SIPP and DB Pension, how much tax free cash can be taken

super_reds

Hi

My wife has had to take early retirment and started drawing her DB pension. She also has a SIPP whioch she'll be able to access in a few years when she gets to 55.

The numbers are approximately 8k p.a. DB pension which she took the full amount rather than a tax free lump sum and reduced pension. For LTA purposes this was valued at 20 times so 160k. SIPP value say 140k currently but might change. So if the total value was 300k can she take 25% of the combined value as tax free (so 75k) or is it just 25% on the SIPP value (so 35k)?

Thanks in advance

Marcon

super_reds said:

Hi

My wife has had to take early retirment and started drawing her DB pension. She also has a SIPP whioch she'll be able to access in a few years when she gets to 55.

The numbers are approximately 8k p.a. DB pension which she took the full amount rather than a tax free lump sum and reduced pension. For LTA purposes this was valued at 20 times so 160k. SIPP value say 140k currently but might change. So if the total value was 300k can she take 25% of the combined value as tax free (so 75k) or is it just 25% on the SIPP value (so 35k)?

Thanks in advance

Just 25% of the value of her SIPP.

The tax free cash relating to the DB scheme was a one off decision at the time she retired and can't now be taken, or used in respect of other pension schemes.

super_reds

Thanks Marcon for the speedy response, much appreciated.

I have a further slightly connected question.....

She's not working but in addition to her pension does receive some dividend income. Is she eligible to contribute to her SIPP and get tax relief on that income stream or is that not classed as income for pension purposes?

Finally if not eligible then I think she can still contribute up to the gross £3600 p.a. is that right?

xylophone

Tax relieved pension contributions - see

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm044100

Neither the dividends or the pension count as "relevant earnings" but she can take advantage  of the "basic amount" (see link) even if she has no "relevant earnings".

If she has relevant earnings within this tax year that are in excess of £3,600, a higher tax relievable contribution could be possible.

Dazed_and_C0nfused

super_reds said:

Thanks Marcon for the speedy response, much appreciated.

I have a further slightly connected question.....

She's not working but in addition to her pension does receive some dividend income. Is she eligible to contribute to her SIPP and get tax relief on that income stream or is that not classed as income for pension purposes?

Finally if not eligible then I think she can still contribute up to the gross £3600 p.a. is that right?

Ignore the dividends but she can contribute £3,600 gross even if she has no income which is relevant for pension contribution purposes.

She pays £2,880 and the pension company adds £720 in basic rate tax relief even if she hasn't actually paid any tax.