UrbanAchiever said:

My wife has zero pensions.  No DB, no DC.  However will be eligible for the full SP.

Her minimum pension age is 57.

When she gets to 57 and will be a non-earner can we put £2,880 into a SIPP and immediately withdraw £3,600 once the govt contribution has been added?  And do this every year?

None of the examples of pension recycling I've seen cover this scenario.

Yes, you can recycle the whole of the £3600.    HMRC only deem a payment into a pension as recycling if the tax free cash  taken within the 5 years centred on the year in which you make the contribution exceeds £7500 and if the amount contributed exceeds 30% of the amount taken.  Also ,putting money into someone else's pension is not counted as recycling.  So I don't think you will have any problem avoiding any chance of recycling.

See https://techzone.abrdn.com/public/pensions/tech-guide-recycle-tax-free-cash

SomeMadeUpName

woolly_wombat said:

Why wait until your wife is 57 before paying £2880 into a SIPP, which the government will top up to £3600?

Erm, maybe because it's not affordable for the OP at present.  Plenty of people at the moment struggling to pay their utilities, never mind saving £240pcm, no matter how good the return is.

UrbanAchiever

woolly_wombat said:

Why wait until your wife is 57 before paying £2880 into a SIPP, which the government will top up to £3600?

Your wife will then have the opportunity to draw down more than £3600 pa when the time comes. Could come in very handy to cover the post 50 years when it can be particularly difficult to find fresh employment opportunities.

I have thought about it, but as I am planning on retiring at 53, 4 years before I can access my pension, I want to build up ISA savings so that we have plenty to see us through until I can access my pension.  So I'm putting our spare cash into the ISA, rather than a SIPP for her. 

But great news that we can recycle in/out of her pension.  That will give us an additional £720 pa for free!

Albermarle

UrbanAchiever said:

My wife has zero pensions.  No DB, no DC.  However will be eligible for the full SP.

Her minimum pension age is 57.

When she gets to 57 and will be a non-earner can we put £2,880 into a SIPP and immediately withdraw £3,600 once the govt contribution has been added?  And do this every year?

None of the examples of pension recycling I've seen cover this scenario.

Can you clarify a couple of points .

When you say 'her minimum pension age is 57' do  you mean she will be eligible for her state pension at 67 ( not 57) ?

Otherwise what significance is age 57 ?maybe when she can draw a non state pension? but she has not got one anyway?

You say when she gets to 57, she will be a non earner. That implies she is working now? If so, has she not got a pension ? Maybe self employed? part time/low pay?

NannaH

Why would you forego all of the tax relief on a sipp for her?  She will be able to get all the cash out tax free,
when the time comes she can take UPFLS payments of £16k a year with no tax and put it in an isa if preferred. 
 seems like a no brainer for me, it’s what we are doing for the next 8-10 years. 

UrbanAchiever

Albermarle said:

UrbanAchiever said:

My wife has zero pensions.  No DB, no DC.  However will be eligible for the full SP.

Her minimum pension age is 57.

When she gets to 57 and will be a non-earner can we put £2,880 into a SIPP and immediately withdraw £3,600 once the govt contribution has been added?  And do this every year?

None of the examples of pension recycling I've seen cover this scenario.

Can you clarify a couple of points .

When you say 'her minimum pension age is 57' do  you mean she will be eligible for her state pension at 67 ( not 57) ?

Otherwise what significance is age 57 ?maybe when she can draw a non state pension? but she has not got one anyway?

You say when she gets to 57, she will be a non earner. That implies she is working now? If so, has she not got a pension ? Maybe self employed? part time/low pay?

Min pension age 57:  Due to when she was born, this will be the earliest she can access any private pension.  So if I only want to pay in and "immediately" draw out of a SIPP, this will be the earliest age she will be able to do so.  I don't want to pay in before she hits 57 as I am putting all of our spare cash (after my workplace pension contributions) into ISAs to bridge the gap from age 53 when I retire to when I can access my pension at 57.

She is self-employed and has been all her life, so doesn't have a workplace pension.  She is likely to stop working at 57.  She only works a small number of hours each week.  However we are ensuring she has full SP by paying the required Class 2 NI.

UrbanAchiever

NannaH said:

Why would you forego all of the tax relief on a sipp for her?  She will be able to get all the cash out tax free,
when the time comes she can take UPFLS payments of £16k a year with no tax and put it in an isa if preferred. 
 seems like a no brainer for me, it’s what we are doing for the next 8-10 years. 

I know it makes a lot of sense to do that, but I want to build up ISAs to bridge the gap between retiring at 53 and accessing my  pension at 57. 

Albermarle

UrbanAchiever said:

Albermarle said:

UrbanAchiever said:

My wife has zero pensions.  No DB, no DC.  However will be eligible for the full SP.

Her minimum pension age is 57.

When she gets to 57 and will be a non-earner can we put £2,880 into a SIPP and immediately withdraw £3,600 once the govt contribution has been added?  And do this every year?

None of the examples of pension recycling I've seen cover this scenario.

Can you clarify a couple of points .

When you say 'her minimum pension age is 57' do  you mean she will be eligible for her state pension at 67 ( not 57) ?

Otherwise what significance is age 57 ?maybe when she can draw a non state pension? but she has not got one anyway?

You say when she gets to 57, she will be a non earner. That implies she is working now? If so, has she not got a pension ? Maybe self employed? part time/low pay?

Min pension age 57:  Due to when she was born, this will be the earliest she can access any private pension.  So if I only want to pay in and "immediately" draw out of a SIPP, this will be the earliest age she will be able to do so.  I don't want to pay in before she hits 57 as I am putting all of our spare cash (after my workplace pension contributions) into ISAs to bridge the gap from age 53 when I retire to when I can access my pension at 57.

She is self-employed and has been all her life, so doesn't have a workplace pension.  She is likely to stop working at 57.  She only works a small number of hours each week.  However we are ensuring she has full SP by paying the required Class 2 NI.

So if I only want to pay in and "immediately" draw out of a SIPP, this will be the earliest age she will be able to do so. 
In this case you will need to read the small print of the SIPP provider. For obvious reasons they are not that keen on clients depositing relatively small sum of money and they withdrawing it again straight away . They will incur admin costs , and have to deal with tax etc , possibly only getting back a few pennies in charges . I know one has a minimum charge for example.

She is self-employed and has been all her life, so doesn't have a workplace pension.  She is likely to stop working at 57.  She only works a small number of hours each week.  However we are ensuring she has full SP by paying the required Class 2 NI.
No problem for a self employed person to have a pension. You still get tax relief, even if you do not earn enough to pay any tax.