New SIPP, aged over 75

Cus

If a person of good health, aged over 75, not employed, opened a SIPP, are they allowed to contribute say £200k in one lump sum?
I know they would not receive any tax relief.  However, in theory the £200k would now be outside of their estate for IHT purposes. Assume the person would be liable to IHT on this amount if it still was inside their estate, I read that HMRC may look on this as an IHT tax avoidance. Does anyone know the actual process to assess this?

Edit - I understand the beneficiaries would be taxed at their marginal rate

Stubod

No....

"Anyone under the age of 75 can pay into a SIPP. Even if you're not earning, you can contribute up to £2,880 net each tax year and receive tax relief. And if you're a parent, you can open a Junior SIPP for each child – just remember that they won't be able to access it until they reach at least age 55 (57 from 2028)".

Cus

From my limited research, you can pay on after age 75, you just don't get any tax relief, and also many SIPP providers do not allow it (probably due to issues with automatic tax relief) but nowhere I can see it is actually legally not allowed 

xylophone

https://moneyforums.citywire.com/yaf_postsm120494_SIPP-Contributions-after-age-75.aspx

may be of interest.

Dazed_and_C0nfused

And this.

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm044100

Marcon

Cus said:

If a person of good health, aged over 75, not employed, opened a SIPP, are they allowed to contribute say £200k in one lump sum?
I know they would not receive any tax relief.  However, in theory the £200k would now be outside of their estate for IHT purposes. Assume the person would be liable to IHT on this amount if it still was inside their estate, I read that HMRC may look on this as an IHT tax avoidance. Does anyone know the actual process to assess this?

Edit - I understand the beneficiaries would be taxed at their marginal rate

You're unlikely to find a SIPP provider who will open a new SIPP for someone aged 75 or over (the possible exception being to accept the proceeds of a pension sharing order on divorce).

What you're proposing would almost certainly be caught under the General Anti Abuse Rule (GAAR) unless something else caught it first!

Audaxer

You may still be able to contribute to a SIPP after age 75 even although you won't get tax relief. However I think you are still subject to the annual contribution limits. So if you are not employed you would be limited to £3,600 annually, or maybe even just the net amount of £2,880 as you are not getting any tax relief added.

DullGreyGuy

What are you actually trying to achieve? Just avoiding IHT on some investments that you won't need in your lifetime? Or is there a chance you will need to draw on it yourself if you live much longer than anticipated?

Cus

[Deleted User] said:

Marcon said:

What you're proposing would almost certainly be caught under the General Anti Abuse Rule (GAAR) unless something else caught it first!

Making a contribution to a SIPP when aged 75 or more would not be caught by the GAAR. If something else was done to make it more fancy (e.g. to extract cash without paying tax using some sort of contrived arrangement or relying on some sort of loophole) then all bets are off. 

Yes, there may be something else that creates an IHT. For example, if the OP intended to gratuitously benefit someone and no other exemption applies.  This is a particular issue if the OP was in ill health when the contribution was made.  The executors would also have to report the contribution to HMRC if the OP died within two years of making the contribution.
 

Yes, it's the specific laws/rules regarding determining if it is a gratuitous benefit that I can't find info on.
There is a scenario where moving part of the estate to a SIPP reduces the IHT liability more than 40% as it may reduce the estate below 2mn and therefore the resident nil band is better.  

Cus

Thanks. Did not know about the taper intricacies.  Likely it nullifies any action I suggested