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  • FIRST POST
    • nxdmsandkaskdjaqd
    • By nxdmsandkaskdjaqd 3rd Jan 17, 7:39 AM
    • 584Posts
    • 79Thanks
    nxdmsandkaskdjaqd
    Paying 2880 into pension when retired
    • #1
    • 3rd Jan 17, 7:39 AM
    Paying 2880 into pension when retired 3rd Jan 17 at 7:39 AM
    Jamesd wrote in another thread the following:
    "She can make 720 a year tax free by paying 2880 net into a pension, having it grossed up to 3600 then withdrawing it. Can only do the withdrawing part from age 55. Can only pay in for this until age 75."

    I have just retired at 60 and have transferred my DC pension to a new SIPP. I plan to live off savings till state pension kicks in.

    I am correct that the above approach should be part of my strategy of being tax efficient?
    Last edited by nxdmsandkaskdjaqd; 03-01-2017 at 9:14 AM.
Page 45
    • AnotherJoe
    • By AnotherJoe 21st Sep 19, 7:19 AM
    • 15,921 Posts
    • 19,141 Thanks
    AnotherJoe
    The HL early account closure charge of 295 in the first year and account closure charge of 25, both plus VAT, were removed on 19 September 2019.
    Originally posted by jamesd

    Although it will be easier to leave a small amount of money in it from one year to the next to save the faff of starting a new SIPP when you can instead reopen it with one phone call.
    Last edited by AnotherJoe; 21-09-2019 at 7:26 AM.
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
    • DeepSporran
    • By DeepSporran 21st Sep 19, 12:48 PM
    • 244 Posts
    • 126 Thanks
    DeepSporran
    Although it will be easier to leave a small amount of money in it from one year to the next to save the faff of starting a new SIPP when you can instead reopen it with one phone call.
    Originally posted by AnotherJoe

    I hope so. However, the updated T&Cs applicable from October 1st still refer to the possibility of any account with less than 1000 in it being closed (albeit the closure fee would presumably be zero.)

    I checked the T&Cs on this page :

    https://www.hl.co.uk/terms-and-conditions
    • AnotherJoe
    • By AnotherJoe 22nd Sep 19, 9:58 AM
    • 15,921 Posts
    • 19,141 Thanks
    AnotherJoe
    I hope so. However, the updated T&Cs applicable from October 1st still refer to the possibility of any account with less than 1000 in it being closed (albeit the closure fee would presumably be zero.)

    I checked the T&Cs on this page :

    https://www.hl.co.uk/terms-and-conditions
    Originally posted by DeepSporran

    Ah, good point. Well there's no harm in keeping it open and seeing what happens you'd be no worse off. Or, keep a "float" of 1k in there while you are doing this, perhaps as a low risk investment even since that could be invested for ten years or so.

    I hate form filling, its bad enough the hoops you have to jump through on the telephone (or on a form) when you cash in your 15% 25% of the 3,600 than starting a whole new SIPP.
    Last edited by AnotherJoe; 22-09-2019 at 11:35 AM.
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
    • stehouk
    • By stehouk 23rd Sep 19, 6:39 AM
    • 277 Posts
    • 114 Thanks
    stehouk
    Can somebody explain to me why I get 25% added to my sipp contributions when all I read is that I will have 20% eg: 2,880+20% = 3,456, 2880+25% = 3600 is my my maths really that bad ?
    • Apodemus
    • By Apodemus 23rd Sep 19, 7:07 AM
    • 1,451 Posts
    • 1,227 Thanks
    Apodemus
    You are paying the equivalent of the after-20%-tax sum in. So if you had earned 3,600 and been charged basic rate tax, you would have 8/10 or 80% or 2880 after tax. Reversing all this, if you pay in 2880, you get a total of 10/8 or 125% of the 2880, which is 3600.

    The fact that you may never have paid any tax on the 2880 in the first place is irrelevant. Look on it as a gift from the Government!
    Last edited by Apodemus; 23-09-2019 at 7:11 AM.
    • stehouk
    • By stehouk 23rd Sep 19, 7:23 AM
    • 277 Posts
    • 114 Thanks
    stehouk
    Thanks Apodemus so it is my maths. never been my strong point.
    • Mick-H
    • By Mick-H 24th Sep 19, 10:02 AM
    • 6 Posts
    • 3 Thanks
    Mick-H
    Ah, good point. Well there's no harm in keeping it open and seeing what happens you'd be no worse off. Or, keep a "float" of 1k in there while you are doing this, perhaps as a low risk investment even since that could be invested for ten years or so.

