Paying into pension after early retirement

ossie48

My wife is due to retire imminently after a period of gardening leave. She will be 55. Looking at the small print of her pension (Barclays afterwork) it states that she will no longer be able to contribute to the pension. 

We'd still like to contribute up to the age of 60 so where would be the best place to transfer to? In addition if she's not working would she get tax relief added to any contributions? Thanks. 

Dazed_and_C0nfused

Why does she want to transfer the Barclays pension?

I presume you/she are aware that in any tax year where she earns £3,600 or less (including zero earnings) that she will be limited to contributing £3,600 gross.  £2,880 that she will pay and £729 that the pension company adds courtesy of HMRC.

NannaH

She can open a Sipp and contribute £2880 per year and get tax relief of £720 added on.
She can probably add more than that for this tax year, depending on her earnings.
She can keep it in cash if she doesn’t want to invest the money but if she won’t access it for 5+ years then a cheap global tracker might suffice.
My Sipp is with Hargreaves Landsdown,  they don’t charge for cash and have a 0.45% platform fee for investments,  a cheap tracker would be .25% or less.   I’m 56,  retired and have my crystalised fund in Vanguard lifestrategy 80/20 plus Fidelity index world and HSBC all world index in my uncrystalised portion

ossie48

Dazed_and_C0nfused said:

Why does she want to transfer the Barclays pension?

I presume you/she are aware that in any tax year where she earns £3,600 or less (including zero earnings) that she will be limited to contributing £3,600 gross.  £2,880 that she will pay and £729 that the pension company adds courtesy of HMRC.

We were only thinking of transferring the pot as she cannot add any more to that scheme when she leaves. In relation to the £2880 contribution and the £729, thanks this is what we'd like to take advantage of. 

NannaH

You can contribute up until age 75 to take advantage of the £720 tax relief 😉

ossie48

NannaH said:

My Sipp is with Hargreaves Landsdown,  they don’t charge for cash and have a 0.45% platform fee for investments,  a cheap tracker would be .25% or less.   I’m 56,  retired and have my crystalised fund in Vanguard lifestrategy 80/20 plus Fidelity index world and HSBC all world index in my uncrystalised portion

Thanks . We have a Vanguard account each (VLS60). I wonder if transferring to a Vanguard personal pension is worth it (as I'm familiar with their platform ) or leaving it with Barclays and just opening a new SIPP with Vanguard

We contribute to our VLS60 every month would this be better contributed to a SIPP or carrying on with our S&S Isas...god I'm confused  

Dazed_and_C0nfused

For most people the pension gives a 6.25% benefit over an ISA.

If she can take some of the taxable pension out without actually paying tax then the pension is an even better option.

Audaxer

ossie48 said:

NannaH said:

My Sipp is with Hargreaves Landsdown,  they don’t charge for cash and have a 0.45% platform fee for investments,  a cheap tracker would be .25% or less.   I’m 56,  retired and have my crystalised fund in Vanguard lifestrategy 80/20 plus Fidelity index world and HSBC all world index in my uncrystalised portion

Thanks . We have a Vanguard account each (VLS60). I wonder if transferring to a Vanguard personal pension is worth it (as I'm familiar with their platform ) or leaving it with Barclays and just opening a new SIPP with Vanguard

We contribute to our VLS60 every month would this be better contributed to a SIPP or carrying on with our S&S Isas...god I'm confused  

When she turns 55, she could use up to her personal tax allowance to draw out of the Barclays pension tax free, and reinvest that in an S&S ISA in a VLS60 rather than a SIPP.  She could open a separate SIPP for contributing £2,880 each year to get the tax relief. There is a good thread on that on this forum where people open a SIPP, usually with HL, leave it as cash and draw the £3,600 out when the tax relief is added, and repeat each year. So if she did this she would be drawing £3,600 out of that SIPP and the rest of her tax free allowance (plus 25% tax free) out her Barclays pension. 

Depending on how much she has in her Barclays pension, she may manage to effectively move it all to an S&S ISA tax free in the 12 years or so, before her State Pension kicks in, which when it does will use up a lot of her personal tax allowance.

ossie48

Audaxer said:

ossie48 said:

NannaH said:

My Sipp is with Hargreaves Landsdown,  they don’t charge for cash and have a 0.45% platform fee for investments,  a cheap tracker would be .25% or less.   I’m 56,  retired and have my crystalised fund in Vanguard lifestrategy 80/20 plus Fidelity index world and HSBC all world index in my uncrystalised portion

Thanks . We have a Vanguard account each (VLS60). I wonder if transferring to a Vanguard personal pension is worth it (as I'm familiar with their platform ) or leaving it with Barclays and just opening a new SIPP with Vanguard

We contribute to our VLS60 every month would this be better contributed to a SIPP or carrying on with our S&S Isas...god I'm confused  

When she turns 55, she could use up to her personal tax allowance to draw out of the Barclays pension tax free, and reinvest that in an S&S ISA in a VLS60 rather than a SIPP.  She could open a separate SIPP for contributing £2,880 each year to get the tax relief. There is a good thread on that on this forum where people open a SIPP, usually with HL, leave it as cash and draw the £3,600 out when the tax relief is added, and repeat each year. So if she did this she would be drawing £3,600 out of that SIPP and the rest of her tax free allowance (plus 25% tax free) out her Barclays pension. 

Depending on how much she has in her Barclays pension, she may manage to effectively move it all to an S&S ISA tax free in the 12 years or so, before her State Pension kicks in, which when it does will use up a lot of her personal tax allowance.

That sounds like a plan ! So she's just turned 55 and the value of her DC pot is £57k (she also has a DB pot from the same employer but we'll be leaving that) . The VLS60 is in place and we have room enough in it for this tax year. I guess the Vanguard SIPP would simply things. I'll have a look at the thread you linked cheers.   

ossie48

One more question If I could.

I cashed in a DB pension two years back, funds now with Royal London 5.  We're now drawing it down (hence facilitating my wifes early retirement). Having taken a 20% tax free lump sum in 2020 I'll be approaching the point where my monthly draw down will be taxed. Could I do likewise regarding a SIPP that may help mitigate the tax loss although appreciate not fully (or are there any better suggestions).  

Secret2ndAccount

A few things to cover here. If you have a pension in drawdown, you will have triggered  the Money Purchase Annual Allowance (MPAA). That is triggered when you take a flexible amount of money from the taxable part of your pot. So if you converted your DB to a pot, then took any more than the 25% lump sum, you are subject to the MPAA. If you don't plan to work again, it's probably not a big deal.
The MPAA is 4k/yr. So your total pension contributions - you, your employer, and tax relief, from all sources can never exceed 4k per year.
The other limit is your salary. You can only get tax relief on the amount of money that you earn. Not pensions; not buy-to-let rent; just salary. So if you are still earning, you could contribute 80% of your earnings into a pension and get it topped up to 100% of your earnings. If you are not earning, or not earning much, then everyone is allowed to contribute 2880->3600 per year.
If you pay in £2880, which turns into £3600, take out £900 tax free, and £2700 @ 20% tax, you end up with £3060. A profit of £180. There may be some administrative costs, and you could have got about £80 in interest in a 1 yr fixed savings account. Some people can't get enough of this, and are metaphorically waiting outside Hargreaves Lansdown on the morning of April 6th every year. Others can't be bothered.