Please could I check if you think this makes sense

islander2025

Hello. This is my first time on here and I wondered if I could ask for some views please. For the past 8 years I have saved to ISA’s and not a pension. I will be stopping work at the end of April and wondered if it might be worth me opening a SIPP and paying in this year’s salary.

I will earn £29K this year but will be stopping work at the end of April. I was thinking.

(1) Open a SIPP.

(2) Pay in £23,200 which they will make up to £29,000 with tax relief.

(3) Pay in another £2,880 in May (so next financial year) which they will make up to £3,600.

(4) There will now be £32,600 in the SIPP which I can withdraw tax free sometime between now and retirement at age 67.

I think it makes sense for me to do this instead of just leaving the money in savings, but I am worried I might have missed something.

Thank you very much indeed for your help.

Rattusnorvegicus

4. There will be £32,600 in the sipp, which is subject to 25% free of tax, and 75% taxed as income at your rate,

dunstonh

(2) Pay in £23,200 which they will make up to £29,000 with tax relief.

Technically, that is a pension contribution of £29,000 of which you pay £23,200 net. Its the same thing as what you have said but its always best to remember that pension contributions are gross. People have got into a mess with HMRC by using the net figure.

I think it makes sense for me to do this instead of just leaving the money in savings, but I am worried I might have missed something.

Yes. And it would have made sense 8 years ago with the money you paid into the ISA. Pension beats ISA in terms of tax efficiency.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81900534#Comment_81900534

It seems they will withdraw it during years whilst having no other taxable income, so should all be tax free, if I understood correctly.

OP - Can you clarify - you say you will be stopping work in April but retirement will be at 67 . Will you be 67 in April ? Or are you confusing State Pension age with retirement age ? How old are you now?

islander2025

Thank you all for the coming back to me.

To clarify, I am 60 and I am going to stop working at the end of April. I am aware I will not get the state pension until I am 67. I have a work pension that I stopped paying into 8 years ago because you were not allowed to pay money in after you left the Company. I have used ISA's over the past few years because I wanted the flexibility of having money I could access before I retired because I did not know my retirement plans back then. Thank you again for the information. It is really appreciated.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81900588#Comment_81900588

I presume you realise this but you will have to pay the majority in the current tax year.

And your limit in 2026/27 will depend on what you earn (P45 pay is likely to be the figure that matters), it could be more than £3,600 (gross).

islander2025

https://forums.moneysavingexpert.com/discussion/comment/81900600#Comment_81900600

Thank you for coming back. Yes my Salary will be £29,000 to end March so I will need to pay the £23,200 this tax year and then, if I don't work next year, I will pay the £2,880 in May for next year. Thanks again.

DRS1

So what do you plan to do with the works pension? Start drawing on that when the SIPP runs out? Do you know what sort of pension it is and what you might get out of it?

islander2025

https://forums.moneysavingexpert.com/discussion/comment/81900734#Comment_81900734

Thank you for coming back. Yes I know what the works pension will pay. That combined with ISA's will be ok. I was just thinking about this years salary to pension and claim it over next couple of years would be beneficial rather than leaving the money in savings. Thanks

xylophone

Have you obtained a state pension forecast? https://www.gov.uk/check-state-pension

Yorkie1

If you are still working, did you say you haven't been contributing at all to the works pension in recent years? Just concerned that your plan to put all of your salary into a SIPP may come across a glitch if you haven't accounted for current pension payments.