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  • FIRST POST
    • nxdmsandkaskdjaqd
    • By nxdmsandkaskdjaqd 3rd Jan 17, 7:39 AM
    • 569Posts
    • 78Thanks
    nxdmsandkaskdjaqd
    Paying £2880 into pension when retired
    • #1
    • 3rd Jan 17, 7:39 AM
    Paying £2880 into pension when retired 3rd Jan 17 at 7:39 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 9:14 AM.
Page 43
    • AlanP
    • By AlanP 9th Apr 19, 2:45 PM
    • 1,591 Posts
    • 1,264 Thanks
    AlanP
    Are you sure? That sounds no different to any other value pot.
    Originally posted by westv
    Difference is it does not trigger MPAA if done under Small Pot rules.
    • vixen1500
    • By vixen1500 9th Apr 19, 7:39 PM
    • 543 Posts
    • 1,056 Thanks
    vixen1500

    Also why wait until Feb 20 to pay in next years - how about Apr 19 instead (potentially partially funded by the £1880 initial withdrawal)? that way you will get next years £720 up to 10 months earlier and you could withdraw this years tax relief at the same time.
    Originally posted by ukdw
    New tax year so can now pay in this years £2880.

    Last year I also had a small earnings around £3000 so can I also pay in 80% of earnings this year as I started paying in to a SIPP last year and not drawn anything out yet.

    But next year I would not be able to pay the extra having already drawn down on it.

    Or could I just pay in enough to bring the total figure upto £4000 instead of the £3600

    Does this now sound right?🤔

    Thanks for everyone's advice on this so far 🙂
    Typically confused and asking for advice
    • Dazed and confused
    • By Dazed and confused 9th Apr 19, 9:01 PM
    • 4,560 Posts
    • 2,347 Thanks
    Dazed and confused
    Last year I also had a small earnings around £3000 so can I also pay in 80% of earnings this year as I started paying in to a SIPP last year and not drawn anything out yet.
    Presuambly you mean last tax year, 2018:19.

    If so it is irrelevant now as you have missed the boat for contributing for 2018:19.

    The maximum you could have contributed was £3,600. £2,880 payment from you and £720 basic rate tax relief added by the pension company. You could have only paid more if your earnings were greater than £3,600.
    • vixen1500
    • By vixen1500 9th Apr 19, 10:03 PM
    • 543 Posts
    • 1,056 Thanks
    vixen1500
    Presuambly you mean last tax year, 2018:19.

    If so it is irrelevant now as you have missed the boat for contributing for 2018:19.

    The maximum you could have contributed was £3,600. £2,880 payment from you and £720 basic rate tax relief added by the pension company. You could have only paid more if your earnings were greater than £3,600.
    Originally posted by Dazed and confused

    Paid in £2880 for tax year 2018/19

    It was the amount for this current 2019/20 I was querying.

    Where does the £3600 figure come from? Is that the £2880 + tax relief?

    So you can only pay in extra if you earn more than that?

    Also once the tax relief for both years is received I can then withdraw £6200, but will then have to claim the tax back on my 2019/20 tax return or can I get it back any sooner?

    Think I might finally be getting my head around this at long last.
    Typically confused and asking for advice
    • Dazed and confused
    • By Dazed and confused 9th Apr 19, 10:14 PM
    • 4,560 Posts
    • 2,347 Thanks
    Dazed and confused
    £2,880 + £720 = £3,600

    Yes, unless you have relevant earnings for pension contribution purposes which are greater than £3,600 then you are limited to paying £2,880 (plus the £720 tax relief = £3,600).

    You may be able to claim a tax refund, if one is due, in advance of competing a Self Assessment return.

    But you would still have to declare the pension income on your return. And also remember to include the tax refund you received in the middle of the tax year on your return.

    Google HMRC P53 and P55 (there are different forms depending on the type of pension withdrawal).
    • vixen1500
    • By vixen1500 10th Apr 19, 3:11 PM
    • 543 Posts
    • 1,056 Thanks
    vixen1500
    £2,880 + £720 = £3,600

    Yes, unless you have relevant earnings for pension contribution purposes which are greater than £3,600 then you are limited to paying £2,880 (plus the £720 tax relief = £3,600).

    You may be able to claim a tax refund, if one is due, in advance of competing a Self Assessment return.

