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  • FIRST POST
    • nxdmsandkaskdjaqd
    • By nxdmsandkaskdjaqd 3rd Jan 17, 8:39 AM
    • 499Posts
    • 50Thanks
    nxdmsandkaskdjaqd
    Paying 2880 into pension when retired
    • #1
    • 3rd Jan 17, 8:39 AM
    Paying 2880 into pension when retired 3rd Jan 17 at 8:39 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 10:14 AM.
Page 27
    • jerrysimon
    • By jerrysimon 2nd Feb 18, 8:26 PM
    • 278 Posts
    • 212 Thanks
    jerrysimon
    Thanks for that. Just so I'm clear when you start drawdown that is that start of the 12 month period and not when you opened the account for putting in cash?
    Originally posted by skycatcher
    From what I recall I had to move the money from my wifes cash only SIPP into a draw down account/facility 1/4/17 and that was when I was told that if I emptied all of that within 12 months there would be a 250 charge. To avoid the charge I needed to leave at least 1000 in the draw down account for at least 12 months after which I could empty it without charge.

    The cash SIPP was then closed without charge, but I asked them to reopen it as I plan like you to keep putting the 2880 in to gain the 720 tax refund. We do in fact still have 4K left in the draw down account as I needed to leave that there as I drew out the max including the 25% so as not to go over her personal allowance. I will draw this out after 1/4/18 but of course that will be beyond the 12 months, then do the same again with the money I put in before the end of this tax year leaving 1000 in beyond 1/4/19 to avoid any charges.

    I will probably need to double check with HL to make sure I have that correct. As I said their advice line is excellent and they are patient and very helpful for us amateurs i.e. I only found out about this 2 years ago when I came on this forum.
    Last edited by jerrysimon; 02-02-2018 at 8:33 PM.
    • Sea Shell
    • By Sea Shell 3rd Feb 18, 7:31 AM
    • 680 Posts
    • 912 Thanks
    Sea Shell
    Just came across this thread, and have subscribed, thanks.

    Just a quick question (sorry I haven't read ALL the pages)...just want to check i'm understanding things correctly.

    - This plan only works for those over 55, as they are able to access their pension pots, correct?
    - It works best if you are a non-taxpayer, or low earner?
    - When can you start? Can you open a SIPP at any time and put the money in....but can you only then draw it out in the tax year AFTER you've turned 55, once the tax rebate has been made?

    Thanks folks.
    " That pound I saved yesterday, is a pound I don't have to earn tomorrow "
    • Dazed and confused
    • By Dazed and confused 3rd Feb 18, 8:56 AM
    • 2,485 Posts
    • 1,185 Thanks
    Dazed and confused
    It works best if you are a non-taxpayer, or low earner?

    Not necessarily, it actually works best (using a realistic scenario) if you contribute when you are a high earner and can get 40% tax relief on the contribution and then have a tax year (or years) when you are a non taxpayer even with the taxable withdrawls from the SIPP as part of your income.

    But the basis principle is you could be a low earner/non taxpayer and still get the 20% relief when you make the payment and not necessarily have any tax to pay when you take the pension as income.
    • skycatcher
    • By skycatcher 3rd Feb 18, 11:51 AM
    • 16 Posts
    • 4 Thanks
    skycatcher
    From what I recall I had to move the money from my wifes cash only SIPP into a draw down account/facility 1/4/17 and that was when I was told that if I emptied all of that within 12 months there would be a 250 charge. To avoid the charge I needed to leave at least 1000 in the draw down account for at least 12 months after which I could empty it without charge.

    The cash SIPP was then closed without charge, but I asked them to reopen it as I plan like you to keep putting the 2880 in to gain the 720 tax refund. We do in fact still have 4K left in the draw down account as I needed to leave that there as I drew out the max including the 25% so as not to go over her personal allowance. I will draw this out after 1/4/18 but of course that will be beyond the 12 months, then do the same again with the money I put in before the end of this tax year leaving 1000 in beyond 1/4/19 to avoid any charges.

