SIPP

nickycstone

I am 64, retired and do not pay tax. Am I right in thinking that I can open a SIPP with £2880, then the government will top it up with the tax relief. Am I being stupid, or can I just cash it all in the following week as I am at the age when I can withdraw it? If so, it seems a no brainer for the free cash, or am I missing something?

masonic

The tax relief usually taxes 4-6 weeks to get added, although a few providers will pre-fund it.

There are some anti-recycling measures that largely focus on large sums being pulled out of a pension and the paid into another, but it would not normally be an issue to do something along the lines of what you describe.

Keep_pedalling

What is your current income?

dunstonh

Am I being stupid, or can I just cash it all in the following week as I am at the age when I can withdraw it?

Yes. Indeed, I have turned one around in 24 hours previously.

 If so, it seems a no brainer for the free cash, or am I missing something?

masonic covers one potential issue if a provider doesn't prefund the tax relief.

Another is if you are in receipt of means-tested benefits, then £2,700 would be treated as income.

Another is that some pension providers will have charges to capture people trying a quick turnaround. (most dont but some will).

If you are planning to return to work, then you will have triggered the MPAA by doing this if your chosen provider does not offer the small pots rule.

Albermarle

https://forums.moneysavingexpert.com/discussion/6661456/sipp

It sort of looks too good to be true, but the amounts involved are rather small, compared to the cost of the 40% tax relief for higher earners for example.

where_are_we

Search "£2,880" in the MSE forum and you will find many threads on this subject. For more information go to MSE forums - Categories - Work Benefits and Business - Pensions , Annuities & Retirement Planning and post your queries there. As a non tax payer, depending on your level of income below the standard personal tax personal allowance of £12,570, you could benefit each tax year up to age 75 by as much as £720 tax free on a contribution of £2880 although I suspect once your State pension kicks in you may become a tax payer and much of the tax free benefit will be lost.

You will have to get your skates on to benefit from this tax year. It is "use it" or "lose it" for each tax year.

BreakingGlass

Here's a rather long thread on the subject:

https://forums.moneysavingexpert.com/discussion/5580163/paying-2880-into-pension-when-retired

I've read all 140 pages (😉) and am doing it for the first time this tax year. I paid £2880 into my new HL* SIPP on 2 Feb and received the £720 'top up' on Monday this week.

I am actually a basic rate taxpayer (aged 60 something), hence as of yet undecided whether to withdraw (most) next month for the net £180 benefit, or wait a few years until I buy a house such that my savings interest drops and I become a non-taxpayer. If the latter, I may dabble with a few investments within the SIPP just for the heck of it.

(*HL = Hargreaves Lansdown)

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81938855#Comment_81938855

Remember if you are currently utilising the savings starter rate band then taking extra pension income can sometimes result in a 40% tax hit.

20% payable on the pension income, coupled with the loss of some or all of your savings starter rate band, meaning savings interest is taxed at 20% rather than 0%.

BreakingGlass

https://forums.moneysavingexpert.com/discussion/comment/81938865#Comment_81938865

Thanks - I've actually saved the worked example here from @DeepSporran in the linked thread!

My only taxable income (until I get the state pension) is savings interest, so I think I'm safe for a few years.

Pompeydave1967

Similar situation here , will put £2.8k next month in invest engine SIPP , appreciate it takes around 12 weeks for top up but perfect for me.Seems a faff with paperwork though , waiting to go through 3 stages via post including having to find a solicitor / doctor / teacher to confirm true docs then hopefully funds released.

norton66

Similar situation here, running the £2880 through my ii SIPP each tax year which is an easy setup online to withdraw. I aim to drawdown just enough to fully utilise the personal allowance + personal savings allowance + savings starter rate.