I did it… I’m retiring… no more dithering

Dew_2

bluenose1 said:

@katejo and @moonwolf. In the tax year you retire I would consider putting all your taxable earnings into a SIPP for the 6.25% return after tax. I put mine in a cash HL SIPP and withdrew it about 9 weeks later when it had been topped up. Depending on whether you leave before or end of next tax year Moonwolf you may also want to consider it for this tax year if you have savings you can use, doesn’t need to be paid in until just before end of 24/25 tax year. Just need to make sure withdrawing it wouldn’t make you a higher rate tax payer in that year.
I also used the “small pots” rule in the run up to retirement to get 3 x £10,000 withdrawal. Worth checking on here if you don’t know about it. Basically I put £8,000 into a HL SIPP and it is  topped up to £10,000 after about 9 weeks. After tax you get £8,500 back, do it again twice more with the same £8k if required,  again be careful doesn’t put you in higher rate tax bracket. Great to make £500 for an hour or so work. 

Katejo - I think it’s known that people can  find it difficult to spend in retirement after so many years of accumulation. I have worked my income and savings out until age 67 when SP starts, keeping back a set amount of savings for emergencies, and have given myself a monthly allowance to cover all essential spending and a “fun” fund. Feel like a monthly salary.

I have a Fidelity SIPP.  Can I pay X amount into it as cash (i.e. not into my tracker fund) and leave it as cash, and still get the 20% tax top up? I'm a higher rate tax payer and claim the additional 20% I pay into my SIPP tracker via self assessment. 

ColdIron

Dew_2 said:

bluenose1 said:

@katejo and @moonwolf. In the tax year you retire I would consider putting all your taxable earnings into a SIPP for the 6.25% return after tax. I put mine in a cash HL SIPP and withdrew it about 9 weeks later when it had been topped up. Depending on whether you leave before or end of next tax year Moonwolf you may also want to consider it for this tax year if you have savings you can use, doesn’t need to be paid in until just before end of 24/25 tax year. Just need to make sure withdrawing it wouldn’t make you a higher rate tax payer in that year.
I also used the “small pots” rule in the run up to retirement to get 3 x £10,000 withdrawal. Worth checking on here if you don’t know about it. Basically I put £8,000 into a HL SIPP and it is  topped up to £10,000 after about 9 weeks. After tax you get £8,500 back, do it again twice more with the same £8k if required,  again be careful doesn’t put you in higher rate tax bracket. Great to make £500 for an hour or so work. 

Katejo - I think it’s known that people can  find it difficult to spend in retirement after so many years of accumulation. I have worked my income and savings out until age 67 when SP starts, keeping back a set amount of savings for emergencies, and have given myself a monthly allowance to cover all essential spending and a “fun” fund. Feel like a monthly salary.

I have a Fidelity SIPP.  Can I pay X amount into it as cash (i.e. not into my tracker fund) and leave it as cash, and still get the 20% tax top up? I'm a higher rate tax payer and claim the additional 20% I pay into my SIPP tracker via self assessment. 

Assuming you have not hit the £60,000 Annual Allowance or have Carry Forward available to you if you have then yes you can

Dew_2

Thanks ColdIron. If I then withdraw this cash plus the 20% top up, does that mean I've crystalised my pot and do I get 25% of it back tax free?   I wouldn't withdraw it until I retire next year.

katejo

bluenose1 said:

@katejo and @moonwolf. In the tax year you retire I would consider putting all your taxable earnings into a SIPP for the 6.25% return after tax. I put mine in a cash HL SIPP and withdrew it about 9 weeks later when it had been topped up. Depending on whether you leave before or end of next tax year Moonwolf you may also want to consider it for this tax year if you have savings you can use, doesn’t need to be paid in until just before end of 24/25 tax year. Just need to make sure withdrawing it wouldn’t make you a higher rate tax payer in that year.
I also used the “small pots” rule in the run up to retirement to get 3 x £10,000 withdrawal. Worth checking on here if you don’t know about it. Basically I put £8,000 into a HL SIPP and it is  topped up to £10,000 after about 9 weeks. After tax you get £8,500 back, do it again twice more with the same £8k if required,  again be careful doesn’t put you in higher rate tax bracket. Great to make £500 for an hour or so work. 

Katejo - I think it’s known that people can  find it difficult to spend in retirement after so many years of accumulation. I have worked my income and savings out until age 67 when SP starts, keeping back a set amount of savings for emergencies, and have given myself a monthly allowance to cover all essential spending and a “fun” fund. Feel like a monthly salary.

I already use a budgeting software which I started 10 years ago so I have clear categories for everything including emergency funds and everything else. Aren't there limits on a SIPP? i already have the max amount in an ISA for this tax  year.

ColdIron

Dew_2 said:

Thanks ColdIron. If I then withdraw this cash plus the 20% top up, does that mean I've crystalised my pot and do I get 25% of it back tax free?   I wouldn't withdraw it until I retire next year.

Assuming you will be 55 at the time of withdrawal then in principle yes and you can take the 25% tax free sum

However depending on the sums involved you might want to consider the tax treatment of the taxable amount if you withdraw a lump sum (UFPLS). Are we talking a couple of grand or a couple of dozen grand or more?