    I will probably need to double check with HL to make sure I have that correct. As I said their advice line is excellent and they are patient and very helpful for us amateurs i.e. I only found out about this 2 years ago when I came on this forum.
    Originally posted by jerrysimon
    Thanks for this...I think the penny has just about dropped! So if I understand correctly....I opened the sipp on 1/2/18, they say I'll get the 720 on 21/3/18 so I can start to drawdown then and still add in another 2880 in say 30/4/18 (next tax year) keeping the 1000 float and have the whole lot out by say 30/3/19 without the close down charge.
    • peteduk
    • By peteduk 3rd Feb 18, 4:44 PM
    • 33 Posts
    • 10 Thanks
    peteduk
    Thanks to everyone for the contributions above.
    I have long believed this scenario existed but could find no-one who would advise - found this thread today by chance. The difference is I thought it was something to do with the "Triviality rule"
    I am sorry I became more confused the more I read - I should have stopped at about half way through...... To get to the point:
    My wife is 70 this year and receives ~5K state pension with insignificant other savings.
    I will gift her the monies and act on her behalf as she refuses to have anything to do with computers and on line accounts - she will not want to claim any tax back. So the plan is:
    Open a HL SIPP
    Deposit 2880 in FY17 - 18 (before April this year)
    HL apply and receive Tax rebate of 720
    Apply to HL to transfer to drawdown
    Fill in risk assessment
    Withdraw 960
    Withdraw 10
    Wait for HL to receive tax code
    Withdraw remaining less 1,000
    Add next 2,880 in FY18 -19 (before April '19)
    HL apply and receive tax rebate of 720
    Withdraw remaining less 1,000

    If that's it, it feels straight forward - are there any steps I've missed, or potential mis-steps?

    Another question or should I go to another thread for this one?:
    I am 57, still working and have a Final Salary pension that my employer is wishing to reduce the benefits of. Can I open a SIPP too? (I have some cash savings but no other investments)

    Thank you for your help
    • jerrysimon
    • By jerrysimon 3rd Feb 18, 4:50 PM
    • 278 Posts
    • 212 Thanks
    jerrysimon
    Thanks for this...I think the penny has just about dropped! So if I understand correctly....I opened the sipp on 1/2/18, they say I'll get the 720 on 21/3/18 so I can start to drawdown then and still add in another 2880 in say 30/4/18 (next tax year) keeping the 1000 float and have the whole lot out by say 30/3/19 without the close down charge.
    Originally posted by skycatcher
    Correct
    • jerrysimon
    • By jerrysimon 3rd Feb 18, 4:56 PM
    • 278 Posts
    • 212 Thanks
    jerrysimon
    If that's it, it feels straight forward - are there any steps I've missed, or potential mis-steps?

    Another question or should I go to another thread for this one?:
    I am 57, still working and have a Final Salary pension that my employer is wishing to reduce the benefits of. Can I open a SIPP too? (I have some cash savings but no other investments)

    Thank you for your help
    Originally posted by peteduk
    Seems correct.

    Re your pension I dont think they can reduce benefits on an existing pension but would need to close it and restart a new one which you may be required to move to. That was my case though it was a PS DB pension which they closed and made everyone join a new pension . That said as I was over 50 and less than 10 years away from drawing my pension I remained in the old pension scheme which I withdrew early anyway having retired last year at 56.

    Suggest you confirm with your pension provider.

    You can open a SIPP whenever you want, as per this thread, and if working can only put in as much as you earn in a year less any other pension payments made elsewhere. There are cases where you can carry over unused earnings from the previous year (i.e. pay in more that you earn in one year) but suggest you read through the threads here/speak to you SIPP provider.
    Last edited by jerrysimon; 03-02-2018 at 5:18 PM.
    • caveman38
    • By caveman38 4th Feb 18, 8:34 AM
    • 913 Posts
    • 291 Thanks
    caveman38
    Thanks to everyone for the contributions above.
    I have long believed this scenario existed but could find no-one who would advise - found this thread today by chance. The difference is I thought it was something to do with the "Triviality rule"
    I am sorry I became more confused the more I read - I should have stopped at about half way through...... To get to the point:
    My wife is 70 this year and receives ~5K state pension with insignificant other savings.
    I will gift her the monies and act on her behalf as she refuses to have anything to do with computers and on line accounts - she will not want to claim any tax back. So the plan is:
    Open a HL SIPP
    Deposit 2880 in FY17 - 18 (before April this year)
    HL apply and receive Tax rebate of 720
    Apply to HL to transfer to drawdown
    Fill in risk assessment
    Withdraw 960
    Withdraw 10
    Wait for HL to receive tax code
    Withdraw remaining less 1,000
    Add next 2,880 in FY18 -19 (before April '19)
    HL apply and receive tax rebate of 720
    Withdraw remaining less 1,000

