SIPP Drawdown and savings interest

Dunky62

I am thinking of retiring next year on a DB pension which could be  45k. I will be 61. I will get a full state pension at 67.I feel it is likely that I could slip into the higher rate tax bracket with the state pension, so am thinking of commuting 4 or 5k to get an extra lump sum. I already get a lump sum of 3x pension  and have an AVC which will be approx. 30k tax free.

My wife has a small SIPP with Vanguard of approx. 60k.  She has a couple of small DB pensions which we intend to leave alone until NRD. She will be 60 next year and also retiring. As she will be a non-earner , we will transfer some marriage allowance and put the lump sums in her name in a monthly income account. We intend to draw down from her SIPP over the next 7years ( before her full state pension ) to use her Personal allowance. If interest from savings was 10k, how much can we take from the SIPP without paying any tax?  I am confused by the various savings allowances!!

Thanks

Dazed_and_C0nfused

Dunky62 said:

I am thinking of retiring next year on a DB pension which could be  45k. I will be 61. I will get a full state pension at 67.I feel it is likely that I could slip into the higher rate tax bracket with the state pension, so am thinking of commuting 4 or 5k to get an extra lump sum. I already get a lump sum of 3x pension  and have an AVC which will be approx. 30k tax free.

My wife has a small SIPP with Vanguard of approx. 60k.  She has a couple of small DB pensions which we intend to leave alone until NRD. She will be 60 next year and also retiring. As she will be a non-earner , we will transfer some marriage allowance and put the lump sums in her name in a monthly income account. We intend to draw down from her SIPP over the next 7years ( before her full state pension ) to use her Personal allowance. If interest from savings was 10k, how much can we take from the SIPP without paying any tax?  I am confused by the various savings allowances!!

Thanks

I think the figure you're after is £7,310.

If she had pension income of £7,310 then that would leave £4,000 of her (reduced) Personal Allowance to be used by the interest.

There are no further allowances available for interest so the next £5,000 would be taxed under the savings starter rate band (0%).

And the final £1,000 would be taxed under the savings nil rate band (also 0%).

Having interest of £10,000 (or more) means a Self Assessment return should be completed even if no tax is payable.

Bimbly

Interest in a cash ISA will be tax free. Something to consider.

Dunky62

Thanks for that Dazed. I am now a bit clearer.

Bimbly, I do intend to use ISA allowances before the wife gets her state pension. Cheers.

Dazed_and_C0nfused

LITRG have quite a good guide here,

https://www.litrg.org.uk/tax-guides/savers-property-owners-and-other-tax-issues/savings-and-tax