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  • FIRST POST
    • nxdmsandkaskdjaqd
    • By nxdmsandkaskdjaqd 3rd Jan 17, 8:39 AM
    • 511Posts
    • 51Thanks
    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 29
    • Dazed and confused
    • By Dazed and confused 6th Mar 18, 8:18 PM
    • 2,643 Posts
    • 1,266 Thanks
    Dazed and confused
    You only pay tax (on the taxable element) when it is withdrawn from the pension.

    Withdrawing 10 of the taxable element doesn't avoid any tax. If you have enough other income you will owe tax on the 10.

    On the first payment (usually paid as a monthly payment for tax purposes) the pension companies use the emergency tax code which allows you to receive 959 before tax is deducted in the current year.

    From 6 April this becomes 988.
    • skycatcher
    • By skycatcher 6th Mar 18, 10:15 PM
    • 18 Posts
    • 4 Thanks
    skycatcher
    Thanks...I understand the 10 is taxable just wanted to make sure that the rest in the drawdown account isn't until it's actually withdrawn which is what I think is you are saying... Cheers
    • westv
    • By westv 6th Mar 18, 10:26 PM
    • 4,545 Posts
    • 2,138 Thanks
    westv
    The money is in drawdown but it's only taxable if it's drawn down.
    • MoneySaving ExNOT
    • By MoneySaving ExNOT 9th Mar 18, 8:27 AM
    • 2 Posts
    • 0 Thanks
    MoneySaving ExNOT
    As you can see from my username I'm a 'newbie' here......
    Hypothetical situation: The reason I ask this question is because when I retire (formally) I expect to have the max state pension of approx 8300 and a small employers pension of around 3700 pa. Assume I'm 51 living on savings, (ISAs, so I pay no tax - have no other taxable income, claim no benefits). For sake of simplicity in the calculations below I assume a personal allowance of 12000.
    I understand that each year I can open a SIPP pay in 2880 & the taxman will top this up by 720 to 3600 After the age of 55 I can withdraw this - might keep small amount in SIPP so a/c is open.

    QUESTION 1. Supposing at age of 55 my total 'pot' was (say) 16000 (4 years of gross contributions of 3600 pa = 14400 plus 'growth' of 1600. So I could withdraw 25% (4000) tax free and the other 12000 tax free because my personal allowance covered it, is this correct?

    QUESTION 2. Supposing my fund grew to (say) 20000 could I withdraw 16000 as above at age 55 and the remaining 4000 in the following year both withdrawals without tax?


    The reason I ask this is because it seems (given that my state & employers pension equal the P.A) that I am better off putting money into a SIPP, getting the tax back and then withdrawing it & putting the money back into a cash ISA (so interest is free)
    Last edited by MoneySaving ExNOT; 09-03-2018 at 8:31 AM.
    • cloud_dog
    • By cloud_dog 9th Mar 18, 9:07 AM
    • 3,726 Posts
    • 2,215 Thanks
    cloud_dog
    Yes, to both/all questions is the simple answer.

    The only caveat is that on the very first withdrawal you will be taxed and will need to reclaim the tax from HMRC. It is not difficult to do, simply ringing them and explaining the situation should be sufficient.
    Personal Responsibility - Sad but True

    Sometimes.... I am like a dog with a bone
    • MoneySaving ExNOT
    • By MoneySaving ExNOT 9th Mar 18, 9:21 AM
    • 2 Posts
    • 0 Thanks
    MoneySaving ExNOT
    Yes, to both/all questions is the simple answer.

    The only caveat is that on the very first withdrawal you will be taxed and will need to reclaim the tax from HMRC. It is not difficult to do, simply ringing them and explaining the situation should be sufficient.
    Originally posted by cloud_dog

    Thanks for your prompt answer.
    • jerrysimon
    • By jerrysimon 9th Mar 18, 9:32 AM
    • 282 Posts
    • 219 Thanks
    jerrysimon
    Put my 2880 in earlier this month. Free money
    • Crabby
    • By Crabby 9th Mar 18, 9:51 AM
    • 740 Posts
    • 182 Thanks
    Crabby
    Yes, to both/all questions is the simple answer.

