Lump sum on retirement into SIPP as one last contribution?

RichardS

Hi all.  I currently pay 50% of my £60k salary into my workplace pension through salary sacrifice.  When I retire I will receive a lump sum of around £55k-£60k due to some equity I have in the company share scheme.  I would think it would be a good idea to make one last payment into my SIPP at this point before I start to crystallise and withdraw funds.  I planned to retire at the end of the tax year (for no other reason than simplicity really) so could I simply pay that £55k into my SIPP the following day  - the start of the next tax year - and benefit from the additional 20% tax relief?  

NoMore

First, there's lump sum recycling rules designed to stop things like this PTM133810 - Unauthorised payments: Deemed or specific situations that are unauthorised payments: recycling of pension commencement lump sums: overview - HMRC internal manual - GOV.UK 

Secondly, ignoring if its recycling or not, doing it in the next tax year will not work as you won't have any relevant income to cover the tax relief. Essentially you are only entitled to relief based on your relevant income (pension income doesn't count). You could possibly do it in the same tax year but, how much you could put in would depend on your income and other contributions already made to any pensions.

bjorn_toby_wilde

NoMore said:

First, there's lump sum recycling rules designed to stop things like this PTM133810 - Unauthorised payments: Deemed or specific situations that are unauthorised payments: recycling of pension commencement lump sums: overview - HMRC internal manual - GOV.UK 

Secondly, ignoring if its recycling or not, doing it in the next tax year will not work as you won't have any relevant income to cover the tax relief. Essentially you are only entitled to relief based on your relevant income (pension income doesn't count). You could possibly do it in the same tax year but, how much you could put in would depend on your income and other contributions already made to any pensions.

It’s not a PCLS so recycling doesn’t apply. The OP states it’s from equity in the company share scheme.

Your second point is valid though. OP you could make a payment, although not the full £55k, in the current tax year. Why wait until after retirement?

NoMore

Ah skim read and missed the lump sum wasn't a PCLS. 

Sarahspangles

RichardS said:

Hi all.  I currently pay 50% of my £60k salary into my workplace pension through salary sacrifice.  When I retire I will receive a lump sum of around £55k-£60k due to some equity I have in the company share scheme.  I would think it would be a good idea to make one last payment into my SIPP at this point before I start to crystallise and withdraw funds.  I planned to retire at the end of the tax year (for no other reason than simplicity really) so could I simply pay that £55k into my SIPP the following day  - the start of the next tax year - and benefit from the additional 20% tax relief?  

Although you get tax relief ‘on the way in’ if you’d be paying basic rate tax when you draw on your SIPP the gain isn’t as significant (6.25% I think). You presumably have the option of salary sacrificing more into your employer pension or paying more into your SIPP in the final year of employment, assuming you have savings to live on. You can then make the maximum contribution to a S&S ISA over a couple of tax years, depending on the timing of receipt from the share scheme.