contributing to SIPP after triggering MPAA

hyperhypo

Hello,

I'm 64, i.n receipt of a DB pension which just exceeds my personal allowance.

I also have a SIPP which is roughly 75% crystallised and so will have triggered MPAA when i started taking drawdown payments as regular montly income on which i pay BR tax.

Last year i started an occasional NHS job, bank,  a handful of days each month , which i'm also taxed at BR rate. Also i pay into the current (db) NHS scheme.

On checking online with HMRC i realised that , as i was now earning a few thousand pounds in my current part time occasional role, i might revist paying into my uncrystallised SIPP, so long as my contribution (plus BR relief) does not exceed my gross NHS pay for this tax year, all  within the limit of £10k.

So far this tax year i've earned £6.5k gross. If i were to base my calc on this i could pay this amount from cash savings into my SIPP, hmrc would add £1300 , and  i'd still be within the £10k limit. The gross amount is likely to rise before April 5th 2024.

I''d like to maximise the amount of pension contribution within the MPAA according to my current earnings.

I would likely want to crystallise the final 25% of SIPP in the next tax year, ie move 100% into drawdown, ie after April 6th 2024, so any future contributions would  remain in cash.

Does this make sense?

 I honestly thought i'd finished with pension contributions when i stopped my old job...and so stopped thinking about such matters, but it seems sensible to use cash savings in this way to maximise any benefits afforded by my new source of income.

I'd probably wait until end of January and base contributions after a couple more monthly salary payments.

Scarum

I would imagine future contributions to an existing SIPP (before the age of 75), that is partially or fully crystallised, will be treated as uncrystallised.  How any particular SIPP provider shows this I am not sure.  How you invest those future contributions of course is up to you.

Put it another way, if you were to open a new SIPP with another provider and were to put your future contributions in to that, those contribution would show as uncrystallised up until you to access it.

zagfles

When you say "gross pay" I assume you mean pay after your conts to the NHS scheme are taken off, ie your taxable pay. If that's £6500 then you could pay in £5200 and they'd claim £1300 from HMRC, assume that's what you meant above.

You must tell the SIPP provider you're subject to the MPAA, if it's the same one your drawing down from they should know anyway but I believe you still have to tell them.

hyperhypo

Zagfles...good call on notifying provider ..Fidelity in my case.

I'd assumed that , as in drawdown for a couple of years now, they would automatically be aware of MPAA , as my monthly drawdowns are treated as "net regular payments" in Fidelity speak, with an associated payment to hmrc at BR tax  each month.

But it won't hurt to point it out to them.

And yes by gross i mean the value that appears in my current year PAYE rolling total on my hmrc account.

Thanks again.

Albermarle

hyperhypo said:

Zagfles...good call on notifying provider ..Fidelity in my case.

I'd assumed that , as in drawdown for a couple of years now, they would automatically be aware of MPAA , as my monthly drawdowns are treated as "net regular payments" in Fidelity speak, with an associated payment to hmrc at BR tax  each month.

But it won't hurt to point it out to them.

And yes by gross i mean the value that appears in my current year PAYE rolling total on my hmrc account.

Thanks again.

The good point about Fidelity, is that they keep crystallised and uncrystallised pots separate, which many providers do not do. So it will be a lot clearer where you stand.

hyperhypo

Albermarle

I'd taken as a given that these accounts are separate...i've only ever done drawdown with Fidelity so have no working knowledge of other providers but couldn't conceive of having both elements lumped into one account.  Writing this post has reminded me i need to give some attention to the drawdown side too, ie in terms of assets. I haven't changed anything over the time i started drawdown, partly because of the volatility of past couple of years and , in truth, i didn't know of any better plan. 

I've also become less interested in the whole subject too, for me, going forward , simplicity needs to be the key, keeping cash !and as few funds / etfs as is practicable on a platform that is easy to use.  I've not searched on here yet for any thread where read drawdown scenarios are discussed, perhaps time i did !

Albermarle

hyperhypo said:

Albermarle

I'd taken as a given that these accounts are separate...i've only ever done drawdown with Fidelity so have no working knowledge of other providers but couldn't conceive of having both elements lumped into one account.  Writing this post has reminded me i need to give some attention to the drawdown side too, ie in terms of assets. I haven't changed anything over the time i started drawdown, partly because of the volatility of past couple of years and , in truth, i didn't know of any better plan. 

I've also become less interested in the whole subject too, for me, going forward , simplicity needs to be the key, keeping cash !and as few funds / etfs as is practicable on a platform that is easy to use.  I've not searched on here yet for any thread where read drawdown scenarios are discussed, perhaps time i did !

Some SIPP providers just have one pension pot and will just say something like 35% is uncrystallised and 65% crystallised ( or whatever the proportions might be ). Splitting the pot, like Fidelity do ( and some others) is cleaner and means you can have different investments in each ( if you want).
There are many threads on here about drawdown scenarios, some can get rather technical.
I would say the main point to watch is the withdrawal rate, which if too high can mean the pot could run out a lot quicker than expected if we run into a protracted down period in the markets .