    The only caveat is that on the very first withdrawal you will be taxed and will need to reclaim the tax from HMRC. It is not difficult to do, simply ringing them and explaining the situation should be sufficient.
    Originally posted by cloud_dog
    I rang them and was told to fill in a form to reclaim.
    Winner winner, Chicken dinner.
    • Mnd
    • By Mnd 9th Mar 18, 10:01 AM
    • 546 Posts
    • 645 Thanks
    Mnd
    I might have misunderstood. .when you you be taking the employers pension..if it's after your senario then ignore me..if it's during then you will be liable for some tax
    • cloud_dog
    • By cloud_dog 9th Mar 18, 10:58 AM
    • 3,726 Posts
    • 2,215 Thanks
    cloud_dog
    I rang them and was told to fill in a form to reclaim.
    Originally posted by Crabby
    Others who have undertaken this seem to have found HMRC more accommodating. Perhaps the person was having a carpy day, or perhaps HMRC have changed / reinforced appropriate protocols.

    Others who have gone through this process have suggested making a small withdrawal, i.e. 10 so as to get an appropriate PAYE code for HMRC before commencing the full draw down (all assuming you draw down in a single event rather than equal monthly withdrawals; which is what PAYE is designed primarily for).

    I might have misunderstood. .when you you be taking the employers pension..if it's after your senario then ignore me..if it's during then you will be liable for some tax
    Based on how it was written my assumption was that the enquiry was for pre-normal / work / state pension payments. And, yes I know what 'assume' makes
    Personal Responsibility - Sad but True

    Sometimes.... I am like a dog with a bone
    • AlwaysLearnin
    • By AlwaysLearnin 11th Mar 18, 8:47 AM
    • 583 Posts
    • 494 Thanks
    AlwaysLearnin
    This form might be useful for anyone in the 2nd (or subsequent) year with HL, i.e. already got the SIPP and drawdown accounts in place and just want to move further funds in to drawdown:

    http://www.hl.co.uk/__data/assets/pdf_file/0011/9196130/moving-further-funds-into-drawdown.pdf

    Believe address is:

    FREEPOST: HARGREAVES LANSDOWN
    Bristol
    BS1 5HL
    • missile
    • By missile 12th Mar 18, 8:48 AM
    • 9,479 Posts
    • 4,715 Thanks
    missile
    I rang them and was told to fill in a form to reclaim.
    Originally posted by Crabby
    I did it online easy
    "A nation's greatness is measured by how it treats its weakest members." ~ Mahatma Gandhi
    Ride hard or stay home
    • AnotherJoe
    • By AnotherJoe 12th Mar 18, 9:44 AM
    • 9,606 Posts
    • 10,683 Thanks
    AnotherJoe
    As you can see from my username I'm a 'newbie' here......
    Hypothetical situation: The reason I ask this question is because when I retire (formally) I expect to have the max state pension of approx 8300 and a small employers pension of around 3700 pa. Assume I'm 51 living on savings, (ISAs, so I pay no tax - have no other taxable income, claim no benefits). For sake of simplicity in the calculations below I assume a personal allowance of 12000.
    I understand that each year I can open a SIPP pay in 2880 & the taxman will top this up by 720 to 3600 After the age of 55 I can withdraw this - might keep small amount in SIPP so a/c is open.

    You dont have to open a new SIPP every year you can just pay into the existing one.

    QUESTION 1. Supposing at age of 55 my total 'pot' was (say) 16000 (4 years of gross contributions of 3600 pa = 14400 plus 'growth' of 1600. So I could withdraw 25% (4000) tax free and the other 12000 tax free because my personal allowance covered it, is this correct?

    Yes

    QUESTION 2. Supposing my fund grew to (say) 20000 could I withdraw 16000 as above at age 55 and the remaining 4000 in the following year both withdrawals without tax?

    Yes

    The reason I ask this is because it seems (given that my state & employers pension equal the P.A) that I am better off putting money into a SIPP, getting the tax back and then withdrawing it & putting the money back into a cash ISA (so interest is free)
    Originally posted by MoneySaving ExNOT
    If you mean, take it out before you are liable to pay tax (eg once SP and EP kicks in), so you can spend it down later when you are paying tax, yes. I'll be doing the same for the next 4 years till my SP starts.
    • plumduff55
    • By plumduff55 19th Mar 18, 8:53 AM
    • 373 Posts
    • 3,006 Thanks
    plumduff55
    I'd just like to thank everyone who has contributed to this thread. Ive read all 29 pages twice just to make sure I'd understood it properly. Yesterday I applied for a cash SIPP online from HL. It took under 5 minutes and all I needed was my NI number and bank details. Very simple to do.