    If that's it, it feels straight forward - are there any steps I've missed, or potential mis-steps?

    Another question or should I go to another thread for this one?:
    I am 57, still working and have a Final Salary pension that my employer is wishing to reduce the benefits of. Can I open a SIPP too? (I have some cash savings but no other investments)

    Thank you for your help
    Originally posted by peteduk


    Could you please explain the significance of withdrawing the exact figures of 960 and then 10. Is it a strategy or just personal?
    • ProDave
    • By ProDave 4th Feb 18, 10:52 AM
    • 801 Posts
    • 867 Thanks
    ProDave
    Could you please explain the significance of withdrawing the exact figures of 960 and then 10. Is it a strategy or just personal?
    Originally posted by caveman38
    The 960 is the 25% tax free lump sum.

    the 10 is a trivial taxable payment but will trigger getting a tax code for future payments.

    The next payment is defered until the tax code is sorted out so can be taxed correctly at the correct rate, not emergency rate.
    • Mnd
    • By Mnd 4th Feb 18, 11:54 AM
    • 479 Posts
    • 547 Thanks
    Mnd
    And repeat until she's 75
    • caveman38
    • By caveman38 4th Feb 18, 11:55 AM
    • 913 Posts
    • 291 Thanks
    caveman38
    The 960 is the 25% tax free lump sum.

    the 10 is a trivial taxable payment but will trigger getting a tax code for future payments.

    The next payment is defered until the tax code is sorted out so can be taxed correctly at the correct rate, not emergency rate.
    Originally posted by ProDave

    Thanks for the explanation, but why 960 and not 900?
    • Dazed and confused
    • By Dazed and confused 4th Feb 18, 12:27 PM
    • 2,485 Posts
    • 1,185 Thanks
    Dazed and confused
    I think 960 is probably a typo (or dodgy calculator!)

    The 10 uses a very cautious approach. The emergency tax code allows a pension provider or employer to make a payment (of taxable income) of upto 958 without needing to deduct any tax (using a monthly payroll).

    From 6 April 2018 this increases to 987.
    • peteduk
    • By peteduk 4th Feb 18, 4:51 PM
    • 33 Posts
    • 10 Thanks
    peteduk
    Thank you all for taking an interest and helping.
    For clarification:
    - The 960 is a typo - of course 25% of 3,600 is 900, sorry for the confusion
    - The 10 is so HL get a tax code and my wife doesn't have to bother the taxman with a refund - I didn't know about the higher limit quoted by 'Dazed and Confused'. I'll stay with the 10 though
    - Yes we'll repeat until she's 75 (sorry meant to add that)
    I will start to put this into effect this week

    Re: My pension
    They wish to change it so it is no longer Final Salary but based on average earnings (each year is treated as a stand alone) and increase my % payment levels. Entitlement to date would be treated as if I retired at current salary. Not the worst change compared to others but significant enough.
    I'll probably see how the above pans out but a SIPP seems like a good idea as I have no other investments.
    Thanks again
    Pete
    • Jakey30$
    • By Jakey30$ 5th Feb 18, 9:47 AM
    • 4 Posts
    • 1 Thanks
    Jakey30$
    pt18
    Hi All,
    I've just seen this on the thread I subscribe to. I took out a H&L sipp for the wife( She is now 65 and been retired for 3 years with only State pension as income) she has 3 years x 2880 in plus 20% Tax relief we haven't done anything with it so far (Still a little confused as to best route to take)
    I will be 67 in July and still working 40% tax payer and still paying into a company pension scheme, I'm, drawing a final salary pension from previous owners of the company I still work for
    (taxed @ 40%) and also drawing a state pension.
    My Question is: Can I also open a sipp with H&L for myself and take advantage of the tax relief
    • dunroving
    • By dunroving 5th Feb 18, 12:08 PM
    • 994 Posts
    • 621 Thanks
    dunroving
    As peteduk brought up the Triviality Rule, thought I'd throw that issue out there. The thread title says "When retired", but retirement is a state of mind, not a specific event or age. ;-)

