Partial Sipp withdrawal.

bab_bob

Hi. In my 50s working very part time as a self employed gardener. This tax year will likely earn approximately 9k. I have a Sipp with about 250k in it. Would I be correct in assuming I could use my unused portion of my tax code up to £12570 to remove some funds from my Sipp free of tax and park it into an s and s ISA? Thanks for any help. 

Marcon

bab_bob said:

Hi. In my 50s working very part time as a self employed gardener. This tax year will likely earn approximately 9k. I have a Sipp with about 250k in it. Would I be correct in assuming I could use my unused portion of my tax code up to £12570 to remove some funds from my Sipp free of tax and park it into an s and s ISA? Thanks for any help. 

Are you at least 55? That's the minimum age to access the funds in your SIPP, rising to 57 in April 2028, unless you have something called a 'protected pension age'. Your SIPP will be able to confirm if you do have a ppa.

bab_bob

Hi. Yes I'm over 55 and dont have a PPA. 

Dazed_and_C0nfused

bab_bob said:

Hi. In my 50s working very part time as a self employed gardener. This tax year will likely earn approximately 9k. I have a Sipp with about 250k in it. Would I be correct in assuming I could use my unused portion of my tax code up to £12570 to remove some funds from my Sipp free of tax and park it into an s and s ISA? Thanks for any help. 

One possible downside is this will mean you have triggered the Money Purchase Annual Allowance.  So future contributions will be limited to a maximum of £10k (gross) each tax year.  

If you haven't already taken some tax free cash then you will need to do that now to be able to take the ~£3.5k taxable pension income.

Secret2ndAccount

In principle yes.
If you are over 55
and you don't mind triggering the MPAA
you could take 4k out of your SIPP.  25% would be tax free. 1k tax free. 3k taxable, but you stay under 12,570 so no tax to pay. SIPP provider will likely take some tax, and you get it back later.
However, you need to get your tax years straight. As a self employed person, you will be declaring your profits from April to April. So, if you earned 9k to last April, you should have done this last March. You can do it this year/next year before April, based on this year's profits. Some estimation is required.

af1963

If your earnings are generally around £9k, MPAA is probably not a big issue for you, but if you wanted to avoid it you could check whether your SIPP provider would allow you to divide your pension to take a "small pots" payment. ( Some do, including H-L , others don't. )

If you earn £9k and have £3570 left in your tax allowance, you could take a small pots payment of £4760 without going over the limit, and would not trigger MPAA.

ali_bear

Have you thought about your state pension? It may be worth checking where you stand with NI contributions and qualifying years. 

bab_bob

Thanks for all these points. Very useful. I have the required number of years NI for a full state pension. I'm not too worried about triggering MPAA as it seems unlikely I will ever have anything close to 10k a year going forward to pay into a pension. 
 

Notepad_Phil

bab_bob said:

Thanks for all these points. Very useful. I have the required number of years NI for a full state pension. I'm not too worried about triggering MPAA as it seems unlikely I will ever have anything close to 10k a year going forward to pay into a pension. 
 

By the bolded text do you mean that you have checked the government pension forecast and it shows that you are due to receive a full state pension, or have you assumed that as you have worked for 35 years that you are due to receive a full state pension.

If the latter then be aware that 35 years will not necessarily be true for you as you will have worked under different pension regimes and so although you might need 35 years, you might also need fewer or more than that - some need about 30 years but others are into the high 40s, so you need to officially check at https://www.gov.uk/check-state-pension

bab_bob

I have checked the forecast. Over 35 years. 

Dazed_and_C0nfused

bab_bob said:

I have checked the forecast. Over 35 years. 

Which is completely irrelevant to your State Pension situation.

Have you already accrued State Pension of at least £230.25/week?