Does a pension scheme terminate is you make a withdrawal?

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  • Scrounger
    Scrounger Posts: 1,007 Forumite
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    The OP could pay £8000 into a SIPP, wait a few weeks for £2000 tax relief to be added and then withdraw the lot using the Small Pots Rule.

    Repeat up to 3 times - about £500 profit each time and doesn't trigger the MPAA. :beer:
    Scrounger
  • bluenose1
    bluenose1 Posts: 2,662 Forumite
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    Scrounger wrote: »
    The OP could pay £8000 into a SIPP, wait a few weeks for £2000 tax relief to be added and then withdraw the lot using the Small Pots Rule.

    Repeat up to 3 times - about £500 profit each time and doesn't trigger the MPAA. :beer:
    Scrounger

    Just thinking. My BIL is 54 a civil servant and a basic rate tax payer. Am I correct in thinking he could use his savings to open 3 different x £8K SIPP this year and cash the 3 out next year making £500 profit x 3?
    Also is it worth him using his savings to top up the equivalent of his annual earnings into a SIPP to get 25% tax free. I take it the disadvantage is when he cashes it in it is classed as crystallised?
    Or am i totally misunderstanding, which wouldn't surprise me.
    Money SPENDING Expert

  • Scrounger
    Scrounger Posts: 1,007 Forumite
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    bluenose1 wrote: »
    Just thinking. My BIL is 54 a civil servant and a basic rate tax payer. Am I correct in thinking he could use his savings to open 3 different x £8K SIPP this year and cash the 3 out next year making £500 profit x 3?
    Depending on earnings it would probably be more practical to do it over 2 or (even 3 years ) as he would need sufficient income to cover the total fund value ie £30k but then to cash it all in would then push him into the 40% band. Also factor in existing pension contributions.

    bluenose1 wrote: »
    Also is it worth him using his savings to top up the equivalent of his annual earnings into a SIPP to get 25% tax free. I take it the disadvantage is when he cashes it in it is classed as crystallised?
    Or am i totally misunderstanding, which wouldn't surprise me.
    Makes sense to me if he can afford it. :beer:
    Scrounger
  • bluenose1
    bluenose1 Posts: 2,662 Forumite
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    Scrounger wrote: »
    Depending on earnings it would probably be more practical to do it over 2 or (even 3 years ) as he would need sufficient income to cover the total fund value ie £30k but then to cash it all in would then push him into the 40% band. Also factor in existing pension contributions.
    Makes sense to me if he can afford it. :beer:
    Scrounger

    Many thanks Scrounger. He has £50k sitting in premium bonds so may as well do it up to his earnings level minus pension deductions.
    Would be worth myself opening three pension pots of £8k as at moment I am putting a large part of my income into my works D.C. scheme but will wait until I am closer to 55.
    Money SPENDING Expert

  • Scrounger
    Scrounger Posts: 1,007 Forumite
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    bluenose1 wrote: »
    He has £50k sitting in premium bonds so may as well do it up to his earnings level minus pension deductions.
    He could miss out on a £1 million prize :eek:
    bluenose1 wrote: »
    ... at moment I am putting a large part of my income into my works D.C. scheme...
    Salary Sacrifice ?

    Scrounger
  • bluenose1
    bluenose1 Posts: 2,662 Forumite
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    Scrounger wrote: »
    He could miss out on a £1 million prize :eek:
    Salary Sacrifice ?

    Scrounger

    Ha, that is why he says he keeps the money in Premium Bonds. I've told him he can put it back in when he cashes in the SIPP.
    If he puts £8k in a couple of weeks before his 55th birthday he can withdraw it as soon as he hits 55 I assume. Might be able to time it so he only skips a month.

    I am getting salary sacrifice on my DC pension contributions. Can't believe how good it is and just wish I had realised sooner. Oh well better late than never. Should be able to afford to go at 55.
    Money SPENDING Expert

  • Scrounger
    Scrounger Posts: 1,007 Forumite
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    bluenose1 wrote: »
    I am getting salary sacrifice on my DC pension contributions.

    Should be able to afford to go at 55.
    Well done! :T

    Scrounger
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