Adding to a SIPP after retirement and drawdown

VXman

Me and my wife have a SIPP with Vanguard. We are already retired and receiving a final salary pension, We opened the SIPP to take advantage of government tax relief top up.

She has now converted her SIPP to drawdown as she had a sizeable AVC policy mature. 

I understand she still add to a SIPP to get the tax relief on future contributions. How does this work? Does it mean just opening a new SIPP? (with Vanguard or someone else)

Audaxer

If you and your wife are retired in receipt of only pension income you can both contribute £2,880 net to your SIPPs and each get £720 tax relief added to make it up to a gross £3,600. 

NoMore

Audaxer said:

If you and your wife are retired in receipt of only pension income you can both contribute £2,880 net to your SIPPs and each get £720 tax relief added to make it up to a gross £3,600. 

As well as that, I think they were asking about the actual mechanics of doing it, as they already have a SIPP in drawdown and are asking if they need to open a new one.

They shouldn't have to open a new one but best to check with the provider on how they handle contributions to a SIPP in drawdown.

VXman

NoMore said:

Audaxer said:

If you and your wife are retired in receipt of only pension income you can both contribute £2,880 net to your SIPPs and each get £720 tax relief added to make it up to a gross £3,600. 

As well as that, I think they were asking about the actual mechanics of doing it, as they already have a SIPP in drawdown and are asking if they need to open a new one.

They shouldn't have to open a new one but best to check with the provider on how they handle contributions to a SIPP in drawdown.

Yes - this is the nub of the question. I have opened a SIPP with Vanguard and am contributing the max gross £3600 each year, so that is straight forward.

However, My wife already has one and it is in drawdown. Therefore I am unsure how she goes about taking in advantage of this.

1. Add to the drawdown pension?  Not sure if that's possible.
2. Open a 2nd SIPP with the same provider. Not sure whether you can.
3. Open another SIPP with a different provider.

Yes, we can ask Vanguard. Just wondered if anyone had experience of this first.

VXman

Audaxer said:

If you and your wife are retired in receipt of only pension income you can both contribute £2,880 net to your SIPPs and each get £720 tax relief added to make it up to a gross £3,600. 

  Yes, I was aware of that. However, what's this about a £4000 limit?

https://www.hl.co.uk/help/sipp,-drawdown-and-annuity/drawdown/planning-for-drawdown/can-i-still-pay-into-pensions-if-im-in-drawdown

dunstonh

  Yes, I was aware of that. However, what's this about a £4000 limit?

If you flexibly access any part of the 75% element of the pension, the annual allowance is reduced from £40,000 to £4,000.   However, a non-earner can only go to £3,600.  So, its not relevant unless they return to work in the future.

Dazed_and_C0nfused

That limit applies if you have triggered MPAA and have pensionable earnings of £4,000 or more.

If you have pensionable earnings of £3,600 or less (including £0) then you are limited to £3,600.

Altior

This is from the Vanguard site's flexible income section:

Do you want to carry on saving into your pension?

You can carry on saving into your pension, even after you've started taking money from it. However, the amount you're allowed to save into your pension will be reduced once you start taking a taxable income from your pension.

• Taking your 25% tax-free cash – you can carry on saving up to £40,000 per year into pensions. This is the standard annual allowance, and the same as if you'd not taken any money from your pension.
• Start taking a regular taxable income – this will trigger the Money Purchase Annual Allowance and reduce how much you can save into pensions from £40,000 to £4,000 per year.

VXman

Altior said:

This is from the Vanguard site's flexible income section:

Do you want to carry on saving into your pension?

You can carry on saving into your pension, even after you've started taking money from it. However, the amount you're allowed to save into your pension will be reduced once you start taking a taxable income from your pension.

• Taking your 25% tax-free cash – you can carry on saving up to £40,000 per year into pensions. This is the standard annual allowance, and the same as if you'd not taken any money from your pension.
• Start taking a regular taxable income – this will trigger the Money Purchase Annual Allowance and reduce how much you can save into pensions from £40,000 to £4,000 per year.

Yes - I saw that. it's not clear how you do that though. You pay into the pension you are withdrawing from or you set up a new, separate pension. Thinking about it I guess it's the latter as the current one is already in drawdown.

Altior

The way it's worded You can carry on saving into your pension, even after you’ve started taking money from it, suggests that you should be able to continue paying into the existing one. However if there are no options to carry on contributing, one for Vanguard to respond to directly. Possibly the crystallised element will need to be kept separate, but nothing in the support content appears to suggest that is required. 

NedS

It is possible to continue paying into a SIPP once put into drawdown. Some providers such as HL allow it - they separate the pot into crystallised and uncrystallised portions, and any further contributions go into the uncrystallised part.

So I guess it will depend on the provider and whether or not they offer the facility. If they do not, just open a new SIPP and pay into that. There is no limit on the number of SIPPs you can have.