£2880 to SIPP for wife
I notice that the latest tax allowance is £12570/yr and the state pension is £10556/yr
So by putting away the £2880 for wifes cash sipp (as we have been doing),
and getting the added bonus making it £3550?
I suspect now, if we withdraw more than £2000 then she is liable to pay the tax ?
Is that true folks ?
1) I wonder if we just leave in (say the extra) £1000 and take it another year ?
2) If all the above is correct = Perhaps its easier not saving the full £2880 each year
(because we cant take it all out w/o paying tax).
3) I seem to remember that there is an age when you can't save the £2880 and claim the bonus.
If thats true then maybe we keep saving the full 2880 and just withdraw after then ?
4) Also perhaps just not save the 2880 one year and just withdraw some cash in the sipp.
- I'm assuming that could be a good plan also
Could I have your thoughts on the best way forward please.
Thanks Steve
Comments
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Its 3600 not 3550, you end up with after tax relief. You can do this every year up to age 75.
Even withdrawing and then having to pay a little tax your ahead, don't necessarily try to avoid tax altogether.
For question 3 its entirely down to your plan for this money.2 -
Your wife pays in £2880 which is increased to £3600, not £3550.
You are correct that if your wife's taxable drawdown + State Pension is over £12570 then tax will be due.
(1) and (2) is up to your wife. Even if she pays a small amount of tax there is still the benefit from the 25% tax free so the tax free withdrawal total is £900+ £12570-£10556)=£2914,
3) You cannot pay into a pension after you reach 75. Your wife can leave the money in the SIPP and withdraw it at any time.0 -
The bit you are missing is that when you withdraw it, then 25% of it will be tax free.and getting the added bonus making it £3550? £3,600
I suspect now, if we withdraw more than £2000 then she is liable to pay the tax ?Small amendment in bold.
If you withdrew the full amount each year. Then £900 would be tax free and £2,700 would be classed as taxable income.
So £10,556 + £2,700 = £13,226
Take away the personal allowance of £12,570 leaves £656 to be taxed at 20% which is £131
So overall she is adding £2,880 and getting back £3,600 minus £131 = £3,469 . A gain of £589 .
As the state pension grows each year but currently the personal allowance is not, so each year she will pay a bit more tax .
She can make this gain until she is 75. It would be advisable not to delay withdrawing the money each year, as the spare personal allowance she has would be wasted,
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stephen0002002 said:2) If all the above is correct = Perhaps its easier not saving the full £2880 each year
(because we cant take it all out w/o paying tax).Would you rather have 80% of something, or 100% of nothing?It's a serious question.N. Hampshire, he/him. Octopus Go elec & Tracker gas / Shell BB / Lyca mobi. Ripple Kirk Hill member.
2.72kWp PV facing SSW installed Jan 2012. 11 x 247w panels, 3.6kw inverter. 30MWh generated, long-term average 2.6 Os.Taking a break, hope to be back eventually.Ofgem cap table, Ofgem cap explainer. Economy 7 cap explainer. Gas vs E7 vs peak elec heating costs.0 -
Even if paying tax on the whole of the £2700 it is £180 profit for little effort. 6.25% uplift for locking your money away for a couple of months, would equate to something like a 37% aer. And interest is paid on the balance whilst in the pension account.
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stephen0002002 said:Wife and myself are 67/66 both retired and taking full state pension.
I notice that the latest tax allowance is £12570/yr and the state pension is £10556/yr
So by putting away the £2880 for wifes cash sipp (as we have been doing),
and getting the added bonus making it £3550?
I suspect now, if we withdraw more than £2000 then she is liable to pay the tax ?
Is that true folks ?
1) I wonder if we just leave in (say the extra) £1000 and take it another year ?
2) If all the above is correct = Perhaps its easier not saving the full £2880 each year
(because we cant take it all out w/o paying tax).
3) I seem to remember that there is an age when you can't save the £2880 and claim the bonus.
If thats true then maybe we keep saving the full 2880 and just withdraw after then ?
4) Also perhaps just not save the 2880 one year and just withdraw some cash in the sipp.
- I'm assuming that could be a good plan also
Could I have your thoughts on the best way forward please.
Thanks Steve
It doesn't alter the basic principle but could slightly reduce the overall benefit her as more of the SIPP income would be taxed.
Also the standard new State Pension is currently £10,600, not £10,556.0 -
Dazed_and_C0nfused said:stephen0002002 said:Wife and myself are 67/66 both retired and taking full state pension.
I notice that the latest tax allowance is £12570/yr and the state pension is £10556/yr
So
Also the standard new State Pension is currently £10,600, not £10,556.
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stephen0002002 I have run some numbers if the good lady puts in £2880 a year up to age 75 and takes the £900 a year tax free and takes £2,700 a year taxable. I assume using various forecast she will pay tax over these years of £3,700 from now until 75.
If she reduces her taxable withdrawal to an annual amount within the personal allowance it is just daft if paying in to 75 years of age. She will never get all the money out tax free.
I recon she should either bite the bullet and pay in to 75 and pay tax on the taxable amounts.Otherwise pay in three years of £2,880 per year to strip the money out in a reasonable term, tax free. That in my honest opinion is the tail wagging the taxfree dog.
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