The Lemon Fool

My sister, who's retired, will receive a lump sum from a family trust this year. Is this considered "income" for the purposes of investing in a SIPP, so raising the contribution limit from £3,600 to £60,000 for this tax year only?

Thanks.


Edit: Just to add, and I'm not sure if it's relevant, the money will be coming from surrendering segments of an investment bond that have been assigned to her.

Oswulf wrote:My sister, who's retired, will receive a lump sum from a family trust this year. Is this considered "income" for the purposes of investing in a SIPP, so raising the contribution limit from £3,600 to £60,000 for this tax year only?

Thanks.


Edit: Just to add, and I'm not sure if it's relevant, the money will be coming from surrendering segments of an investment bond that have been assigned to her.

No. The test isn't against income, it's against relevant earnings.

See https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm044100#earnings for the list of what counts.

No. The test isn't against income, it's against relevant earnings.

Whilst I suspect you're right, this page says "You can contribute 100% of your annual income to your SIPP each tax year"

https://www.ii.co.uk/ii-accounts/sipp/m ... tributions

Oswulf wrote:

No. The test isn't against income, it's against relevant earnings.

Whilst I suspect you're right, this page says "You can contribute 100% of your annual income to your SIPP each tax year"

https://www.ii.co.uk/ii-accounts/sipp/m ... tributions

That is very sloppy wording from Interactive Investor, however in the same section they also state:
"If you do not have any earnings in a tax year, you can still contribute a maximum of £3,600 (£2,880 in personal contributions and £720 tax relief)."

Which is a nod to the fact that they are using "income" as a synonym for "earnings", which of course it is not.

Always better to go to gov.uk for the definitive rules.

Oswulf wrote:

No. The test isn't against income, it's against relevant earnings.

Whilst I suspect you're right...

There's no need to suspect, I provided a link to the HMRC manual on the matter precisely so you could check for yourself.

You can lead a horse to water....

Aren't there two separate issues being conflated here?

1. The limit to what you can pay into a SIPP that is building, during (or normally during) your working life.
2. The much lower limit permitted when you've drawn down income from the SIPP.

If someone has (ever) drawn down income from (any) pension, the rules being discussed here don't apply (except for the £3600 - 'cos it's within what you're still allowed to contribute).

UncleEbenezer wrote:Aren't there two separate issues being conflated here?

1. The limit to what you can pay into a SIPP that is building, during (or normally during) your working life.
2. The much lower limit permitted when you've drawn down income from the SIPP.

If someone has (ever) drawn down income from (any) pension, the rules being discussed here don't apply (except for the £3600 - 'cos it's within what you're still allowed to contribute).

I don't think so....

If you have no EARNINGS and are under 74(?) you can contribute £3600 inc tax relief into a SIPP.

Starting to take money from a SIPP CAN (but doesn't always) trigger the MPAA, which is a cap in SIPP contributions irrelevant of your earnings, and which used to be £3600, but is now £10k.

So someone earning a £50k salary would only be able to contribute £10k pa into a SIPP if they'd ever taken taxable income from one and triggered the MPAA, although the limit AIUI doesn't apply to paying into a DB scheme, and nor does taking money from a DB scheme trigger the MPAA.

Paul