Can I open a SIPP?

Ad_Astra

Hi

I have recently taken early retirement from work. I have contributed the maximum tax free savings into the company defined contribution benefits pension before I left. I have some cash left over so looking to save this as part of my pension planning. Can I open a SIPP as I am nolonger employed and make a one off payment into the SIPP in this financial tax year?

Many thanks

Marcon

Ad_Astra said:

Hi

I have recently taken early retirement from work. I have contributed the maximum tax free savings into the company defined contribution benefits pension before I left. I have some cash left over so looking to save this as part of my pension planning. Can I open a SIPP as I am nolonger employed and make a one off payment into the SIPP in this financial tax year?

Many thanks

Not sure what you mean by 'maximum' - please could you clarify?

Your tax-relievable annual allowance is £60K per year, including all personal contributions, tax relief on personal contributions, plus employer contributions. 

You can contribute to a SIPP in this financial year if you still have the necessary 'headroom' to do so; or you have carry forward available: https://www.moneyhelper.org.uk/en/pensions-and-retirement/tax-and-pensions/carry-forward In either case, you must have earnings sufficiently high in this financial year to cover your previous contributions to your company scheme AND any contribution to a SIPP.

Ad_Astra

By maximum I mean I have used this years tax free penison contribution allowance (60K) and all the unused tax free allowance from the previous three years. I am not looking for more tax free savings but I am looking for a home for the extra cash I have available. Can I open a SIPP with this cash as a one off payment?

MallyGirl

most SIPPs are not geared up to take payments in that shouldn't get tax relief. You would have to ask them if they accept this sort of contribution otherwise they will automatically apply for it 

Marcon

Ad_Astra said:

By maximum I mean I have used this years tax free penison contribution allowance (60K) and all the unused tax free allowance from the previous three years. I am not looking for more tax free savings but I am looking for a home for the extra cash I have available. Can I open a SIPP with this cash as a one off payment?

SIPP provides don't generally accept non-relievable contributions, so you'd need to find one who does - although whether it's a good idea is quite another matter. 

You can pay in £2,880 a year from 2024-25 until you hit age 75 and get basic rate tax relief even if you have no 'relevant earnings'. 

Presume you've maxed your ISA contributions? How about VCTs or other tax-efficient savings vehicles - or possible just a 'good' savings account?

QrizB

Ad_Astra said:

By maximum I mean I have used this years tax free penison contribution allowance (60K) and all the unused tax free allowance from the previous three years. I am not looking for more tax free savings but I am looking for a home for the extra cash I have available. Can I open a SIPP with this cash as a one off payment?

Why would you choose a SIPP rather than any of the other options?

You'll gain no tax relief paying in, but will pay income tax on 75% of it when you take it out.

Ad_Astra

I am looking for a way to take regular income. I thought if I put the cash into a SIPP I could use a drawdown plan to get an income. What other ways could I convert a pot of cash into a regular income? I am thinking a Cash ISA is not a good place for a long term draw down.

eskbanker

Ad_Astra said:

What other ways could I convert a pot of cash into a regular income?

Have you considered annuities?

Ad_Astra said:

I am thinking a Cash ISA is not a good place for a long term draw down.

You could use a combination of cash ISA for short term and S&S ISA for longer term?

Marcon

eskbanker said:

Ad_Astra said:

What other ways could I convert a pot of cash into a regular income?

Have you considered annuities?

Particularly a non-pension annuity (ie one bought with your own savings, rather than funds being withdrawn from a pension scheme), which has favourable tax treatment. Part of the income is deemed to be a return of capital, so isn't taxed.