Really confused by SIPPs

chubsta

Believe me I have tried researching this stuff but still don't know how to proceed.

Currently 59 (soon to be 60) and retired, taking my Civil Service pension, no other income, never intend to work again.

I have not used my Lump Sum at all, so currently have it in a stocks and shares ISA, doing pretty well too.

I have approx £10,000 left over from my lump sum and looking around I see all sorts of options for it, one of which I see is a SIPP, but I don't know if that is at all suitable for me. I do pay 20% income tax on my civil service pension.

I read about tax breaks when It comes to sipps so…

a: can I put my extra £10,000 in a SIPP?

b: what are the advantages (if any) of doing so?

Dazed_and_C0nfused

No, you can only add £2,880. Which is made up to £3,600 with the basic rate relief that will be added.

You can take 25% TFLS so if you pay basic rate tax on the rest you are 6.25% up for every little effort.

But you can currently contribute £3600 (gross) each year until you are 75. The tax situation will depend on what other income you have. For example once you reach State Pension age you may be paying higher rate tax?

chubsta

thanks very much for the reply, I should have specified that the £10,000 would be out in over time, that bit I think I understood.

So I could put £2000 in each year for 5 years and with the basic rate relief that would become £12000 ((2000*0.2)*5)? How is that additional money applied - daughter has a LISA and I think that just gets credited.

When could I access the money, I am already over 57?
my oh only earns £7500 a year but because she has savings doesn’t get any other income beyond interest on her savings, but is still below £18750 per year in total. Would a sipp be a good idea and if so how much could she put in?

These may sound basic questions but I have only just got my head around stocks and shares isas and now I suddenly start hearing about this stuff!

eskbanker

The 20% tax relief applies to the gross figure rather than the net, so the latter is marked up by 25%, i.e. £10K paid in becomes £12,500, not £12K flat.

However, remember that 75% of this is taxable on the way out, so you'd be left with a net £10,625 once withdrawn…

Marcon

Do a bit of reading, which is likely to be more helpful than piecemeal questions and answers. Good place to start is Pensions explained | MoneyHelper https://www.moneyhelper.org.uk/en/pensions-and-retirement/pensions-basics

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81997208#Comment_81997208

She could add more, the exact amount depends on her existing pension contributions.

There may also be scope for her to patiently it out at some point and pay no tax on it (if she has unused Personal Allowance).

molerat

https://forums.moneysavingexpert.com/discussion/comment/81997208#Comment_81997208

Your oh can put up to £7500 gross, £6000 net, into a pension including any workplace contributions. Depending on exactly how much interest she is receiving - and being over 55 - she may also be able to take a good amount from that pension using up the remainder of her tax allowance.

chubsta

thanks very much for all the replies - it would certainly appear that this is something that could be beneficial to us both.

Now I know that it is potentially useful I will go away and research absolutely everything I can, I just needed to know the very basics so that I wouldn’t waste my time on something that wouldn’t be available to us.

Cheers for the help.

SacredStephan

Have you and your oh checked your state pension entitlement, using your Personal Tax Account, through Govt Gateway?