Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • nxdmsandkaskdjaqd
    • By nxdmsandkaskdjaqd 3rd Jan 17, 8:39 AM
    • 552Posts
    • 70Thanks
    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 32
    • Deneb
    • By Deneb 19th Apr 18, 4:58 PM
    • 345 Posts
    • 272 Thanks
    Deneb
    I had one SIPP with HL with 400k give or take.
    I took out the 25% (100k obviously)
    I ended up with one account "original SIPP" which was closed to new entries with nothing in it and another "drawdown SIPP" with 300k in it.
    Originally posted by AnotherJoe
    I took a slightly different approach. I crystallised all but 1K of my SIPP, taking the 25% PCLS. The remaining 75% was moved to a SIPP Income Drawdown account, leaving the original SIPP open with the uncrystallised 1K still in it, to which I have continued to add further contributions.

    You could keep repeating this. As long as you leave at least 1K uncrystallised each time, the original SIPP will remain open.
    • missile
    • By missile 20th Apr 18, 11:24 AM
    • 9,780 Posts
    • 4,918 Thanks
    missile
    In practice it makes little difference, you can easily open another SIPP with one phone call.
    "A nation's greatness is measured by how it treats its weakest members." ~ Mahatma Gandhi
    Ride hard or stay home
    • ukdw
    • By ukdw 20th Apr 18, 5:28 PM
    • 72 Posts
    • 43 Thanks
    ukdw
    In practice it makes little difference, you can easily open another SIPP with one phone call.
    Originally posted by missile
    Won't you eventually be liable for an extra closure fee of either 25+VAT or 295+VAT for each additional SIPP you open with HL?
    http://www.hl.co.uk/pensions/sipp/charges-and-interest-rates
    • peteduk
    • By peteduk 24th May 18, 9:22 PM
    • 35 Posts
    • 10 Thanks
    peteduk
    Hello,
    I thought I understood when questions I asked earlier in this thread were kindly answered. Now some of the later posts show that I didn't understand. Therefore apologies and please bear with me.

    Current status:
    SIPP opened in my wife's name. 2880 deposited, 720 added by taxman for FY17
    Next steps proposed with questions:
    1). Call HL and ask to withdraw 900 = 25% tax free.
    Q. Can this be done online so I can do it on my wife's behalf?

    2). Call HL and ask to withdraw 10 so HL get tax code for my wife
    Q. Can this be done online so I can do it on my wife's behalf?
    Q. How will I know when HL have received the tax code?

    3). I was going to withdraw the balance less 1,000 and then top up with a further 2,880 for FY18.
    Q. But if the account has gone into drawdown my new understanding is that it might as well be closed and the total balance taken because my wife is a non tax payer. Is this right?
    Q. Can this be done online so I can do it on my wife's behalf?

    4). Q. If I am correct in step 3 can my wife open a new SIPP for FY18 with a new deposit of 2,880 with HL?
    Q. Can it be done in parallel with the above steps?

    5). Q. If step 4 and above is ok, is there a downside to this? e.g. are HL / the taxman happy for this to happen?

    Thank you for your support and I apologise for the length of my post, and especially if you feel I should have grasped it by now.

    Pete
    • Audaxer
    • By Audaxer 24th May 18, 11:30 PM
    • 1,432 Posts
    • 871 Thanks
    Audaxer
    Hello,
    I thought I understood when questions I asked earlier in this thread were kindly answered. Now some of the later posts show that I didn't understand. Therefore apologies and please bear with me.

    Current status:
    SIPP opened in my wife's name. 2880 deposited, 720 added by taxman for FY17
    Next steps proposed with questions:
    1). Call HL and ask to withdraw 900 = 25% tax free.
    Q. Can this be done online so I can do it on my wife's behalf?

    2). Call HL and ask to withdraw 10 so HL get tax code for my wife
    Q. Can this be done online so I can do it on my wife's behalf?
    Q. How will I know when HL have received the tax code?

    3). I was going to withdraw the balance less 1,000 and then top up with a further 2,880 for FY18.
    Q. But if the account has gone into drawdown my new understanding is that it might as well be closed and the total balance taken because my wife is a non tax payer. Is this right?
    Q. Can this be done online so I can do it on my wife's behalf?

