Paying £2880 into pension when retired
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I need some help to get my head around this before I take the plunge.
I am on low earnings but last year because of ill health, I had to start taking my deferred SP, plus another little private pension which at the moment I actually give straight to a charity. I also get enhanced WTC as I am on PIP
I haven't worked the full figures out yet by I think that my earnings plus pensions will be probably £1000 - £2000 over my PA.
Next year however, my earnings are going to drop substantially I think and I probably won't be over my PA.
If I open a HL cash Sipp with £2880 and get the £720 tax relief. I know I can draw 25% tax free.
I might need the rest of the money at some time within the next year or two to purchase a car, or put towards one so I don't want to tie it up too much.
I obviously won't be able to draw the other 75% anyway until the next tax year (2018/2019), when I am earning less, so if I draw on this other money, leaving at least some in to keep the account open, would I still have to pay tax on it? Or will the fact that I paid it in when I was liable for tax mean I would still get charged the tax on it?
The money at the moment is not earning any interest, I have no savings that are earning interest, it is just left in my current account. If I wanted to draw it out from the SIPP and put it in an ISA or something would I get taxed on it then? As I say, whatever I do with it, I don't want it being tied up and unable to be withdrawn as I know I will need it for a car at some stage.
As another poster has said above though, if I pay that £2880 into the SIPP, would that be deducted as useable income and take me below the PA anyway for this year as long as the earnings plus pension drawn were not more?
I would really appreciate your advice before I do this.
So, I will take my TFLS out when I can, to replenish my current account, but then would like to put the rest of the money into some account that will earn some interest on it, perhaps an ISA that would let me draw out if I needed it urgently for a car. As I say, I probably won't be up to my PA in the coming tax year so unlikely to have to pay tax on it, if so, I might just pay it then draw it at the end of the tax year. HMRC already have over £2000 of mine which was paid years ago when I was on the wrong tax code, I let them keep it as a) it is earning interest with them, b) if I got to the stage of having to pay tax - as in this year, they have already got it and can take what I owe from the credit I have. It was over £3000 but I did draw some last year.
Would a cash ISA be a good place to put it and can you draw from them when you like?
Thanks for your help.0 -
What would happen if after the uplift to £3600 and you did not draw the money out straight away and the pension collapsed to say £2800,ie the same as you invested,if you take the whole amount out would you still be taxed on £2100 ( 75% of total )
I know this is a hypothetical scenario but even if you get the tax back but in theory you have earned £2800 against your taxable income but you started with this and have made no profit,sorry if this question does not make a lot of sense but was on my mind and do not know the answer.ITS NOT EASY TO GET EVERYTHING WRONG ,I HAVE TO WORK HARD TO DO IT!0 -
Another thought, once you start taking income (not the PCLS) from the DC pension/SIPP, you will be affected by the MPAA.
This would not prevent your contributing the £2880 per annum discussed in previous posts.
It could potentially affect the amount you could contribute to a new employer's pension scheme.
http://www.scottishwidows.co.uk/Extranet/Literature/Doc/FP0617
Life has got in the way slightly this week and time is running out. Surprisingly - or not, given the date - there are no telephone appointments available with Pension Wise this side of May.
On Monday I received a letter from CM inviting me to consider my options for the former company DC pension as I am no longer employed. I rang them and have been assured that it is not a with-profits scheme, there will be no charge for transferring it. The figure now is c £33k, a bit less than the £34k as at 31/12/17.
Will the HL SIPP opened with £2880 have these transferred funds added to it, or will they go into a separate new account? Suggestions through this thread that after the initial deposit, a monthly payment should go in and a similar monthly withdrawal taken, imply keeping it as a separate account - or have I misunderstood?
I've been able to look at the Benpal modeller and the old DB pension with L&G shows secured income £3110 pa and £20700 tax free lump sum, at a projected date a year hence. It will not model any closer to retirement. I have used the online tool to request a retirement quotation as at my 62nd birthday, three months away, but this will be sent by post.
Considering part time job options I and am aware that any new earnings have the potential to scupper how this tax advantage will work!0 -
You could open a SIPP. You could contribute £2880 before 6 April.
The tax relief will be added in May.
You could take the PCLS and draw down the balance monthly - drawing down the balance would trigger the MPAA.
You will have crystallised this pension.
If you transfer the CM/SW pension into the SIPP, you could take the PCLS tax free and draw down the pension monthly - this pension is then crystallised.
You could continue to contribute a net £2880 a year until age 75 even if you have no relevant earnings.
If you get a job and the employer offers a pension remember that if you have taken more than a PCLS from a DC pension, you are limited to a net contribution of £3200 per annum.0 -
Surely any benefit in this scheme is negated because you can withdraw 25% tax free but the rest maybe be taxable if your income is above the PA AND surely there are transaction charges in paying out the other 75% or less??Feudal Britain needs land reform. 70% of the land is "owned" by 1 % of the population and at least 50% is unregistered (inherited by landed gentry). Thats why your slave box costs so much..0
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surely there are transaction charges in paying out the other 75% or less??
HL doesn't charge for withdrawals.
The OP is contemplating either nil employment income or low employment income?0 -
After the tax has been added to your SIPP,making it up to £3600,what is the minimum you have to leave in the SIPP so HL dont charge you for closing it in the first 12 month?0
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Apologise if this has been answered before but not sure if these circumstances included....
My wife started taking a deferred Defined Benefit pension within the current tax year (small monthly amount). She hasn't worked for 5 years so has had no earnings, but has been a member of the above DB pension scheme (as a deferred member). I have read the "use it or lose it" advice.....but does this still apply if my wife was a pension fund member as I have indicated? Some advice via google seems to indicate that carry forward of previous allowance may be used if the person was a pension fund member. Thanks0 -
After the tax has been added to your SIPP,making it up to £3600,what is the minimum you have to leave in the SIPP so HL dont charge you for closing it in the first 12 month?
£1000 apparently- in the OP's case (as far as I can gather) she is thinking of a contribution in this tax year, another in the next, drawing down the first contribution after the PCLS, and a transfer in of the DC pension from her former employer's scheme with CM/SW - if so, the "minimum" requirement shouldn't affect her.0 -
Some advice via google seems to indicate that carry forward of previous allowance may be used if the person was a pension fund member. Thanks
But she would still need "relevant earnings" of the necessary amount in the year she wanted to use the "carry forward".
It appears that your wife has no relevant earnings and hasn't had for the past five years.
She is limited to a pension contribution of £2880 net to a scheme offering "relief at source" - £720 tax relief would be added.0
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