Also be aware that UFPLS will trigger the MPAA (Money Purchase Annual Allowance) which would restrict your future pension contributions to £10,000. This may or may not matter to you

Accessing the cash will not have any affect on the crystallised status of your tracker fund, in other words you will not have 'crystalised my pot'

Dew_2

Thanks ColdIron and apologies Sunsh1ne54 for hijacking your thread!  I earn £62k of which £4k is a car allowance.  I pay £900 a month into my SIPP.  I'm retiring at the end of the year and know I can't pay in more to my pension than I earn in a year.  I paid £600 a month into my SIPP  last year. I could pay in £30k as a lump sum. So, if I'm understanding correctly,  this would add £6k in tax refund. I could then withdraw it all either as a tax free lump sum (overall SIPP worth £290k), or each withdrawal would be @25% tax free?

ColdIron

Dew_2 said:

I could pay in £30k as a lump sum. So, if I'm understanding correctly,  this would add £6k in tax refund. I could then withdraw it all either as a tax free lump sum (overall SIPP worth £290k), or each withdrawal would be @25% tax free?

 A £30,000 SIPP contribution would receive £7,500 basic rate relief not £6,000

A UFPLS withdrawal would be 25% tax free but the other 75% would be taxable. You can't take a UFPLS lump sum 100% tax free

It would be possible to crystallise £150,000 into flexi access drawdown and take a £37,500 PCLS leaving £112,500 crystallised and £140,000 uncrystallised but I wonder if we are getting a bit off track here

Perhaps you could say what you are trying to achieve, possibly in a new thread. If it's to put £30,000 into your SIPP and withdraw £37,500 tax free and not affect anything else, it can't be done

bluenose1

katejo said:

bluenose1 said:

@katejo and @moonwolf. In the tax year you retire I would consider putting all your taxable earnings into a SIPP for the 6.25% return after tax. I put mine in a cash HL SIPP and withdrew it about 9 weeks later when it had been topped up. Depending on whether you leave before or end of next tax year Moonwolf you may also want to consider it for this tax year if you have savings you can use, doesn’t need to be paid in until just before end of 24/25 tax year. Just need to make sure withdrawing it wouldn’t make you a higher rate tax payer in that year.
I also used the “small pots” rule in the run up to retirement to get 3 x £10,000 withdrawal. Worth checking on here if you don’t know about it. Basically I put £8,000 into a HL SIPP and it is  topped up to £10,000 after about 9 weeks. After tax you get £8,500 back, do it again twice more with the same £8k if required,  again be careful doesn’t put you in higher rate tax bracket. Great to make £500 for an hour or so work. 

Katejo - I think it’s known that people can  find it difficult to spend in retirement after so many years of accumulation. I have worked my income and savings out until age 67 when SP starts, keeping back a set amount of savings for emergencies, and have given myself a monthly allowance to cover all essential spending and a “fun” fund. Feel like a monthly salary.

I already use a budgeting software which I started 10 years ago so I have clear categories for everything including emergency funds and everything else. Aren't there limits on a SIPP? i already have the max amount in an ISA for this tax  year.

You  can put 100% of your earnings into a SIPP, the maximum allowed is £60k per year. SIPPs are not  linked to ISAs. 

I always get mixed up with the terminology but think you actually pay in 80% of your taxable pay and HMRC top up your SIPP by 25%.
I will be putting in £2,880 per year from this year for the 6.25% uplift, this is the max allowed when no earned income.

katejo

bluenose1 said:

katejo said:

bluenose1 said:

@katejo and @moonwolf. In the tax year you retire I would consider putting all your taxable earnings into a SIPP for the 6.25% return after tax. I put mine in a cash HL SIPP and withdrew it about 9 weeks later when it had been topped up. Depending on whether you leave before or end of next tax year Moonwolf you may also want to consider it for this tax year if you have savings you can use, doesn’t need to be paid in until just before end of 24/25 tax year. Just need to make sure withdrawing it wouldn’t make you a higher rate tax payer in that year.
I also used the “small pots” rule in the run up to retirement to get 3 x £10,000 withdrawal. Worth checking on here if you don’t know about it. Basically I put £8,000 into a HL SIPP and it is  topped up to £10,000 after about 9 weeks. After tax you get £8,500 back, do it again twice more with the same £8k if required,  again be careful doesn’t put you in higher rate tax bracket. Great to make £500 for an hour or so work. 

Katejo - I think it’s known that people can  find it difficult to spend in retirement after so many years of accumulation. I have worked my income and savings out until age 67 when SP starts, keeping back a set amount of savings for emergencies, and have given myself a monthly allowance to cover all essential spending and a “fun” fund. Feel like a monthly salary.

I already use a budgeting software which I started 10 years ago so I have clear categories for everything including emergency funds and everything else. Aren't there limits on a SIPP? i already have the max amount in an ISA for this tax  year.

You  can put 100% of your earnings into a SIPP, the maximum allowed is £60k per year. SIPPs are not  linked to ISAs. 

I always get mixed up with the terminology but think you actually pay in 80% of your taxable pay and HMRC top up your SIPP by 25%.
I will be putting in £2,880 per year from this year for the 6.25% uplift, this is the max allowed when no earned income.

Even if I am paying into a DB pension? I am a standard rate tax payer. 

gerdo

Be aware that when people say you can put 100% of your earnings into your pension, you should yourself only be putting in 80% and the taxman puts in the other 20% thus making it 100% of your salary