    4). Q. If I am correct in step 3 can my wife open a new SIPP for FY18 with a new deposit of 2,880 with HL?
    Q. Can it be done in parallel with the above steps?

    5). Q. If step 4 and above is ok, is there a downside to this? e.g. are HL / the taxman happy for this to happen?

    Thank you for your support and I apologise for the length of my post, and especially if you feel I should have grasped it by now.

    Pete
    Originally posted by peteduk
    As you wife is a non-tax payer and just wants the benefit of the tax relief each year, the best method in my view would be to draw out 2,600 by a lump sum (UFPLS rather than drawdown), and leave 1,000 in to keep account open. 650 (25%) of the 2,600 will be tax free and she will be taxed on the rest, but will be able to claim it back from HMRC in due course.

    In 2018/19 she can pay in 2880 and once the tax relief is added she can withdraw by UFPLS the 3,600, leaving in the original 1,000 as cash. So in 2018/19, and subsequent years if she follows the same process, she will be able to profit from the full 720 tax relief once claimed back from HMRC. That is how I understand it.

    Oh, and certainly for the first UFPLS withdrawal at least, you wife needs to phone up and get a form to complete and sign, before it's processed.
    • peteduk
    • By peteduk 25th May 18, 8:38 PM
    • 35 Posts
    • 10 Thanks
    peteduk
    Hello Audaxer,
    Thank you for your reply.
    Unfortunately my wife hates computers and talking to anyone about money so even getting this far is difficult for her. When I first read it I thought it was more complicated than my proposal but if the claim from the taxman is simple maybe not.

    Thinking on:
    I could ask HL to send the form for her to complete to withdraw the 2,600

    Q. Then is it simply the case of getting another form from HMRC and filling it in to reclaim the tax paid?
    If so, again I could do that for her to complete.

    Q. Am I correct in thinking she'd only have to declare her other income (state pension) to the taxman so it would be straightforward?

    Thank you again for your help
    Pete
    • Audaxer
    • By Audaxer 25th May 18, 9:12 PM
    • 1,432 Posts
    • 871 Thanks
    Audaxer
    Q. Then is it simply the case of getting another form from HMRC and filling it in to reclaim the tax paid?
    If so, again I could do that for her to complete.

    Q. Am I correct in thinking she'd only have to declare her other income (state pension) to the taxman so it would be straightforward?
    Originally posted by peteduk
    I'm not sure how you claim it back from HMRC. You can check online but you may need to phone them. If you/she registers online they will have details of all her income, which in this case will only be the State Pension, so I think it should be fairly straightforward.
    • TBC15
    • By TBC15 26th May 18, 2:27 PM
    • 623 Posts
    • 314 Thanks
    TBC15
    I took a slightly different approach. I crystallised all but 1K of my SIPP, taking the 25% PCLS. The remaining 75% was moved to a SIPP Income Drawdown account, leaving the original SIPP open with the uncrystallised 1K still in it, to which I have continued to add further contributions.

    You could keep repeating this. As long as you leave at least 1K uncrystallised each time, the original SIPP will remain open.
    Originally posted by Deneb
    I'm sure its all one SIPP, part of which is in drawdown.
    Could be wrong but I'm sure we put all of my wife's SIPP into drawdown recently and our monthly contributions now go into the part of the SIPP that isn't in drawdown.
    • Deneb
    • By Deneb 26th May 18, 6:12 PM
    • 345 Posts
    • 272 Thanks
    Deneb
    I'm sure its all one SIPP, part of which is in drawdown.
    Could be wrong but I'm sure we put all of my wife's SIPP into drawdown recently and our monthly contributions now go into the part of the SIPP that isn't in drawdown.
    Originally posted by TBC15

    It is, but if you're with HL, log in and you will see it is now split into drawdown and non-drawdown accounts for management purposes. It makes it easier to tell how much has been crystallised and how much hasn't. Any new contributions will go into the non-drawdown account to separate them from the crystallised funds.
    • Rob749
    • By Rob749 26th May 18, 8:03 PM
    • 37 Posts
    • 2 Thanks
    Rob749
    Hi everyone,
    My wife did UFPLS last tax year for the first time, and then reclaimed the tax back as she was taxed on emergency code. She has now got a tax code of 223N. HMRC have reduced her tax free allowance by the amount she withdrew from her pension provider (HL) plus her state pension and the married allowance, which I have claimed. Thats how that code was calculated.

