SIPP advice

proudgecko

Newbie here, who has no real knowledge of investing and low risk tolerance
I have virtually no income other than my savings
Heard a bit about SIPPs and have been told I should put money in a SIPP to get tax relief back - but I don't pay tax except potentially a little on my savings, so not sure I understand how I can get tax relief
I right in thinking I can contribute a maximum of £2880 pa, and get £720 tax relief?

I do have a pension pot with Standard Life, which I am not adding to, nor drawing from
I'm very wary of investing as its outside my knowledge and I have low risk tolerance
Is there a way of putting money into a cash SIPP
It feels like if I can get effectively 25% tax relief, that's a good return without any profits from investing or interest from saving

Any guidance on SIPPs would be very welcome

threlkeld53

Yes, you're correct about the '£2880'. Many people on here do the same. If you have no income, it's a good way of earning a free £720 for a bit of online work.


For example, you pay into a SIPP £2880 on say 1st-4th May. Keep it there in cash. On 21st June HMRC will add 25% tax relief of £720, turning it into £3600. On the same day, you crystalize this amount and request the £900 tax free element (25% of £3600). You also request the balance of £2700 which will be paid to you 28th July. 

So basically you laid out £2880 and received £3600 back. All done in a 12 week turnaround.

proudgecko

this year I am going to be just about on the edge of paying tax on my savings (good place to be in)
but am I right in thinking I can pay the 2880 each year, getting the gov money, request £900 tax free each year, and leave the balance in the IPP ( to avoid tax), then when my interest from savings is lower, I can request more of the balance
I guess there will be a balancing act to compare keeping the balance in the SIPP each year vs withdrawing it, paying tax but earning decent interest outside the SIPP

do the platforms charge fees for keeping a cash only SIPP?
any suggestions on the platform to use

ColdIron

proudgecko said:

do the platforms charge fees for keeping a cash only SIPP?
any suggestions on the platform to use

Many, including HL, will pay you interest on cash in the account

Albermarle

this year I am going to be just about on the edge of paying tax on my savings (good place to be in

If you have no earnings then this must mean that you will be earning over £18,570 in interest in a year.

That means you must already have a large amount of cash savings, so why worry about keeping the £3K pa in the SIPP in cash?

You say you have a low risk tolerance, but having so much cash and so little invested is a risk in itself due to inflation risk.

As an aside your Standard Life pension and SIPP's are legally the same, the differences are largely cosmetic.. They are both Defined Contribution pensions. Presumably the SL pension is not in cash as well ?

proudgecko

Yes, I have a fairly large savings pot - I'm living off the interest & capital for the moment - so want to maximise the income from this with low risk - and 25% on £2880 seems a good pay back

I do understand the inflationary risk on my savings
SL pension is invested - not cash - I'm ok with this much being invested but I don't want more of my money in investments

proudgecko

ColdIron said:

proudgecko said:

do the platforms charge fees for keeping a cash only SIPP?
any suggestions on the platform to use

Many, including HL, will pay you interest on cash in the account

Is this interest taxable?

ColdIron

proudgecko said:

ColdIron said:

proudgecko said:

do the platforms charge fees for keeping a cash only SIPP?
any suggestions on the platform to use

Many, including HL, will pay you interest on cash in the account

Is this interest taxable?

Not in a SIPP or ISA

Albermarle

proudgecko said:

Yes, I have a fairly large savings pot - I'm living off the interest & capital for the moment - so want to maximise the income from this with low risk - and 25% on £2880 seems a good pay back

I do understand the inflationary risk on my savings
SL pension is invested - not cash - I'm ok with this much being invested but I don't want more of my money in investments

Just for info, it should be OK to add the £2880 to your old SL pension, rather than opening a new pension.
However I do not think they will have an interest paying cash fund, so it would have to be invested in some way.

proudgecko

hi, me again with more stupid questions about SIPPs - apologies
I have opened a HL cash SIPP and deposited £2880 and expect the £720 tax relief in May. If I withdraw some money now does that reduce the tax relief or is the tax relief based on the original deposits only ?

I'm just checking my finances for 2023/24 tax year and think I will have earned around 7000 in income & £10000 interest so am I right in thinking I can take out £1570 tax free as it won't take me over the limit on paying tax (I believe £18570) ?
This is the first time I've had to consider tax on interest and not sure if I've got my calculations correct

Albermarle

For the first part, I think you should be OK, but best to check with HL first.

For the second part. 
If you withdraw the £2880 from the SIPP then 25% will be tax free and 75% taxable as income. So this 75% would be added to your other £7K taxable income. 
The savings starter rate of £5K and £1000 Personal savings allowance only applies to savings interest .

Note also the withdrawal from the SIPP will most likely get taxed, and then you will have to claim it back from HMRC.