Taking money from pension questions

Prunetheroses123

My SIPP is currently held with Bestinvest and is all in cash and I’m getting an interest payment of 4.35% at the moment

I am 65 this year and newly retired and only income is £3085 a year annuity but ok because wife is earning and we have interest off savings now and are mortgage free.  I have no desires to work again so would only make the minimum contributions to a pension you can make.

I get my state pension in the next tax year 24/25

This tax year 23/24 I was thinking of drawing some of this pension out using what is left of my tax free personal allowance ( I have transferred my marriage allowance to my wife) so I think it is £11310

I thought I would be able to do a UFPLS with BestInvest but they say they only do flexible access drawdown.

Am I correct in thinking either?

I only take £8225.00 plus 25% tax free portion of £2741.66 = £10966.66 the rest is left uncrystallized and can be passed to children IHT free and I keep earning interest on cash that is left in SIPP as long as interest rates are OK.  I will then stick this sum in a fixed rate ISA to earn a slightly higher rate.

Or I take the full 25% of my pension pot tax free £23641 plus £8225.00 that I can have within my personal allowance.  The rest that is left sits in a crystallised pot can still earn interest with Bestinvest or I invest this with them.  This cannot be passed to children tax free.  I will then take this withdrawal and put into ISA or fixed interest savings. I will only have earnings up to the personal allowance each year so am I correct in thinking some of my interest will fall into 0% band rate

I can repeat this in the Tax year 24/25 as I only get my pension towards the end of year and could draw some out making it up to my personal allowance.

Either way I can now only put the minimum into a pension each year as I triggered MPAA

I want to get a bit out making use of my spare personal allowance

I realize all this depends on interest rates staying at a decent level

Dazed_and_C0nfused

Two things, you are correct in that if you have applied for Marriage Allowance your Personal Allowance will be £11,310.

You've either misunderstood MPAA or it's the way you've worded it but from 2024-25 not earning appears to be your limit, MPAA (£10k) won't be a factor.  £3,600 (gross is your limit).

Either way I can now only put the minimum into a pension each year as I triggered MPAA

Prunetheroses123

Thanks yes I only intend on putting £3600 in per year now as I am not earning anymore

Marcon

Prunetheroses123 said:

Thanks yes I only intend on putting £3600 in per year now as I am not earning anymore

Just to make quite sure...that's £3,600 gross (so you'd need to pay in £2,880).

Prunetheroses123

Yes thats correct £3600 gross

LHW99

I only take £8225.00 plus 25% tax free portion of £2741.66 = £10966.66 the rest is left uncrystallized and can be passed to children IHT free and I keep earning interest on cash that is left in SIPP as long as interest rates are OK.

Isn't this UFPLS, which BestInvest says you can't do?

Albermarle

Or I take the full 25% of my pension pot tax free £23641 plus £8225.00 that I can have within my personal allowance.  The rest that is left sits in a crystallised pot can still earn interest with Bestinvest or I invest this with them.  This cannot be passed to children tax free

Whatever is in a pension pot when you die, is currently not subject to IHT, whether it is crystallised or not.

If you die before 75, then any beneficiary can take the whole pot tax free ( although this rather odd rule appears to be under government review). If you die after 75 then your beneficiaries will pay income tax on any withdrawals ( crystallised or uncrystallised as far as I know but not 100% sure)

dealyboy

Prunetheroses123 said:

My SIPP is currently held with Bestinvest and is all in cash and I’m getting an interest payment of 4.35% at the moment

I am 65 this year and newly retired and only income is £3085 a year annuity but ok because wife is earning and we have interest off savings now and are mortgage free.  I have no desires to work again so would only make the minimum contributions to a pension you can make.

I get my state pension in the next tax year 24/25

This tax year 23/24 I was thinking of drawing some of this pension out using what is left of my tax free personal allowance ( I have transferred my marriage allowance to my wife) so I think it is £11310

I thought I would be able to do a UFPLS with BestInvest but they say they only do flexible access drawdown.

Am I correct in thinking either?

(i) I only take £8225.00 plus 25% tax free portion of £2741.66 = £10966.66 the rest is left uncrystallized and can be passed to children IHT free and I keep earning interest on cash that is left in SIPP as long as interest rates are OK.  I will then stick this sum in a fixed rate ISA to earn a slightly higher rate.

Or (ii) I take the full 25% of my pension pot tax free £23641 plus £8225.00 that I can have within my personal allowance.  The rest that is left sits in a crystallised pot can still earn interest with Bestinvest or I invest this with them.  This cannot be passed to children tax free.  I will then take this withdrawal and put into ISA or fixed interest savings. I will only have earnings up to the personal allowance each year so am I correct in thinking some of my interest will fall into 0% band rate

I can repeat this in the Tax year 24/25 as I only get my pension towards the end of year and could draw some out making it up to my personal allowance.

Either way I can now only put the minimum into a pension each year as I triggered MPAA

I want to get a bit out making use of my spare personal allowance

I realize all this depends on interest rates staying at a decent level

Hi Prunetheroses123 ...

I have to own up, I'm slightly confused by your post but I think this is wholly due to BestInvest as you have stated your requirements quite clearly.

I have labelled your options (i) and (ii).

You have stated your SIPP is all in cash and I presume you have not accessed it in any way before, so it is all uncrystallized.

