Paying £2880 into pension when retired

ezhiks wrote: »

I'm trying to understand, and think I have it.


A question if I may, does it have to be SIPP, or can it be a Stakeholder Pension such as the one Virgin operate that can be opened easily online?

I used a Virgin Stakeholder Pension a couple of years ago for this purpose. You need to be aware however that Virgin doesn't have the option of keeping your investment in cash, unlike Hargreaves Lansdown's SIPP. So your £2880 / £3600 has to be invested in a fund which may go up or down in value in the few weeks before you are able to cash out. I used the Pension Bond and Gilt Fund as it seemed like the least volatile of the funds on offer. In my case I ended up with a marginal gain of £3.50 on the £3600.


No reason why the Hargreaves Lansdown SIPP can't be opened online as far as I can see. Pretty sure I did so last year.



Whichever way you go, the cashing out will definitely involve some hardcopy forms to be completed

ezhiks wrote: »

Thank you. I'll not rush into anything yet as I also have an account with Fidelity and looking at their SIPP.


Is the PensionBee worth looking into to simplify the drawdown with just the one SIPP? I'm assuming it really becomes useful with more than one though.

I've just had a quick look at PensionBee website and I would say that it is not at all appropriate if you are seeking to get the full benefits of the approach this thread is all about.


Ideally, you pay in £2880, wait for the taxman to add £720 to your account (a few weeks later), then withdraw the whole £3600. Depending on your tax situation, you may end up a full £720 better off ( if you have little other income and are not utilising your full personal tax allowance), or £180 better off (if you are already paying basic rate tax on existing income) or somewhere in between.



However, you have to take into account any charges applied by the pension provider . PensionBee appears to charge £480 if you withdraw everything within 12 months of opening the account, or if a withdrawal reduces the balance to less than £480 at any time. Not much left of your possible benefit of £180 - £720.


Hargreaves Lansdown (HL) is the favoured provider in this thread because it doesn't charge any closure fee, and no ongoing fee if you keep the investment in cash. (For completeness I should point out that HL used to have a hefty closure fee if you closed the account within 12 months, which is why you'll see references upthread where people leave £1000 in the account from year to year to avoid this fee. HL got rid of the fee last month.)


Virgin has no closure fee either, but does have the disadvantage I mentioned in previous post that you can't stay in cash, you must choose a fund. As well as being exposed to the vagaries of the market, you also get charged an annual 1% which gets reflected in the unit price of the fund - however, since ideally you're only in the market for a few weeks that 1% shouldn't amount to much at all. Eight weeks worth of an annual 1% of £3600 is about £5.54

PJM_62,


It is your pension and you have the ability to check HL and Fidelity costs. Can I suggest it is up to you to check these cost on your possible pension inputs, rather than sit there and expect others to do it for you!


I always check these things myself; it is your responsibility to your own financial wellbeing.

traceyaj wrote: »

Hi, I am a non taxpayer and have a total of £7190 in my sipp due to contributions and tax relief top up from both the last tax year and the current one. HL have confirmed that I can draw out £1797 tax free as at today, and leave the rest either in the SIPP or move it into drawdown. Is there any advantadge/disadvantage in moving it into drawdown? I have no intention of investing any of this money in the stockmarket. I understand the other option of drawing up to £6190 and leaving the Sipp running in order to invest in the next year.

If you don't want to invest in the stockmarket, I'd be inclined to get your money back out of the SIPP as fast as you can without incurring any income tax. Then you can at least put the cash into a savings account which will get you some interest rather than earning nothing at all in the HL SIPP.


Two caveats :

1. You won't be able to put more than £4000 per year into a SIPP in future years, so if you plan to get a new well paid job which means you would be able to make a bigger pension contribution, you'd be blocked.


2. Possibly you planned to avoid inheritance taxes by handing down the SIPP on your (eventual) decease.