    But you would still have to declare the pension income on your return. And also remember to include the tax refund you received in the middle of the tax year on your return.

    Google HMRC P53 and P55 (there are different forms depending on the type of pension withdrawal).
    Originally posted by Dazed and confused
    Thanks for your help as until I came across this thread I did even realised SIPP even existed
    Typically confused and asking for advice
    • skycatcher
    • By skycatcher 16th Apr 19, 3:55 PM
    • 38 Posts
    • 24 Thanks
    skycatcher
    £2,880 + £720 = £3,600

    Yes, unless you have relevant earnings for pension contribution purposes which are greater than £3,600 then you are limited to paying £2,880 (plus the £720 tax relief = £3,600).

    You may be able to claim a tax refund, if one is due, in advance of competing a Self Assessment return.

    But you would still have to declare the pension income on your return. And also remember to include the tax refund you received in the middle of the tax year on your return.

    Google HMRC P53 and P55 (there are different forms depending on the type of pension withdrawal).
    Originally posted by Dazed and confused
    I want to reclaim the tax paid (in 18/19 tax yr) using P53Z but the link on the HMRC website only has forms for 19/20. Does anyone know if you can get last years forms from their site as I haven't been able to find them?
    • drumtochty
    • By drumtochty 16th Apr 19, 8:42 PM
    • 217 Posts
    • 120 Thanks
    drumtochty
    As we are in the 19/20 tax year, you have to claim any tax overpaid in 2018/2019 tax year on your self assessment tax return not on the forms mentio


    The forms are only for the current tax year, therefore you cannot find the forms for last year.
    • Dazed and confused
    • By Dazed and confused 16th Apr 19, 8:47 PM
    • 4,560 Posts
    • 2,347 Thanks
    Dazed and confused
    You don't need to file a Self Assessment return to claim a tax refund on a pension withdrawal.

    If you have to file a return for some other reason then the Self Assessment return is the only option now but if not you can just write to HMRC with all the information the P53Z asks for and they will make any refund due.

    Or do nothing and they will refund it automatically when they review your records later this year.
  • jamesd
    Would those who understand the tax forms to use please check that my summary is right and let me know about any useful tips that I've missed?

    I want to reclaim the tax paid (in 18/19 tax yr) using P53Z but the link on the HMRC website only has forms for 19/20. Does anyone know if you can get last years forms from their site as I haven't been able to find them?
    Originally posted by skycatcher
    The "print, fill in and post" version of the P53 (not P543Z) (scroll down) has a box where you can say which tax year it's for.
    Last edited by jamesd; 23-04-2019 at 11:55 AM. Reason: say it's p53 not p543z with year box
    • Madeinireland
    • By Madeinireland 21st Apr 19, 8:26 AM
    • 23 Posts
    • 1 Thanks
    Madeinireland
    Hi - just a quick question on this recycling into SIPP trick that this thread covers nicely...

    In order to continue doing it and to stay within the personal allowance could you delay taking your state pension if you wanted? I’m not sure if I’d want to do that but it may be something some people would consider

    Thanks...
  • jamesd
    Yes, you can delay.

    For those in normal good health who don't have plenty of guaranteed income I usually like deferring because it's a not particularly expensive way to get extra guaranteed income.
    • nigelbb
    • By nigelbb 22nd Apr 19, 7:12 AM
    • 2,288 Posts
    • 3,060 Thanks
    nigelbb
    Yes, you can delay.

    For those in normal good health who don't have plenty of guaranteed income I usually like deferring because it's a not particularly expensive way to get extra guaranteed income.
    Originally posted by jamesd
    I disagree. Take your pension just as soon as you are eligible. The benefit from deferring is small & nobody knows how long they will live so better a bird in the hand.

    As a simplistic example the full new State Pension is £168.60 a week. Defer for 52 weeks & youíll get an extra £9.74 a week (just under 5.8% of £168.60). However you have missed out on £8767.20 by deferring a year & it will take seventeen years to recoup with the extra pension of £506.48 per year.

