The Lemon Fool

Mrs VRD will be able to access her SIPP next year. She currently pays £2880 a year in. Will she be able to continue to do that whilst also drawing out money? (Her plan is to take a sum made up of 75% crystallised to use up her tax allowance and also the 25% tax free portion). The £2880 would come from other investments.

VRD

If you have accessed a pension since 6 April 2015, or had flexible drawdown before, a reduced money purchase annual allowance applies. This is set at £10,000 gross for the 2016/17 tax year and the government has proposed it will be reduced to £4,000 gross from the 2017/18 tax year. You cannot use carry forward to increase the money purchase annual allowance. If you are not earning the usual lower £3600 gross £2880 net allowance applies.

Mrs VRD will be able to access her SIPP next year. She currently pays £2880 a year in. Will she be able to continue to do that whilst also drawing out money? (Her plan is to take a sum made up of 75% crystallised to use up her tax allowance and also the 25% tax free portion).

It is a good plan and similar to what I am doing, however note it is not classed as "drawdown". You would actually be taken "Uncrystallised funds pension lump sums" (UFPLS). I am currently withdrawing the full annual income tax allowance plus tax free 25%, £1,222.22 per month.

jimleigh wrote:It is a good plan and similar to what I am doing, however note it is not classed as "drawdown". You would actually be taken "Uncrystallised funds pension lump sums" (UFPLS). I am currently withdrawing the full annual income tax allowance plus tax free 25%, £1,222.22 per month.

So am I, going up to £1277 next month. But it definitely is classed as drawdown.

Scott.

swill453 wrote:

jimleigh wrote:It is a good plan and similar to what I am doing, however note it is not classed as "drawdown". You would actually be taken "Uncrystallised funds pension lump sums" (UFPLS). I am currently withdrawing the full annual income tax allowance plus tax free 25%, £1,222.22 per month.

So am I, going up to £1277 next month. But it definitely is classed as drawdown.

Scott.

The rules and terminology relating to pensions in the UK seem really straightforward and easy to understand.

...said no-one ever.



StepOne

Please give me an answer slowly in Noddy language.

The wife is not earning, and not drawing state pension or any other pension.

She pays £2880 into a SIPP.

When she begins to draw her State Pension, can she:

1. Continue to pay into the SIPP.

2. Pay more than £2880 ?

Fairleas wrote:Please give me an answer slowly in Noddy language.

The wife is not earning, and not drawing state pension or any other pension.

She pays £2880 into a SIPP.

When she begins to draw her State Pension, can she:

1. Continue to pay into the SIPP.

Yes, the £2880 can still be paid in, and attracts tax relief. She can even do this if she's already taking income drawdown from the same SIPP. She can do this up to age 75.

Fairleas wrote:2. Pay more than £2880 ?

I believe so, but it obviously won't attract any tax relief as she doesn't have any pensionable earnings.

Scott.

Thank you.

swill453 wrote:I believe so, but it obviously won't attract any tax relief as she doesn't have any pensionable earnings.

It's not a sensible plan without tax relief on the way in, since money in a pension arrangement is taxed on the way out.

It's easy to lose track of ever changing regulations, but I might suspect that contributions in excess of what's allowed would be returned by the provider. They are after all sheltered from tax in the accumulation phase.

Alaric wrote:

swill453 wrote:I believe so, but it obviously won't attract any tax relief as she doesn't have any pensionable earnings.

It's not a sensible plan without tax relief on the way in, since money in a pension arrangement is taxed on the way out.

It's easy to lose track of ever changing regulations, but I might suspect that contributions in excess of what's allowed would be returned by the provider. They are after all sheltered from tax in the accumulation phase.

Now I'm interested about this, if a person with no pensionable income pays in more than the allowable for tax relief does the provider actually return the excess cash or does it stay within the SIPP but no tax rebate is due? Also SIPPs are I understand not part of ones estate for IHT purposes and can be passed to nominated beneficiaries and have been a part of post mortem tax planning.

kempiejon wrote:Now I'm interested about this, if a person with no pensionable income pays in more than the allowable for tax relief does the provider actually return the excess cash or does it stay within the SIPP but no tax rebate is due? Also SIPPs are I understand not part of ones estate for IHT purposes and can be passed to nominated beneficiaries and have been a part of post mortem tax planning.

I think you can pay in what you like. The Pension Advisory Service page says:

"You can save as much as you want into a pension
You will receive tax relief on the full amount, provided this is not greater than your annual earnings or the Annual Allowance"

https://www.pensionsadvisoryservice.org ... -a-pension

Of course whether it's sensible to do so is another question.

Scott.

swill453 wrote:"You can save as much as you want into a pension
You will receive tax relief on the full amount, provided this is not greater than your annual earnings or the Annual Allowance"

https://www.pensionsadvisoryservice.org ... -a-pension

Of course whether it's sensible to do so is another question.

Scott,

That was the way I understood it, you can pay in what you like and only get relief on the relevant amounts. It was the other poster alaric who suggested the excess money would be paid back that threw me. I think I know whether it's sensible in these circumstance and it is a small win with the current tax regimes.