Should I start to empty my SIPP

Time4T_Accounts

My wife is 6 years older than me. I retired, aged 60, 8 years ago. With the recently much improved annuity rates, I decided late last year to buy an annuity: index linked, 50% survivor pension. Very glad I did. I went from my entire SIPP being needed to cover ‘my’ SWR, to buying the entire monthly sum needed to cover life, with a tidy chunk of SIPP still left over. Even better. I don’t have to concern myself now with market downturns.

it may not work for everyone, but it certainly seems to have for me.

FIREDreamer

https://forums.moneysavingexpert.com/discussion/comment/82104305#Comment_82104305

Pretty much what I did with my SIPP in two tranches - October 2023 and June 2025.

I now grow my ISA post retirement, nothing risky just global and income ETFs such as PACW, VHYL, LDGG with a slug of ERNS as ballast.

hoofy

So, I did decide to start emptying my SIPP and put it into drawdown 2 weeks ago.

I took 50k which was 12.5k tax free.

This morning the cash was transferred to my bank. £34746.80 including the tax free 12.5k.

They have given me an emergency tax code which has meant I have been taxed £15253.20 from the £37.5k taxable. I think I should have been taxed at the basic 20% rate as all my taxable income for this year is going to be 50k or just less. So I think I've over payed roughly 7.5k.

What is my best course of action?

If I do nothing how long will it take before HMRC pays me back?

Albermarle

If you do nothing ( presuming you do not normally fill in a self assessment tax return) you will get a refund when your tax calculation for 26/27 is done automatically- which will be in about a year.

So best to inform HMRC now- I can not remember the best way but someone else will.

DRS1

Presumably you are not planning to take a second taxable bite out of the pension this tax year? If you were the PAYE mechanics might take care of the tax deducted from the first payment. You would need to check the tax code you have been allocated for the SIPP to make sure - eg is the code cumulative or not.

Veloflyer

An enjoyable read. I have 2 SIPPs. One is to be kept for the cost of living - bills/council tax/food etc etc - and is in (hopefully a lower risk) IL gilt ladder maturing in phases before state pension age, for which I will receive full pension according to HMG website. At which point, I may keep the SIPP going with the IL gilt ladder or some such, else cash in for an annuity - jury is out for the present. I also have a few years to state pension age. This gap will be filled by drawing down from this SIPP using TFA and taking income up to personal allowance - thus paying no tax.

The second SIPP is essentially bunce - holidays, cars, emergencies etc - and invested in tracker ETFs and a few company shares. I can play around with this a little given the other SIPP covers everything else.

It think this clear divide enables me to sleep more easily and dictates that I can only muck about with the second SIPP.

hoofy

https://forums.moneysavingexpert.com/discussion/comment/82145946#Comment_82145946

No, I'm not planning taking any more out this tax year. My plan is to take out as much as possible each year without going over the basic tax rate.

DRS1

Then you probably need form P55

Claim back tax on a flexibly accessed pension overpayment (P55) - GOV.UK

For future years if you are taking the money in one lump it is better to do it late in the tax year (March) just because of the way PAYE works. Or if you are doing FAD then take the taxable payments in 12 equal monthly instalments.

seacaitch

https://forums.moneysavingexpert.com/discussion/comment/82146012#Comment_82146012

If you’ve paid too much Income Tax on a flexibly accessed pension payment you can claim a refund if all of the following apply:

• you’ve flexibly accessed your pension pot but not emptied it

• you will not be taking regular or flexible payments before the end of the tax year

• the pension body is unable to make a tax refund

Does the bolded condition mean they only want you submitting a P55 if you're not planning on making any further FADs in the current tax year, such that if you've overpaid tax on a payment/withdrawal and would quite like a tax repayment, but you intend making a further payment(s) later in the tax year, then you're stuck with the overpayment until all of your planned payments are finished for the tax year?

⇒ I believe the answer is 'Yes' :)

DRS1

https://forums.moneysavingexpert.com/discussion/comment/82146369#Comment_82146369

Yes (and maybe not just FADs but UFPLS as well).

The point is that if you take a further taxable payment in the tax year then the PAYE system will kick in and you may get your refund that way instead of through this form. So you may get back the overpayment (or part of it) sooner. And they don't want you getting two repayments for the same tax payment!