    I retired in October 2015, aged 60 with a small final salary annual pension of 5,280 and am not a tax payer. I am using my pension lump sum to fund my retirement till October 2021 when I will receive my state pension. An extra 720 a year is great for me and will give me a short annual holiday without touching any more of my savings.

    I just wish I'd known about this in 2015. Im sure there's many others out there in my situation who would benefit from this extra money. Thanks again to all the posters who have explained about SIPPs.
    SPC 10 Member 045 Target 250
    • twiglet98
    • By twiglet98 23rd Mar 18, 11:45 PM
    • 809 Posts
    • 3,808 Thanks
    twiglet98
    I have recently taken redundancy and have to make alternative arrangements for my meagre company pension plan. I had assumed it would transfer to a new employer's scheme but I have not found a new job and I'm now looking at very part-time or casual work, which may not offer a pension scheme at all.

    It is a 'money purchase' scheme which I joined in 2000, the annual statement at 31/12/2017 shows the plan value as about 34k and the projected monthly pension of a paltry 180 assumes retirement at age 75.

    I am nearly 62, female, divorced, my only other pension is a small DB one with L&G which would be about 3k a year, or 18k cash and a smaller regular payment, this could have been paid from age 60 but I haven't really explored options other than looking at the Benpal modeller.

    Now I presently have no income at all, 8k left of my redundancy settlement, no other investments and the end of the tax year is looming. My earnings, on my P45, were just over 18k, and I doubt I'll ever earn that much again.

    Is it insane to follow the steps outlined in this thread, sinking 2880 into it next week (or before 5 April) to gain the top-up payment which can then be withdrawn, or is it insane not to do so?
    • xylophone
    • By xylophone 24th Mar 18, 3:15 PM
    • 25,585 Posts
    • 15,114 Thanks
    xylophone
    Have you obtained a new state pension statement? What does it say? https://www.gov.uk/check-state-pension


    It is possible to obtain tax relief on 100% of your relevant earnings subject to the annual allowance.

    Your relevant earnings for the current tax year are (say) 18,000.


    This would mean that in the current tax year, a maximum of 14.400 could be contributed to a personal pension/SIPP and up to 3,600 claimed in tax relief.

    It seems that you have already made some contribution to your DC pension in this tax year but it seems likely that you have room to contribute more than the 2880 permitted for those with no relevant earnings.

    You would have time to open a SIPP with eg Hargreaves Lansdown and make your contribution.

    You could also consider transferring in the DC pension to which your refer.

    HL are helpful on the phone so that you could give them a ring.

    There is a lot of information on their site which you can read.

    You could also consider an appointment with Pension Wise to discuss your DC pension options.

    https://www.pensionwise.gov.uk/en?gclid=EAIaIQobChMIqq6gj6CF2gIVpBXTCh2-qQg1EAAYASAAEgLBOvD_BwE

    If you are unlikely to obtain employment or anticipate earning low amounts on a casual basis, is it now time to consider drawing the small deferred DB pension?
    • twiglet98
    • By twiglet98 24th Mar 18, 7:14 PM
    • 809 Posts
    • 3,808 Thanks
    twiglet98
    Thank you so much for sharing some ideas and giving me lots to ponder.

    The state pension forecast is 159.55/week if I contribute for another two years before 5 April 2022 (my SPA is 66). I have paid full N.I. contributions for 45 years with no gaps.

    A former colleague who was made redundant at the same time said he has applied for Contribution-Based JSA and apparently if this is awarded it covers N.I. payments when out of work. I think my lump sum payment was higher as I had been there longer, but it's something to look into.

    When employees were invited to join the works pension scheme the suggestion was to pay 10% of wages into it. I was then working during school hours, 20 hours a week at 5/hour, and the 10/week that I started paying has never changed despite increasing to 30 and then 40 hours. We didn't get pensions advice and I realise rather too late that I should have asked. My weekly payslip show an EE deduction of 10.26 and an ER amount of 9.00, the respective totals at leaving date were EE 451.44 and ER 396.00.

    Clearly there is room to pay a lot more into pension savings but I need to keep some money in the bank as that's what I'm living on for now. If I take 2880 out of the bank now, just before the end of this tax year, to start a SIPP it wouldn't make sense to withdraw anything from it in this same tax year as I've already earned more than the Personal Allowance. If I do start one next week, paying it out of my redundancy payment, I assume I can then repeat it at any time in the 2018-19 tax year. It does look as if moving the former company pension (Clerical Medical) would be better than just leaving it with them.