    So ... considering retirement is a fluid concept, it is possible that some people in this scenario do take up work again, through choice/boredom or necessity, either FT or PT. In the current scenario, you'd be hit by the MPAA rule and pension contributions would be restricted to 4,000.

    To avoid that, would it make sense to maybe contribute to one SIPP for a couple of years, and then open another SIPP, and so on, to keep all the SIPP pots below 10k?
    (Nearly) dunroving
    • MallyGirl
    • By MallyGirl 5th Feb 18, 12:19 PM
    • 2,613 Posts
    • 7,609 Thanks
    MallyGirl
    I thought triviality rule was applied to total of all pots - could be wrong though
    • xylophone
    • By xylophone 5th Feb 18, 2:28 PM
    • 25,190 Posts
    • 14,837 Thanks
    xylophone
    https://www.pensionsadvisoryservice.org.uk/about-pensions/retirement-choices/the-right-choice-for-me/taking-a-small-pension-as-a-cash-lump-sum

    https://www.pensionsadvisoryservice.org.uk/content/publications-files/uploads/Taking_small_pensions_Detailed_SPOT008_V1.5.pdf
    • Dazed and confused
    • By Dazed and confused 5th Feb 18, 8:33 PM
    • 2,485 Posts
    • 1,185 Thanks
    Dazed and confused
    Jakey30$

    You will need to consider your current pension contributions as there are limits to how much you can contribute but in theory yes however based on your post you will potentially be eligible for double the tax relief your wife gets.

    20% at source (like your wife) but you can then advise HMRC of the gross contribution and that increases the amount of 20% tax you can pay which in turn reduces the amount of 40% tax you have to pay.

    Using the 3600 amount for simplicity and assuming you pay 40% tax on at least 3600 then you could pay 2880 into a SIPP and the pension company adds 720 basic rate tax relief. You notify HMRC of the gross pension contribution of 3600 and they adjust your tax so you pay more 20% and less 40% tax, a potential saving of 720 (3600 x 20%). Depending on when you tell HMRC you either get a tax refund or pay less tax as you go along.

    So ultimately you have a pension pot of 3600 but the real cost to you could be as low as 2160.
  • jamesd
    considering retirement is a fluid concept, it is possible that some people in this scenario do take up work again, through choice/boredom or necessity, either FT or PT. In the current scenario, you'd be hit by the MPAA rule and pension contributions would be restricted to 4,000.

    To avoid that, would it make sense to maybe contribute to one SIPP for a couple of years, and then open another SIPP, and so on, to keep all the SIPP pots below 10k?
    Originally posted by dunroving
    It's the defined contribution small pots rule that you seem to be thinking of. Taking money using the small pots rule doesn't trigger the MPAA so you don't need to wait if you don't want to. You can transfer an uncrystallised pot so it's OK to go over 10k. Your base idea is good.
    • Dorian1958
    • By Dorian1958 12th Feb 18, 5:59 PM
    • 136 Posts
    • 98 Thanks
    Dorian1958
    Humble apologies if this question has been asked before:


    Someone has taxable income (not from employment, but from pensions, rental income, benefits etc) 14,000 which takes them over the personal allowance by just a few thousand and therefore they are required to pay tax at the basic rate on the marginal amount. If they then pay 2880 into a personal pension is this then declared gross 3660 during self assessment and could this in theory take them under the personal allowance threshold? Or does this only work if paying into an occupational pension?


    Thank you for you looking and please say if this should have been asked on the Cutting Tax board.


    Cheers Dorian
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