    She only has a small income of 3816 from her State Pension, which was based on my NI contributions when I reached 65. She is a non tax payer and she has now received a letter from HMRC asking her to fill in a Self Assessment tax return for 2017/18. Will she have to do this next year if she puts another 2880 in her SIPP this year, and then draws the 3600, or will that be it now, once they see that she is not going to get any more income than that.

    Also in the letter HMRC have sent, they said she could do the return on line, she is already registered with Gov Gateway, but nowhere in her personal account is there any access to online forms. I eventually found a link to register for self assessment, but all that has done is created another Gateway account for her, which is exactly the same as the original one. Getting really frustrated now ! Please somebody help me ! Thank you.
  • jamesd
    Check the letter for a Unique Taxpayer Reference (UTR) number. Then try visiting https://online.hmrc.gov.uk/ to see whether she can log in there with her gateway account. A UTR is issued to everyone in self-assessment. Online self-assessment is pretty easy once you get used to it.
    Last edited by jamesd; 27-05-2018 at 12:56 AM.
    • Rob749
    • By Rob749 27th May 18, 11:14 AM
    • 37 Posts
    • 2 Thanks
    Rob749
    Thanks for the reply. I have the letter with the UTR on it, and can log in to her Personal Tax account on Gov Gateway, but then there are no links or forms on there to fill in, just her income, tax details etc. As I mentioned, I found a link to register for self assessment, which said I would get a code in the post in 10 days, but all that did was create another Gateway account with a different log in, that takes you to the same place as before, no mention of anything being sent through the post at the end of it. All I got was the access code again on my mobile as before. Really frustrating !
    • jingleberry
    • By jingleberry 1st Jun 18, 2:07 PM
    • 76 Posts
    • 31 Thanks
    jingleberry
    Thanks to the helpful info on here i've convinced myself that I should invest 2880 pa in a Hargreaves Lansdown SIPP, withdraw 900 pa as a tax free lump sum and invest the rest. I'm aged 61, a 40% tax payer with a defined benefits pension of approx 57K pa, another small pension taken as an annuity and paying 500pa, plus earned income of about 2000 pa and investment income outside ISAs of just below 500 pa (ie tax free). Im trying to get to grips with the rules of defined benefit pensions and the lifetime allowance. When I retired aged 51 10 years ago my defined benefits pension was 43K pa and I was told that it would use up 56% of the lifetime allowance. Since then the allowance has gone down and my pension has gone up. Do I need to be worried about exceeding the lifetime allowance, either now or when I reach 75? Any help would be appreciated.
    • zagfles
    • By zagfles 1st Jun 18, 5:32 PM
    • 13,534 Posts
    • 11,492 Thanks
    zagfles
    Thanks to the helpful info on here i've convinced myself that I should invest 2880 pa in a Hargreaves Lansdown SIPP, withdraw 900 pa as a tax free lump sum and invest the rest. I'm aged 61, a 40% tax payer with a defined benefits pension of approx 57K pa, another small pension taken as an annuity and paying 500pa, plus earned income of about 2000 pa and investment income outside ISAs of just below 500 pa (ie tax free). Im trying to get to grips with the rules of defined benefit pensions and the lifetime allowance. When I retired aged 51 10 years ago my defined benefits pension was 43K pa and I was told that it would use up 56% of the lifetime allowance. Since then the allowance has gone down and my pension has gone up. Do I need to be worried about exceeding the lifetime allowance, either now or when I reach 75? Any help would be appreciated.
    Originally posted by jingleberry
    Doesn't sound like it. I presume you started drawing your DB pension 10 years ago? In which case it would have crystallised then, and used up a percentage of your LTA then at the high amounts it was then. Unless you get above inflation increases on the DB pension it won't use up any more of the LTA.

