Paying into pension 1 year before retirement.

Sg28

This is hypothetical im only 40.

Assume im 56 and retiring at 57. I have a SIPP and happen to have £60k in savings. Could I put the £60k into my pension get the tax relief only to draw on it the following year? 

Could I even do this, 1 day before my 57th birthday? 

JoeCrystal

Do you have enough income this tax year to cover £60k gross contribution?

Sg28

JoeCrystal said:

Do you have enough income this tax year to cover £60k gross contribution?

Good point, assume im still working full time by then. To rephrase, could I put the max Im allowed to contribute, effectively immediately before then drawing it back out. 

Doctor_Who

Sg28 said:

JoeCrystal said:

Do you have enough income this tax year to cover £60k gross contribution?

Good point, assume im still working full time by then. To rephrase, could I put the max Im allowed to contribute, effectively immediately before then drawing it back out. 

Be aware that withdrawing from a SIPP is not like withdrawing from a savings account.....things take time and there is paperwork! Also, it will take time (8-10 weeks) for the tax relief to be added to the SIPP. Emergency tax is also likely unless you provide a P45 to the pension company.

Edit: rules will almost certainly have changed by the time you can access your SIPP!

cloud_dog

Sg28 said:

This is hypothetical im only 40.

Assume im 56 and retiring at 57. I have a SIPP and happen to have £60k in savings. Could I put the £60k into my pension get the tax relief only to draw on it the following year? 

Could I even do this, 1 day before my 57th birthday? 

Theoretically, yes.  As others have commented on, it depends if you will have sufficient earnings in the FY that you make the lump sum deposit, and then you are likely to be limited by those earnings.  So if you earn £70k and your birthday is 31 March, then probably yes.  If You earn £70k but your birthday is 30 April, then probably no (or rather you would be limited to very little).  

Horsewidower

This is a very useful thread, thanks for all the contributions. I am 65 with a spare chunk of cash and I have (didn't know it till last week) a tiny Nest pension. Would I get any benefit if I chuck say £10,000 into that Nest pension and withdraw it next year when I'm 66?

basill

You could draw it as soon as the tax relief is added but it will count as taxable income after 25% tax free sum

Steve_666_

Nest charges are significantly higher than say Vanguard, so a SIPP with a low cost provider would be better, and you will have a much better/larger choice in investments.
Nest charge 1.8 on contributions, and they have the cheek to call that low!, plus a 0.3% annual charge. Vanguard for an example charge 0.15% annually for the account and their funds have low charges (avg 0.2%)

Horsewidower

basill said:

You could draw it as soon as the tax relief is added but it will count as taxable income after 25% tax free sum

Thank you so much for posting, that is very useful. So if I put in £10,000, when I withdraw it next year I will save the tax on 25% ie the tax on £2500...which is worth it I guess. Seems to good to be true. On another tack, I don't know how to pay cash into a Nest pension, anyone know if its allowed and if so how to do it? Can't find anything on the Nest site.

Dazed_and_C0nfused

Horsewidower said:

This is a very useful thread, thanks for all the contributions. I am 65 with a spare chunk of cash and I have (didn't know it till last week) a tiny Nest pension. Would I get any benefit if I chuck say £10,000 into that Nest pension and withdraw it next year when I'm 66?

Are you going to earn at least £12.5k in this tax year (from employment or self employment profits, not pension income)?

cloud_dog

Horsewidower said:

This is a very useful thread, thanks for all the contributions. I am 65 with a spare chunk of cash and I have (didn't know it till last week) a tiny Nest pension. Would I get any benefit if I chuck say £10,000 into that Nest pension and withdraw it next year when I'm 66?

It really depends on your circumstances, plans, and timescales, but I have been doing something similar (as I approach R-Date; possibly 2 years now), and simply liquidating S&S investments each year and adding them to my pension for the obvious benefit (my method / process is a little more complicated due to being paid under a Salary Sacrifice arrangement, but the effect is the same).