Sipp Question

where_are_we

While your income is below the £12570 threshold withdraw from the SIPP each tax year the maximum you can to keep you below £12570. Remember the SIPP may have a minimum to keep it open. When you reach state pension age, if you have made full contributions, you almost certainly begin paying tax and this very lucrative process will diminish. One option to consider is to defer your state pension if you do not need the income and are in good health and carry on for a few years getting about 25% return on £2880 annually.

soulsaver

And, just in case it applies to any reader… you don't get tax the relief after your 75th birthday.

jimjames

https://forums.moneysavingexpert.com/discussion/comment/82038657#Comment_82038657

How old are you?

clairbear_3

I got similar question my OH is self employed

nett earnings £10K for 2026/7 and 2027/8

if he opens SIPP puts £8k in I assume £2k tax relief will be added each year?

2028/9 he wont earn anything so can he take £5k (25%) out and £1k/month drawdown as well as adding £2880 for the 25% tax relief?

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/82040460#Comment_82040460

Assuming by net earnings you mean his taxable profit then yes, a gross contribution of £10k would be the maximum he could contribute in each of those years.

The fact that he (probably) isn't paying any tax in those two years doesn't mean he won't get the basic rate tax relief.

And assuming the rules don't change yes, he can contribute £3.6k gross in a year when he has no earnings/profit. The tax relief is actually 20%, not 25%. But it is 25% of the amount he has to pay i.e. £2,880 becomes £3,600 and the £720 is 20% of the gross contribution.

If you are married and he applies for Marriage Allowance then he would pay a little bit of tax on £12k taxable pension income. But no tax if he has the standard Personal Allowance.

aroominyork

One option to consider is to defer your state pension if you do not need the income and are in good health…

The point about good health is that if you defer your state pension, it takes about 18 years before the amount you have forgone in the early years is recovered by the higher amount you receive once you start taking it. That 'gain' then keeps growing after the 18th year. If a doctor told me "you have great genes - no reason you shouldn't live to 90" I would not use it to defer my SP; if there are good tax reasons, I might for a short while.

clairbear_3

https://forums.moneysavingexpert.com/discussion/comment/82040468#Comment_82040468

I understand the 'tax relief' is to incentivise people to invest for the long time but is it perfectly legal to take the 'free' 20% tax relief annually as some suggest doing

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/82041001#Comment_82041001

Not sure what you mean by 'taking' the tax relief annually, but tax relief applies to all valid contributions, and the only restriction on drawing down is that the holder must be 55 or older, i.e. there's nothing requiring individual contributions to be left in the pension for n months/years, etc.

masonic

https://forums.moneysavingexpert.com/discussion/comment/82041001#Comment_82041001

HMRC has anti-recycling rules, but if the amount received over 12 months is less than £7.5k then it considers that a recycling event hasn't taken place.

clairbear_3

https://forums.moneysavingexpert.com/discussion/comment/82041048#Comment_82041048

thanks is there a link to this Im taking £1k/month drawdown and considering putting £2880/yearly into a SIPP Im not working you are saying this is illegal?