(i) accessing £10,966.66 makes perfect sense and uses your tax allowance efficiently, but as you have stated it that is an UFPLS. This triggers the MPAA.

(ii) accessing £23,641 tax free is a PCLS crystallizing £70,923, this does not trigger the MPAA. Drawing down £8,225 as 'income' again utilizes your personal allowance, this does trigger the MPAA. The remainder crystallized in the SIPP is protected from IHT. You, as we all do, have a £1,000 tax free interest allowance, plus in your specific case of having 'earnings' not exceeding the personal tax allowance, you have an additional £5,000 savings interest at zero percent tax (of course this is irrelevant if this is in a cash ISA).

In 24/25 you can either do (i) again or access your crystallized SIPP (ii). When you claim state pension you should be informed by letter from either DWP or The Pension Service of the amount of SP you will receive in 24/25, this won't be taxed.

As stated, either way you will have triggered the MPAA but as you will have no earnings your contributions will be limited to £3,600 (£2,880 net).

Note: I am neither a professional nor an IFA and stand to be corrected by either.

Edit: Neither @LHW99's post nor @Albermarle's post were present when I wrote this ... apologies if I trod on some toes  .

Prunetheroses123

LHW99 said:

I only take £8225.00 plus 25% tax free portion of £2741.66 = £10966.66 the rest is left uncrystallized and can be passed to children IHT free and I keep earning interest on cash that is left in SIPP as long as interest rates are OK.

Isn't this UFPLS, which BestInvest says you can't do?

Yes Im really struggling to understand the difference between the two i wanted to do UFPLS but they dont do it

Prunetheroses123

dealyboy said:

Prunetheroses123 said:

My SIPP is currently held with Bestinvest and is all in cash and I’m getting an interest payment of 4.35% at the moment

I am 65 this year and newly retired and only income is £3085 a year annuity but ok because wife is earning and we have interest off savings now and are mortgage free.  I have no desires to work again so would only make the minimum contributions to a pension you can make.

I get my state pension in the next tax year 24/25

This tax year 23/24 I was thinking of drawing some of this pension out using what is left of my tax free personal allowance ( I have transferred my marriage allowance to my wife) so I think it is £11310

I thought I would be able to do a UFPLS with BestInvest but they say they only do flexible access drawdown.

Am I correct in thinking either?

(i) I only take £8225.00 plus 25% tax free portion of £2741.66 = £10966.66 the rest is left uncrystallized and can be passed to children IHT free and I keep earning interest on cash that is left in SIPP as long as interest rates are OK.  I will then stick this sum in a fixed rate ISA to earn a slightly higher rate.

Or (ii) I take the full 25% of my pension pot tax free £23641 plus £8225.00 that I can have within my personal allowance.  The rest that is left sits in a crystallised pot can still earn interest with Bestinvest or I invest this with them.  This cannot be passed to children tax free.  I will then take this withdrawal and put into ISA or fixed interest savings. I will only have earnings up to the personal allowance each year so am I correct in thinking some of my interest will fall into 0% band rate

I can repeat this in the Tax year 24/25 as I only get my pension towards the end of year and could draw some out making it up to my personal allowance.

Either way I can now only put the minimum into a pension each year as I triggered MPAA

I want to get a bit out making use of my spare personal allowance

I realize all this depends on interest rates staying at a decent level

Hi Prunetheroses123 ...

I have to own up, I'm slightly confused by your post but I think this is wholly due to BestInvest as you have stated your requirements quite clearly.

I have labelled your options (i) and (ii).

You have stated your SIPP is all in cash and I presume you have not accessed it in any way before, so it is all uncrystallized.

(i) accessing £10,966.66 makes perfect sense and uses your tax allowance efficiently, but as you have stated it that is an UFPLS. This triggers the MPAA.

(ii) accessing £23,641 tax free is a PCLS crystallizing £70,923, this does not trigger the MPAA. Drawing down £8,225 as 'income' again utilizes your personal allowance, this does trigger the MPAA. The remainder crystallized in the SIPP is protected from IHT. You, as we all do, have a £1,000 tax free interest allowance, plus in your specific case of having 'earnings' not exceeding the personal tax allowance, you have an additional £5,000 savings interest at zero percent tax (of course this is irrelevant if this is in a cash ISA).

In 24/25 you can either do (i) again or access your crystallized SIPP (ii). When you claim state pension you should be informed by letter from either DWP or The Pension Service of the amount of SP you will receive in 24/25, this won't be taxed.

As stated, either way you will have triggered the MPAA but as you will have no earnings your contributions will be limited to £3,600 (£2,880 net).

Note: I am neither a professional nor an IFA and stand to be corrected by either.

Edit: Neither @LHW99's post nor @Albermarle's post were present when I wrote this ... apologies if I trod on some toes  .

Thankyou for your answer I think I just got confused as I could not do UFPLS and the provider Bestinvest only do a flexi access drawdown

As I am scared to invest it seems the best to get as much out using my personal tax allowance

Prunetheroses123

dealyboy said:

When I first tried to find this information from BestInvest it was as clear as mud, but I've tried again ...
https://www.bestinvest.co.uk/pensions-and-retirement/lump-sum-withdrawals

They do do UFPLS.

I have seen this and messaged them and was sent an application form by email that stated 'you need a different form for UFPLS' so I have emailed twice now and they say they dont do anymore and old information on site and on forms.