Tax-free sum ... hedging my bets

valiant24

I have quite a substantial sum in my SIPP.  I also have "2012 Protection" which means that as things stand today I could take out up to £450,000 tax free.

Concerned as I am about Ms Reeves' intentions in next week's budget I have applied to take the full tax-free sum that I can now.  Obviously if she doesn't lower or abolish the tax-free sum I'll have done so unnecessarily.

My accountant reckons that there's a 14-day grace period and that, if the Chancellor doesn't touch the lump-free sum in a way that affects me, I can repay it all and carry on as before.

I can't find any reference to that anywhere via web searches though.   Does anyone have an informed view on his opinion?

Thanks
V

vacheron

Drawing out almost half a million pounds from a pension (and losing out on potentially decades of investment compounding within your SIPP) sounds like a huge risk based on a guess of a politicians future intentions and "my accountant reckons".   

I've never heard of a cooling off period for tax free pension withdrawls. There certainly wasn't one in 2018.
I sincerely hope your accountant (who, it should be stated, is not a financial advisor) isn't assuming that this will be covered by the 14 day distance selling regulations!

Even if you are planning to re-invest outside of the SIPP, it will take you 25 years+ to get that all back into your ISA, and until then you could get turned over by capital gains tax, which is another thing that she has her eyes firmly set on!

Dazed_and_C0nfused

valiant24 said:

I have quite a substantial sum in my SIPP.  I also have "2012 Protection" which means that as things stand today I could take out up to £450,000 tax free.

Concerned as I am about Ms Reeves' intentions in next week's budget I have applied to take the full tax-free sum that I can now.  Obviously if she doesn't lower or abolish the tax-free sum I'll have done so unnecessarily.

My accountant reckons that there's a 14-day grace period and that, if the Chancellor doesn't touch the lump-free sum in a way that affects me, I can repay it all and carry on as before.

I can't find any reference to that anywhere via web searches though.   Does anyone have an informed view on his opinion?

Thanks
V

I presume you understand the tax implications for the remaining 75% (assuming you plan on taking taxable income in the future)?

valiant24

vacheron said:

Drawing out almost half a million pounds from a pension (and losing out on potentially decades of investment compounding within your SIPP) sounds like a huge risk based on a guess of a politicians future intentions and "my accountant reckons".   

I've never heard of a cooling off period for tax free pension withdrawls. There certainly wasn't one in 2018.
I sincerely hope your accountant (who, it should be stated, is not a financial advisor) isn't assuming that this will be covered by the 14 day distance selling regulations!

Even if you are planning to re-invest outside of the SIPP, it will take you 25 years+ to get that all back into your ISA, and until then you could get turned over by capital gains tax, which is another thing that she has her eyes firmly set on!

Thank you for the link.  I hadn't found that one, and it is quite instructive: I certainly can't find any link saying that the concerns raised had been addressed.  You evidently framed the query more effectively than I did!

You're right, my accountant isn't an IFA, and he explicitly stated that he cannot offer advice on this matter.  He did tell me that he's taken his tax-free sum  though.   I did ask him to point out any errors in my reasoning.  The reasoning goes like this:

1.      The £450,000 will become subject to IHT, but I am happy to accept this because a) my wife is my sole heir and most likely to inherit free of IHT anyway; b) this IHT exemption will get changed soon enough, perhaps even next week and c) Master and Miss Valiant are feckless wastrels ;-)

2.      The £450,000 protection I have is unlikely ever to be raised by a future government.

 3.      The £450,000, however invested, will henceforth grow and the growth will attract CGT and income tax.  But if I left it within the SIPP and it grew free of these things, I'd still pay income tax on the surplus when eventually I withdrew it, so the loss of tax-free gain is fairly small relative to the impact of a retrospective reduction in the tax free sum.

valiant24

Dazed_and_C0nfused said:

valiant24 said:

I have quite a substantial sum in my SIPP.  I also have "2012 Protection" which means that as things stand today I could take out up to £450,000 tax free.

Concerned as I am about Ms Reeves' intentions in next week's budget I have applied to take the full tax-free sum that I can now.  Obviously if she doesn't lower or abolish the tax-free sum I'll have done so unnecessarily.

My accountant reckons that there's a 14-day grace period and that, if the Chancellor doesn't touch the lump-free sum in a way that affects me, I can repay it all and carry on as before.

I can't find any reference to that anywhere via web searches though.   Does anyone have an informed view on his opinion?

Thanks
V

I presume you understand the tax implications for the remaining 75% (assuming you plan on taking taxable income in the future)?

I'll pay income tax on it as I withdraw it.

Albermarle

The £450,000, however invested, will henceforth grow and the growth will attract CGT and income tax.

Have you considered that managing £450K of investments outside a tax wrapper will be quite an admin exercise/headache if you are not used to it.
Whereas zero input needed at the moment.

valiant24

Albermarle said:

The £450,000, however invested, will henceforth grow and the growth will attract CGT and income tax.

Have you considered that managing £450K of investments outside a tax wrapper will be quite an admin exercise/headache if you are not used to it.
Whereas zero input needed at the moment.

I'm not quite sure I get your point.  The amount of management in investing the £450k within an (say) AJ Bell dealing account will be exactly the same as within an AJ Bell SIPP account.

Unless you mean that, within the dealing account, I'll need to keep a track on gains, losses and income and include them on my annual tax return?

Thanks
V

wjr4

Why are you asking your accountant for financial advice? Most accounts I know don’t have a clue about pensions and basic financial advice!

wjr4

valiant24 said:

vacheron said:

Drawing out almost half a million pounds from a pension (and losing out on potentially decades of investment compounding within your SIPP) sounds like a huge risk based on a guess of a politicians future intentions and "my accountant reckons".   

I've never heard of a cooling off period for tax free pension withdrawls. There certainly wasn't one in 2018.
I sincerely hope your accountant (who, it should be stated, is not a financial advisor) isn't assuming that this will be covered by the 14 day distance selling regulations!

Even if you are planning to re-invest outside of the SIPP, it will take you 25 years+ to get that all back into your ISA, and until then you could get turned over by capital gains tax, which is another thing that she has her eyes firmly set on!

Thank you for the link.  I hadn't found that one, and it is quite instructive: I certainly can't find any link saying that the concerns raised had been addressed.  You evidently framed the query more effectively than I did!

You're right, my accountant isn't an IFA, and he explicitly stated that he cannot offer advice on this matter.  He did tell me that he's taken his tax-free sum  though.   I did ask him to point out any errors in my reasoning.  

So you’re basing your own finances on what your accountant has done? Sounds like a terrible accountant to me. 

NoMore

Your not hedging your bets at all, you are going all in on the assumption that something might happen.

Dazed_and_C0nfused

valiant24 said:

Dazed_and_C0nfused said:

valiant24 said:

I have quite a substantial sum in my SIPP.  I also have "2012 Protection" which means that as things stand today I could take out up to £450,000 tax free.

Concerned as I am about Ms Reeves' intentions in next week's budget I have applied to take the full tax-free sum that I can now.  Obviously if she doesn't lower or abolish the tax-free sum I'll have done so unnecessarily.

My accountant reckons that there's a 14-day grace period and that, if the Chancellor doesn't touch the lump-free sum in a way that affects me, I can repay it all and carry on as before.

I can't find any reference to that anywhere via web searches though.   Does anyone have an informed view on his opinion?

Thanks
V

I presume you understand the tax implications for the remaining 75% (assuming you plan on taking taxable income in the future)?

I'll pay income tax on it as I withdraw it.

And on any increase from investment performance, interest and dividends which increases the 75%.