    Legal and General (or JLT, their administrators) sent me a booklet from Pension Wise just before my 60th birthday but I seem to remember getting something about the Pensions Advisory Service too, maybe from Clerical Medical or Scottish Widows - what's the difference? Do they both give recommendations about small investments? What might it cost me to move the DC scheme into a SIPP with HL?

    Monday is diaried for a day on the phone, oh the luxury of NOT being at work during office hours!!
    Last edited by twiglet98; 24-03-2018 at 7:17 PM. Reason: apostrophes
    • twiglet98
    • By twiglet98 24th Mar 18, 7:37 PM
    • 809 Posts
    • 3,808 Thanks
    twiglet98
    If you are unlikely to obtain employment or anticipate earning low amounts on a casual basis, is it now time to consider drawing the small deferred DB pension?
    Originally posted by xylophone
    I'm confused about the L&G pension. The Benpal modeller is stuck on a retirement age of 60 but I've had a letter from L&G in February which says they are writing because I have previously decided to defer payment from the scheme which would otherwise have been paid from my normal retirement date, my 60th birthday. I didn't actually tell them to do, or not do, anything, so my inaction led to this.

    It says until now, the late retirement factor has been 9% per year applied on a compound basis for the first eight years and then on a simple basis for any years beyond that. It is changing to 6% per year compund from 1 March 2018.

    It goes on to say if I decide to proceed with retirement now or in the near future I can request a retirement quote, the quote cannot be retrospective or quoted more than 12 months in advance.

    I think the Benpal modeller is not compatible with my old computer so it isn't updating properly. I'll try on my daughter's computer next week.
    Last edited by twiglet98; 24-03-2018 at 7:38 PM. Reason: typo
    • kidmugsy
    • By kidmugsy 24th Mar 18, 8:53 PM
    • 10,881 Posts
    • 7,436 Thanks
    kidmugsy
    It is a 'money purchase' scheme which I joined in 2000, the annual statement at 31/12/2017 shows the plan value as about 34k.

    I am nearly 62, female, divorced, my only other pension is a small DB one with L&G which would be about 3k a year, or 18k cash and a smaller regular payment, this could have been paid from age 60 but I haven't really explored options other than looking at the Benpal modeller.

    Now I presently have no income at all, 8k left of my redundancy settlement, no other investments and the end of the tax year is looming. My earnings, on my P45, were just over 18k, and I doubt I'll ever earn that much again.

    Is it insane to follow the steps outlined in this thread, sinking 2880 into it next week (or before 5 April) to gain the top-up payment which can then be withdrawn, or is it insane not to do so?
    Originally posted by twiglet98
    The maximum gross amount you can contribute to a pension in this tax year is your earnings minus any contributions you made on your work pension. So if you can stomach the risk of having very little cash for a few weeks you could contribute more than 3,600 gross/2,880 net.

    How quickly could your work pension get the TFLS to you? Can you take the TFLS without their trying to pay you an annuity?
    Free the dunston one next time too.
    • xylophone
    • By xylophone 24th Mar 18, 10:47 PM
    • 25,585 Posts
    • 15,114 Thanks
    xylophone
    Pension Wise offers guidance on DC pensions.

    The PAS offers help with matters relating to pensions.

    https://www.pensionsadvisoryservice.org.uk/?utm_expid=.Luj1oalXTTyNdDX8FdnnpA.0&utm_referrer= https%3A%2F%2Fwww.google.co.uk%2F

    With regard to your DB pension, it appears that payment of your pension has been deferred by default because you did not contact the administrator when you were about to reach Scheme Pension Age.

    If you make a large a payment as possible into a SIPP with HL before 6 April, you should find that the tax relief is added in May.

    You could also ask them about a transfer in of the DC pension.

    You could then commence drawdown as suits you best - you can read about it or book an appointment with Pension Wise.

    You might have say a PCLS of around 10,000 from a combination of your transfer in and your contribution and in addition to this a lump sum from your DB pension.

    It seems that you have been managing on a salary of 18000 a year - the above lump sums together with your DB pension could keep you going for a couple of years.

    You could then draw down your SIPP as suited your tax position up to state pension age.

    Even if you do not start earning again, you can continue to contribute up to 2880 a year to the SIPP up to age 75 and receive the 720 tax relief.

    Don't forget that if you are job searching, you can apply for JSA.
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