Adding £2,880 to pension

bigbill

If I was to add the maximum for a non earner at £2,880 after this tax year April 7th onwards to my existing small pension pot wait on Gov top up at £720 to be added, can I then withdraw that full amount £3,600 after a few weeks? 

Albermarle

bigbill said:

If I was to add the maximum for a non earner at £2,880 after this tax year April 7th onwards to my existing small pension pot wait on Gov top up at £720 to be added, can I then withdraw that full amount £3,600 after a few weeks? 

Yes you can, but the thing to watch out for is the provider closing your account if there is nothing in it. Have a close look at the T's and C's

poolboy

Won't 75% of the sipp withdrawal be taxed at your marginal rate, so you are surrendering the tax uplift on entry.

I m pretty sure I read on here that someone was doing as you suggest, like recycling your cash to gain 720 gbp.

Sorry I don't know, I only qualify for the 3.6k sipp but plan to buy an annuity, for its simplicity.

Dazed_and_C0nfused

poolboy said:

Won't 75% of the sipp withdrawal be taxed at your marginal rate, so you are surrendering the tax uplift on entry.

I m pretty sure I read on here that someone was doing as you suggest, like recycling your cash to gain 720 gbp.

Sorry I don't know, I only qualify for the 3.6k sipp but plan to buy an annuity, for its simplicity.

No, you are surrendering 75% of it.

The £3,600 has only cost you £2,880.

If you are a basic rate payer when you take it out (and haven't used your maximum tax free cash) then you get £900 tax free.  And £2,700 less £540 tax.  A total of £900 + £2,160 = £3,060.

£180 more than you paid in the first place (6.25% return).

poolboy

OK thanks for clarifying, so the poster i referred to recycles his cash every year for the 180 gbp.  Not a bad return.

bigbill

Many thanks for this help.

Section62

bigbill said:

If I was to add the maximum for a non earner at £2,880 after this tax year April 7th onwards to my existing small pension pot wait on Gov top up at £720 to be added, can I then withdraw that full amount £3,600 after a few weeks? 

Not been mentioned yet, but to be able to withdraw (and therefore for this to work) you normally have to be over 55 years old.

jimjames

bigbill said:

If I was to add the maximum for a non earner at £2,880 after this tax year April 7th onwards to my existing small pension pot wait on Gov top up at £720 to be added, can I then withdraw that full amount £3,600 after a few weeks? 

Only if you are over 55 (will be changing to over 57 shortly)

NoMore

Section62 said:

bigbill said:

If I was to add the maximum for a non earner at £2,880 after this tax year April 7th onwards to my existing small pension pot wait on Gov top up at £720 to be added, can I then withdraw that full amount £3,600 after a few weeks? 

Not been mentioned yet, but to be able to withdraw (and therefore for this to work) you normally have to be over 55 years old.

And under 75 to get the tax relief that enables it.

happybagger

Dazed_and_C0nfused said:
No, you are surrendering 75% of it.

The £3,600 has only cost you £2,880.

If you are a basic rate payer when you take it out (and haven't used your maximum tax free cash) then you get £900 tax free.  And £2,700 less £540 tax.  A total of £900 + £2,160 = £3,060.

£180 more than you paid in the first place (6.25% return).

Separate question to OP's, if a non-taxpayer, presume the £3600 is not taxed, as it is added to income for the year (unless it takes you into paying tax)?

And - if the other income is solely savings interest, does the starter rate still apply,
eg 
£14k interest, £3600 SIPP withdrawal
£17,600 total, less £1k PSA, £12,570 personal allowance, £4,030 not taxed due to starting rate 0% on savings?

(I get that £900 of the SIPP withdrawal can be take tax free also)

Are my reading of the rules correct?

masonic

happybagger said:

Dazed_and_C0nfused said:
No, you are surrendering 75% of it.

The £3,600 has only cost you £2,880.

If you are a basic rate payer when you take it out (and haven't used your maximum tax free cash) then you get £900 tax free.  And £2,700 less £540 tax.  A total of £900 + £2,160 = £3,060.

£180 more than you paid in the first place (6.25% return).

Separate question to OP's, if a non-taxpayer, presume the £3600 is not taxed, as it is added to income for the year (unless it takes you into paying tax)?

And - if the other income is solely savings interest, does the starter rate still apply,
eg 
£14k interest, £3600 SIPP withdrawal
£17,600 total, less £1k PSA, £12,570 personal allowance, £4,030 not taxed due to starting rate 0% on savings?

(I get that £900 of the SIPP withdrawal can be take tax free also)

Are my reading of the rules correct?

Yes, those with very low earned/pension incomes would still get the benefit of the starter rate plus remainder of personal allowance.