£2880/£3600 in SIPP - how to withdraw

2childmum2

I have recently found out (via this page) that I can pay £2880 into a SIPP and tax relief will be added to make up the amount to £3600.  I read about some people who are doing this each year and withdrawing the money again - it sounded like a fairly easy way to make a little money which I will use to buy the 3 years NI contributions I need to get a full state pension.  I have no earnings at the moment.

I opened a SIPP with Hargreaves Lansdown, choosing to keep the money in cash, last tax year, and the tax relief has been added to it.  So now I would like to withdraw the money (minus £50 needed to keep the account open) but I am struggling a bit to work out how!

I contacted HL and told them what I wanted to do and I received a cut-and-paste answer detailing the different ways of accessing my pension (ie drawdown, tax free lump sum, buy an annuity etc) but nothing about how to actually do it.

I routed around on the webpage and finally found a page where I could request an illustration, which I did, and that has arrived today with a risk questionnaire, most of which isn't really that relevant but I understand that it is a requirement I fill it in.  The accompanying letter said to either send it back and I would be sent an application form, or go on-line and do it there.  I have been on-line, filled in the risk questionnaire, and am now told I will be sent an illustration - I already have that!  Is there some other way to receive an application form?

I feel a bit like I am going round in circles!

For those of you who have done this before (and made it sound easy) am I missing something?  Do I have to repeat this each year?

Many thanks

squirrelpie

I assume you found https://www.hl.co.uk/retirement/ufpls and that contrary to the description on that page you found a web address for the risk questionnaire on the paper copy they sent you? I think the documents you have will also mention a phone number for their Pensions Helpdesk on 0117 980 9926 and I suggest you call that number and explain what you have done and what you now want to do. It sounds like something got confused when completing the risk questionnaire.

And yes, I believe you will have to complete a risk questionnaire every year. (IIRC it's after six months you need a new one). But hopefully you won't have to repeat the confusion every year!

Also, do consider taking out a smaller amount first if this is the first time you've made a withdrawal from this account. Otherwise you will be taxed with an emergency tax code and will have to wait for a refund. According to https://www.hl.co.uk/retirement/preparing/tax-matters/emergency-calculator the most you can take on the first withdrawal is £1396.

2childmum2

Thanks for your answer.

Yes I think that was the webpage I found and filled in the details there for an illustration. It says 'illustration and application pack' but no application form arrived. It said the next step was to either send back the risk questionnaire or complete it online ( with a link) and then I would be sent the application form but I'm not sure that is going to happen 
I've messaged them again asking about the application form - if I don't hear back within a couple of days I'll phone.

Thank you also for the advice about only taking a small amount first. However, the illustration is based on taking all but £50 - if I change my mind I can see me ending up back at the beginning again! I will have no other income this tax year, apart from interest on savings, so my plan is so claim back the tax straight away

Next tax year I will start to receive a small pension (less than £5000) and have no idea how the tax for that plus doing this paying in £2880 and taking it out thing will work. But I will worry about that next year!

Thanks again

squirrelpie

2childmum2 said:

Thank you also for the advice about only taking a small amount first. However, the illustration is based on taking all but £50 - if I change my mind I can see me ending up back at the beginning again! I will have no other income this tax year, apart from interest on savings, so my plan is so claim back the tax straight away

Next tax year I will start to receive a small pension (less than £5000) and have no idea how the tax for that plus doing this paying in £2880 and taking it out thing will work. But I will worry about that next year!

I don't think reducing the amount will cause a problem, but again you could ask first. They're very helpful in my experience.

You'll be able to take both your £5000 pension and £3600 via HL without paying any tax if they're your only taxable income. It should all be automatic.

otb666

i have done this last 2 years.  You can add the 2700 to your tax account on goverment website once you have taken the first payment.  Heres my thread https://forums.moneysavingexpert.com/discussion/6441598/hl-2880-to-3600/p1
Its best to call them and get form sent to you.  Its all a bit clunky but well worth it.
Going forward you can only put in 4000 a year in pensions as it trigers The MPAA (money purchase annual allowance) was introduced with pension freedoms and this limits the amount of money which can be contributed to a money purchase scheme once pensions have been flexibly accessed before a tax charge is payable. but not something that effects me as I no longer work.  As you see it took me  several pages of comments but as always some very helpful people on here

molerat

What it shows on the illustration is irrelevant, it is what is on the application that counts - mine is always different to the illustration - so if you want to pay no tax withdraw £1397 first.  Once the tax code is applied,usually after a day or so of them paying out, you can figure out the best approach to withdraw the rest without paying tax.  Hopefully now you have filled in the on line questionnaire they will send you the application.  You will need to prove ID to make the first withdrawal, not sure if they have moved into the 21st century on that one yet or still require a copy of birth certificate, marriage certificate if applicable and an in the post bank statement.  And, as this is last years money, you need to get another £2880 in to get it out this year.

squirrelpie

otb666 said:

Going forward you can only put in 4000 a year in pensions as it trigers The MPAA (money purchase annual allowance)

The MPAA is presently £10,000 rather than £4,000 (see e.g. https://www.mandg.com/wealth/adviser-services/tech-matters/pensions/annual-allowance/money-purchase-annual-allowance ) but otherwise a good point.

Grumpy_chap

squirrelpie said:

otb666 said:

Going forward you can only put in 4000 a year in pensions as it trigers The MPAA (money purchase annual allowance)

The MPAA is presently £10,000 rather than £4,000 (see e.g. https://www.mandg.com/wealth/adviser-services/tech-matters/pensions/annual-allowance/money-purchase-annual-allowance ) but otherwise a good point.

Assuming the OP is receiving sufficient earned income

2childmum2

Any thanks everyone. You've been very helpful.

Its very unlikely I will be earning anything now before I retire so triggering the MPAA won't be an issue.  

I'll have a read of otb666's thread - thanks for the link.