    The fact that there is no real advantage to deferring is unsurprising as the government isn't giving you a bonus just working on actuarial tables. The average life expectancy of a 65 year old man is 19.6 years while for a woman it's 20.4 years. The total sums paid out to pensioners will be much the same whether they defer or not.
    • brewerdave
    • By brewerdave 22nd Apr 19, 8:51 AM
    • 5,525 Posts
    • 2,451 Thanks
    brewerdave
    I disagree. Take your pension just as soon as you are eligible. The benefit from deferring is small & nobody knows how long they will live so better a bird in the hand.
    The fact that there is no real advantage to deferring is unsurprising as the government isn't giving you a bonus just working on actuarial tables. The average life expectancy of a 65 year old man is 19.6 years while for a woman it's 20.4 years. The total sums paid out to pensioners will be much the same whether they defer or not.
    Originally posted by nigelbb

    It WAS worth doing if you reached SPA prior to April 2016 as deferral yielded 10.4% pa -the "breakeven" point is hence much earlier
    • Madeinireland
    • By Madeinireland 22nd Apr 19, 9:01 AM
    • 23 Posts
    • 1 Thanks
    Madeinireland
    Hi - fair point but what about other savings you may make from being able to reduce your tax band for a while - such as withdrawing from drawdown at a reduced tax rate ��
  • jamesd
    I disagree. Take your pension just as soon as you are eligible. The benefit from deferring is small & nobody knows how long they will live so better a bird in the hand.
    Originally posted by nigelbb
    So, lets consider some cases:

    1. If a person wants more guaranteed income.

    For typical buying ages and many health and lifestyle situations state pension deferral pays about twice what an annuity would pay. Always compare but expect deferral to win easily.

    2. If a person wants longevity insurance to provide core income if they live longer than anticipated.

    There are no pure longevity insurance products in the UK market, those pay nothing until you've reached the specified age. In the UK your main options are annuity or state pension deferral and deferral is usually better value for money.

    3. If you want a higher drawdown income.

    Blanchett considered how you can vary your drawdown success rate depending on how your guaranteed income compares to your minimum spending requirement. The more is covered by guaranteed income, the lower the drawdown success rate can be, and lower success rates mean higher income from the drawdown portion because you're no longer having to cover those bad cases from the drawdown portion. The analysis includes your chance of not living long enough, your bird in the hand point.

    4. If you prefer taking the likely winning side of bets to the likely losing side.

    Male life expectancy is 21 years and female is 24 years at the start. Make the choice to bet on living less than 17 years and if you're average you're picking the likely losing side of the bet, with only a 1 in 4 chance of winning.

    5. If you like the losing side of bets but have a spouse or other inheritance beneficiary.

    Term life insurance is cheap for people in good health. Buy 5, 10 and 15 year policies so the cover payout decreases as the amount of higher income you've had increases. You may end up dead but your beneficiaries don't need to be on the losing end. This cost extends the break even time.

    6. What you do with the money instead matters.

    UK economist John Kay provides a tool that considers how long you should defer based on life expectancy and what you'd do with the money instead. It doesn't include the longevity insurance and drawdown success rate aspects so it'll still be on the low side.

    There are factors like low life expectancy that can make deferring a bad idea but it's a remarkably useful tool.
    Last edited by jamesd; 23-04-2019 at 11:48 AM.
    • skycatcher
    • By skycatcher 23rd Apr 19, 9:14 AM
    • 38 Posts
    • 24 Thanks
    skycatcher
    Would those who understand the tax forms to use please check that my summary is right and let me know about any useful tips that I've missed?

    The "print, fill in and post" version of the P53Z (scroll down) has a box where you can say which tax year it's for.
    Originally posted by jamesd
    Maybe i'm missing something but I dont see where you can specify the tax year on that form...it has 19/20 everywhere on it.
  • jamesd
    Sorry, it's the P53 version with that, not the P53Z.
    • Abbey1991
    • By Abbey1991 23rd Apr 19, 8:05 PM
    • 117 Posts
    • 15 Thanks
    Abbey1991
    Hi, a friend wants to make a withdrawal but they have been sent a HL Flexible Drawdown application form.

    Does this form work for either Drawdown and for UFPLS, or are there separate forms?

    Thanks
    • Motherspride
    • By Motherspride 23rd Apr 19, 8:58 PM
    • 4 Posts
    • 0 Thanks
    Motherspride
    Hypothetically could I transfer my 10% tax allowance in retirement to my parter & without taking any tax free cash could my parter theoretically withdraw £18333 tax free PA from various pension provisions
    Ie 12500+10% =13750 +25%(not taking any TFLS ) =£18333
    Thanks
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