    I hate form filling, its bad enough the hoops you have to jump through on the telephone (or on a form) when you cash in your 15% 25% of the 3,600 than starting a whole new SIPP.
    Originally posted by AnotherJoe
    I moved my pension from Zurich to Pension Bee because of all the form filling.
    With Pension Bee you answer around 10 yes no questions press a button 2 weeks later your money is in the bank.
    Couldn't be happier.
    • akh43
    • By akh43 26th Sep 19, 4:24 PM
    • 1,295 Posts
    • 3,194 Thanks
    akh43
    I am trying to figure out if this is worth doing in my circumstances. I have been trying to wade through the posts, but so much to read. I took early retirement @ 60 in March and get my DB monthly work pension of 1,079.32 and pay 7.40 tax. How would this work for me and what would the benefits, if any be? Thanks
    • PennyForThem
    • By PennyForThem 26th Sep 19, 4:32 PM
    • 606 Posts
    • 545 Thanks
    PennyForThem
    You have retired on a DB pension which is great!

    If you want to take advantage of paying 2880 and getting the Government to contribute then you need a Self Invested Pension Plan (SIPP).

    I st one up several years ago for the free Gov money while I was working and contributing to DB NHS pension because my salary was low enough to give me leeway.

    Suggest you ask the Board what they would advise for setting up a SIPP in retirement as HMRC only allows you to contribute 2880 if not working.

    However.......if you have part time work then you may be able to contribute more.... Suggest you ask - maybe new thread?
    • Crabby
    • By Crabby 26th Sep 19, 5:45 PM
    • 786 Posts
    • 227 Thanks
    Crabby
    As a tax payer, if you recycle it every year it's 180 free cash for you.


    Pay 2880 into a SIPP, it's topped up by 720 to 3600. Draw it all down, 25% tax free (900), 2700 taxed at 20% (540 tax). 720 - 540 = 180 free cash.
    Same again the next year till you are 75.
    Winner winner, Chicken dinner.
    • akh43
    • By akh43 26th Sep 19, 6:41 PM
    • 1,295 Posts
    • 3,194 Thanks
    akh43
    As a tax payer, if you recycle it every year it's 180 free cash for you.

    Pay 2880 into a SIPP, it's topped up by 720 to 3600. Draw it all down, 25% tax free (900), 2700 taxed at 20% (540 tax). 720 - 540 = 180 free cash.
    Same again the next year till you are 75.
    Originally posted by Crabby
    Thanks for the information. Is there any best/easiest/cheapest SIPP provider I should use? Do I just transfer the 2880 from my income/savings? When I draw down do I have to leave any money in the SIPP as I recall reading something on the thread about that to avoid charges with HL but it was on the early pages? It is taxed automatically when I draw it down? Do I still pay the same tax on my income or does doing this affect it?
    • Malchester
    • By Malchester 27th Sep 19, 5:42 AM
    • 180 Posts
    • 118 Thanks
    Malchester
    Mick-H

    I have just done the same. Have two DB pensions, an LGPS one that started when I was 60 last year and another due in 5 years. But also just retired early and the DC pension with latest company was with The Pension Trust with little flexibility on taking the pension (withdraw all or annuity). So transferred to PensionBee. Took a long time because of PensionBee delaying things but now all set up. Non taxpayer (until receive other pension) so Can contribute 2880 a year topped up by 720 from government. Very simple to withdraw money.
    • ezhiks
    • By ezhiks 1st Oct 19, 1:29 PM
    • 53 Posts
    • 7 Thanks
    ezhiks
    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?
    • uk03878
    • By uk03878 1st Oct 19, 2:12 PM
    • 130 Posts
    • 102 Thanks
    uk03878
    Has anybody done this with some of the money from the TFLS? ie just the 2,880 per year?
    Or do you take it from your taxable pension?
    • drumtochty
    • By drumtochty 1st Oct 19, 2:19 PM
    • 288 Posts
    • 166 Thanks
    drumtochty
    At that level there is not an issue with recycling by using the tax free cash. Therefore use either the tax free cash or the taxable cash to put in 2,880 per year.
    • DeepSporran
    • By DeepSporran 1st Oct 19, 3:12 PM
    • 244 Posts
    • 126 Thanks
    DeepSporran
    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?
    Originally posted by ezhiks

    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
    Last edited by DeepSporran; 02-10-2019 at 8:28 AM.
    • ezhiks
    • By ezhiks 2nd Oct 19, 7:56 AM
    • 53 Posts
    • 7 Thanks
    ezhiks
    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 definitlely involve some hardcopy forms to be completed
    Originally posted by DeepSporran

    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.
    • DeepSporran
    • By DeepSporran 2nd Oct 19, 10:21 AM
    • 244 Posts
    • 126 Thanks
    DeepSporran
    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.
    Originally posted by ezhiks

    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
    • By PJM_62 3rd Oct 19, 6:33 AM
    • 48 Posts
    • 6 Thanks
    PJM_62
    HL are being the suggested platform for this, to keep it all free of fees.
    Anyone know how Fidelity compares? (I have ISA with them)
    • drumtochty
    • By drumtochty 3rd Oct 19, 8:31 AM
    • 288 Posts
    • 166 Thanks
    drumtochty
    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.
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