Taking UFPLS and still contribute to SIPP while drawing state pension only

cameo4

I apologise if this has been covered.
I am recently retired and only draw my state pension which will put me over the tax threshold with the rise in April.
I have a SIPP and will be taking approx £8-10,000 per year in UFPLS, I do not intend at this moment in time to take the tax free lump sum.
My question is, can I still contribute to the same SIPP, £2880 and still get tax relief.
I should be able to get a better return then in a savings account and if tax relief is applicable it would also cover my SIPP charges.

molerat

With a UFPLS you will be taking 25% of each withdrawal tax free.

Yes, you can contribute the £2880 / £3600 each year.

cameo4

Thanks for your reply molerat. 
I was not sure if my state pension would cause a problem.

Dazed_and_C0nfused

cameo4 said:

Thanks for your reply molerat. 
I was not sure if my state pension would cause a problem.

It won't cause a problem as such but it will mean that all of the (taxable) element of the UFPLS will ultimately be liable to tax at 20%.

You do seem to misunderstood what UFPLS is.  Each time you take money out of the pension using this method it will be 25% TFLS and 75% taxable income.

With no earnings for pension contribution purposes you can contribute £3,600 (gross) but nothing more and that can continue until you are 75.

xylophone

It seems that you have not yet accessed your SIPP.

You might wish to book an interview with Pension Wise for guidance before you do?

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise/book-a-free-pension-wise-appointment

dealyboy

... agree with all regulars' comments.

Just to point out OP that adding £2,880 before the 5th of a month will attract £720 tax relief into the SIPP around about the 25th of the following month (individual providers may have additional stipulations). If you performed an UFPLS on the £3,600, £900 would be tax free and £2,700 'income' would be taxed on a 'basic rate' (20% currently) basis, unless the SIPP provider holds a tax code for you. Any 'income' triggers the MPAA (not to be undertaken lightly). Any expected excess income tax for the financial year can be reclaimed from the HMRC.

Some providers allow flexibility (flexi access drawdown) such that you could access £900 without 'income', a PCLS, which would crystallize or create a 'pot' of the £2,700 in 'drawdown', which would not trigger the MPAA. It may also be possible to take part of the taxable income and crystallize the remainder according to the amount of TFLS accessed.

All food for thought prior to an appointment with Pension Wise, strongly recommended by the FCA and questioned by all providers.