    The annuity would have used up a bit more LTA, but not much by the sounds of it. You should have the total % of the LTA you've used on your statements somewhere.

    You have really fallen lucky with timings and rules here. Someone getting similar levels of pension now, or from DC, would be way above the LTA.
    • jingleberry
    • By jingleberry 2nd Jun 18, 7:57 AM
    • 76 Posts
    • 31 Thanks
    jingleberry
    Aha yes now I think I understand. The percentage lifetime allowance used crystalises on first drawing and will not change, regardless of what may happen to the overall allowance in the future. Yes I started drawing 10 years ago, and my payments rise with RPI so I'm assuming the inflation increases I have received over the years will not impact either. Many thanks for your reply zagfiles.
    • nxdmsandkaskdjaqd
    • By nxdmsandkaskdjaqd 3rd Jul 18, 9:34 AM
    • 552 Posts
    • 70 Thanks
    nxdmsandkaskdjaqd
    I used this process last year and have now started for this tax year. Will the HMRC tax code that was used last tax year be used this tax year?
    I am a non tax payer.
    • missile
    • By missile 4th Jul 18, 7:46 AM
    • 9,780 Posts
    • 4,918 Thanks
    missile
    I used this process last year and have now started for this tax year. Will the HMRC tax code that was used last tax year be used this tax year?
    I am a non tax payer.
    Originally posted by nxdmsandkaskdjaqd
    HL will use the same tax code unless HMRC decide to change it.

    In their infinite wisdom HMRC have decided that I might be a higher rate tax payer and reduced my allowance .
    "A nation's greatness is measured by how it treats its weakest members." ~ Mahatma Gandhi
    Ride hard or stay home
    • Mothman
    • By Mothman 5th Jul 18, 11:09 AM
    • 95 Posts
    • 22 Thanks
    Mothman
    Does anyone know where the 1000 min balance needs to kept in a HL SIPP to avoid the early closure charge. Is it OK to leave say 100 in the SIPP account to keep it open and as long as you leave 1000 in the Drawdown account you will avoid the early closure charge or do you effectively need to leave 1000 in both SIPP & Drawdown accounts i.e. 2000 total for the first year?
    • parcival
    • By parcival 5th Jul 18, 3:50 PM
    • 482 Posts
    • 284 Thanks
    parcival
    I moved my SIPP into a drawdown account almost immediately so it has a zero balance. The drawdown account has about 10k in it and reducing. No early closure charge was levied when I moved from SIPP to drawdown.....
    • caveman38
    • By caveman38 3rd Nov 18, 11:49 AM
    • 908 Posts
    • 295 Thanks
    caveman38
    Is it worth it?
    My wife who has a cash SIPP and plans to retire 9 months ahead of SPA. She plans to take her TFLS and a withdrawal which together with her 3 months of SP will be within her tax allowance for the year. She intends to top that up with savings to give her a final fiure of approx. 18,000.
    From the following year her plan was to draw approx. 3,750 which together with her 8,750 SP will be within the 12,500 tax allowance for 19/20.
    After taking TFLS and large withdrawal her SIPP will be worth say 50,000 and although not increasing year by year will last 15 years ish.
    If she decided to take advantage of the 2880/3600 idea for retired persons. She could withdraw 2,880 from savings to pay the SIPP, gain the 720 PIRAS and withdraw 4,650 from the scheme and still be within her tax allowance as 900 would be another TFLS (assuming that's what you call it when in drawdown)
    The dilemma I that if she did go with the additional tax free plan, she would effectively only be withdrawing a little over 1,000 per year. Her savings would diminish quicker but her SIPP would last forever unless she was happy paying tax on larger withdrawals.
    Assuming this makes sense, is there an alternative to her plan?
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

157Posts Today

2,071Users online

Martin's Twitter
  • "Sabrina, you're young. I'm not sure you've the experience I'm looking for in a business partner." Eh? Isn't the pr? https://t.co/IeTxBQq2OU

  • I am predicting the word myself will be misused 6 times in today;s boardroom. What do yourself think? #TheApprentice

  • Not sure how I ever succeeded running a successful entreprise? After all my gardening and garden design skills are? https://t.co/FFnvkjsGDU

  • Follow Martin