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    • Cottage Economy
    • By Cottage Economy 9th Apr 18, 10:24 AM
    • 904Posts
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    Cottage Economy
    Are we being too cautious?
    • #1
    • 9th Apr 18, 10:24 AM
    Are we being too cautious? 9th Apr 18 at 10:24 AM
    So the situation is that 84-year old MIL moved in last year and gave us some money from the sale of her house. She kept about half to put towards future care fees, if needed, and split the other half between my husband and his brother on the understanding that the council may require the money back if she needed nursing care and her money ran out.

    DH and I put the money into two ISAs and opted for two income generating funds; Artemis Monthly Distribution and Premier Monthly Asset Distribution. If the money had to go back at least we would have had some benefit from it. We get about 55 a month off one and 280 a quarter off the other. There is also some capital growth. The rest has sat in our current account waiting to move into the ISAs in the new tax year.

    I am now having second thoughts about whether this is a good idea.

    DH (57 years old) wants to retire in about 5 years (currently: paid into Royal Mail pension for ~20 years + 12k SIPP in Vanguard LifeStrategy 60/40). At the moment the plan is for me to take on the mortgage (I am 45) when it drops low enough to be covered by income alone if the term was extended, which will be in about 5 years or so, thus allowing him to retire. We might pay off some of the mortgage using the lump sum from his pension or recycle that into my pension.

    MIL gives us 200 a month to cover bills and food, and is saving approx. 1,000 a month into her savings account. She is showing no inclination on spending anything (she has frugal hobbies) and is active and in quite good health. The few health issues she has are well-controlled and have been for decades. After a chat about money, I have realised that she has about 2 years of nursing fees put aside (allowing 5k per month) and an income of around 1500 per month.

    I am now wondering whether the money she has given us would be better going into the SIPP, given that we could have quite a period of time before the council could demand the money be returned if she moved into a nursing home and used up her available funds.

    Are we being too cautious with this money given the plans we want to realise? If we did put the money into the SIPP, would it be better to drip feed a set proportion every year or take the chance it will not be needed and put the maximum allowable until it is all in there?

    I currently have an emergency fund of about 4k and although I am saving for a new kitchen, this money could also be used as a back-up emergency fund.

    Any suggestions, ideas, pitfalls I'm not seeing?
    Last edited by Cottage Economy; 09-04-2018 at 10:34 AM.
    'Save 12k in 2018' 2,000/6,000 (33%)
    March GC 71.68/160

    "...success in personal finance isn't about mastering the technicalities. It is about mastering yourself."
Page 1
    • AnotherJoe
    • By AnotherJoe 9th Apr 18, 10:27 AM
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    AnotherJoe
    • #2
    • 9th Apr 18, 10:27 AM
    • #2
    • 9th Apr 18, 10:27 AM
    Seems to me if you put it into the SIPP, since he's over 55 you can get it back anytime so theres no harm in doing what you propose and as a lump sum (subject to teh usual caveats about earnings maxima etc)
    • TcpnT
    • By TcpnT 9th Apr 18, 11:22 AM
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    TcpnT
    • #3
    • 9th Apr 18, 11:22 AM
    • #3
    • 9th Apr 18, 11:22 AM
    You could withdraw it from the SIPP at any time but obviously anything apart from the 25% tax free lump sum will be subject to income tax at your husband's marginal rate
    • AnotherJoe
    • By AnotherJoe 9th Apr 18, 11:37 AM
    • 9,049 Posts
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    AnotherJoe
    • #4
    • 9th Apr 18, 11:37 AM
    • #4
    • 9th Apr 18, 11:37 AM
    You could withdraw it from the SIPP at any time but obviously anything apart from the 25% tax free lump sum will be subject to income tax at your husband's marginal rate
    Originally posted by TcpnT
    True but as long as thats no higher than 20% they are no worse off, tax uplift on the way in cancelled by downlift on the way out, plus they have the 25% tax free sum.
    • Cottage Economy
    • By Cottage Economy 9th Apr 18, 11:50 AM
    • 904 Posts
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    Cottage Economy
    • #5
    • 9th Apr 18, 11:50 AM
    • #5
    • 9th Apr 18, 11:50 AM
    You could withdraw it from the SIPP at any time but obviously anything apart from the 25% tax free lump sum will be subject to income tax at your husband's marginal rate
    Originally posted by TcpnT
    True but as long as thats no higher than 20% they are no worse off, tax uplift on the way in cancelled by downlift on the way out, plus they have the 25% tax free sum.
    Originally posted by AnotherJoe
    Thank you both. I hadn't considered the tax angle. We're both basic rate tax payers.

    The hope is that the lump sum also grows a little, although appreciate that over five years it may not and we take the risk it will go the other way.

    The lump sum would be, in total, 55,000. Am I right in thinking I could carry forward some unused pension allowance for DH?

    He earns about 24k a year once all the overtime, etc, is totted up, although Royal Mail only take into account his pensionable pay of about 18k for his occupational pension.
    'Save 12k in 2018' 2,000/6,000 (33%)
    March GC 71.68/160

    "...success in personal finance isn't about mastering the technicalities. It is about mastering yourself."
    • TcpnT
    • By TcpnT 9th Apr 18, 12:03 PM
    • 107 Posts
    • 60 Thanks
    TcpnT
    • #6
    • 9th Apr 18, 12:03 PM
    • #6
    • 9th Apr 18, 12:03 PM
    I'm afraid carry forward will not help you as your husband's annual pension contributions will be subject to the earned income limit each year. He can only contribute up to his earned income minus whatever contributions or deemed contributions he makes to his existing company scheme. Depending on your earnings and pension contributions you might be able to put some of the money in a SIPP in your name as well as his. Usually good to spread the future pension income between both partners to optimise income tax later on.
    • Cottage Economy
    • By Cottage Economy 9th Apr 18, 12:19 PM
    • 904 Posts
    • 3,998 Thanks
    Cottage Economy
    • #7
    • 9th Apr 18, 12:19 PM
    • #7
    • 9th Apr 18, 12:19 PM
    I'm afraid carry forward will not help you as your husband's annual pension contributions will be subject to the earned income limit each year. He can only contribute up to his earned income minus whatever contributions or deemed contributions he makes to his existing company scheme. Depending on your earnings and pension contributions you might be able to put some of the money in a SIPP in your name as well as his. Usually good to spread the future pension income between both partners to optimise income tax later on.
    Originally posted by TcpnT
    I'd rather not have a SIPP as I won't be able to access the money for 10 years.

    Ahhhh...I misunderstood. I thought it applied to everyone if you had unused allowance from previous years. I see it only applies to high earners.

    So, can I just clarify that there is no way for a basic rate tax payer to access unused pension allowances from previous years?
    Last edited by Cottage Economy; 09-04-2018 at 12:40 PM.
    'Save 12k in 2018' 2,000/6,000 (33%)
    March GC 71.68/160

    "...success in personal finance isn't about mastering the technicalities. It is about mastering yourself."
    • atush
    • By atush 9th Apr 18, 2:08 PM
    • 16,640 Posts
    • 10,343 Thanks
    atush
    • #8
    • 9th Apr 18, 2:08 PM
    • #8
    • 9th Apr 18, 2:08 PM
    and is active and in quite good health. The few health issues she has are well-controlled and have been for decades.
    This means to me anyway, that deprivation of asset tests could fail and they wouldnt be able to claw anything back.
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