Adding cash to SIPP for pension soon to be claimed

rothers

Micrographia said:

rothers said:

Ah, ok, thanks for that both of you. I’ll adjust the figures!

You may also be able to add any unused annual allowance carried forward from the previous 3 years to those figures.

https://www.gov.uk/guidance/check-if-you-have-unused-annual-allowances-on-your-pension-savings

Thanks, I'll have a look at that.

Dazed_and_C0nfused

rothers said:

Dazed_and_C0nfused said:

rothers said:

Dazed_and_C0nfused said:

rothers said:

Let's say that she just puts it into the vanguard SIPP that she currently has invested as cash. Before she retires she can put £45k in which will attract and additional 25% tax relief (£11,250) which means she will have a total of around £131,250 (£56,250 in cash and £75,000 invested). When she retires can she take the 25% tax free amount of the whole pot in one go (circa £33k) and take that from the cash part of the sipp, leaving the invested part to be drawn down over the next 12 years?

I hope that I am making a little bit of sense!!

Does she earn enough to add £56,250 across this and the tax year?

As in meeting the rules, not has she got the cash in the bank to do it.

She earns just short of £37k per year and pays 9.1% into her NHS pension. She hasn't paid anything extra into her SIPP this financial year and will have 6.5 months of the next financial year to make more contributions. Am I right in thinking that she can put up to 100% of her wage into a pension (in total) each financial year?

Edited to add that she will be adding £45k, the £56,250 is including the tax relief.

As she is in the NHS pension scheme I think yo will find she only actually earns £33.6k for tax and pension contribution purposes.

You should be able to see her taxable earnings on her payslips, this will be less than her salary and it is the taxable amount (which goes on her P60 each year) that matters.

Yeah, I've just looked at her payslip and they are two different amounts, why is that and how would I calculate it for the rest of the year as I want to put money into it in January? Cheers

Because the NHS operate a "net pay" pension scheme.

If her monthly salary is say £3,000 and her contribution rate is 9.1% then her taxable earnings will be £2,727.  And she avoids paying tax on the £273 pension contribution.

Dazed_and_C0nfused

Micrographia said:

rothers said:

Ah, ok, thanks for that both of you. I’ll adjust the figures!

You may also be able to add any unused annual allowance carried forward from the previous 3 years to those figures.

https://www.gov.uk/guidance/check-if-you-have-unused-annual-allowances-on-your-pension-savings

As the op's wife is only earning ~£33k it is unlikely that unused annual allowance is going to be a factor here, even allowing for the PIA for the DB scheme.

rothers

Dazed_and_C0nfused said:

rothers said:

Dazed_and_C0nfused said:

rothers said:

Dazed_and_C0nfused said:

rothers said:

Let's say that she just puts it into the vanguard SIPP that she currently has invested as cash. Before she retires she can put £45k in which will attract and additional 25% tax relief (£11,250) which means she will have a total of around £131,250 (£56,250 in cash and £75,000 invested). When she retires can she take the 25% tax free amount of the whole pot in one go (circa £33k) and take that from the cash part of the sipp, leaving the invested part to be drawn down over the next 12 years?

I hope that I am making a little bit of sense!!

Does she earn enough to add £56,250 across this and the tax year?

As in meeting the rules, not has she got the cash in the bank to do it.

She earns just short of £37k per year and pays 9.1% into her NHS pension. She hasn't paid anything extra into her SIPP this financial year and will have 6.5 months of the next financial year to make more contributions. Am I right in thinking that she can put up to 100% of her wage into a pension (in total) each financial year?

Edited to add that she will be adding £45k, the £56,250 is including the tax relief.

As she is in the NHS pension scheme I think yo will find she only actually earns £33.6k for tax and pension contribution purposes.

You should be able to see her taxable earnings on her payslips, this will be less than her salary and it is the taxable amount (which goes on her P60 each year) that matters.

Yeah, I've just looked at her payslip and they are two different amounts, why is that and how would I calculate it for the rest of the year as I want to put money into it in January? Cheers

Because the NHS operate a "net pay" pension scheme.

If her monthly salary is say £3,000 and her contribution rate is 9.1% then her taxable earnings will be £2,727.  And she avoids paying tax on the £273 pension contribution.

So in that case I can put up to her total taxable pay into a SIPP (including the tax rebate)? 

I had planned on taking her pension contributions off her gross pay to calculate how much she could put in so that will be easier if that is the case.  Cheers

GunJack

Couple of things you may not have taken into account:

1. Is she taking the db pension as soon as she stops working? If so, is your stated 4k pa after the actuarial reduction, which will be hefty if taking it 12 years early?

2. Have you considered leaving it deferred until NPA?

3. Have you considered, that if she's taking the db you will be able to take less from the sipp if you're determined for her not to pay tax?

4. It appears you're letting the tax tail wag the dog!!

rothers

GunJack said:

Couple of things you may not have taken into account:

1. Is she taking the db pension as soon as she stops working? If so, is your stated 4k pa after the actuarial reduction, which will be hefty if taking it 12 years early?

2. Have you considered leaving it deferred until NPA?

3. Have you considered, that if she's taking the db you will be able to take less from the sipp if you're determined for her not to pay tax?

4. It appears you're letting the tax tail wag the dog!!

Hi,

The £4k is after the actuarial deduction, what are the benefits of leaving the pension deferred until NPA? Is it simply to access the pension without the deduction? None of us know how long we are going to live for so my thoughts were that it is better to take the pension (albeit reduced) at 55yrs rather than wait for 12 years to take just less than double at 67. Wouldn't she only break even when she gets to around 78/79 years of age?

I am aware that I can take less from the sipp if she has accessed the NHS pension but there won't be enough in the sipp to take out over £16k tax free for 12 years anyway.

QrizB

rothers said:

None of us know how long we are going to live for so my thoughts were that it is better to take the pension (albeit reduced) at 55yrs rather than wait for 12 years to take just less than double at 67. Wouldn't she only break even when she gets to around 78/79 years of age?

Unless your wife has preexisting health problems, per the statistics she's more likely than not to live to her late 80s.

Of course if you have reasons to think she won't, that changes the calculation.

But that's just something you need to take into account. If drawing her pension at 55 still let's you both have the retirement you want, regardless of who predeceases the other or when, it's less important.