SIPP and approaching 75

[Laughton]

Gifting money from income isn't as easy as it first seems.

Firstly, it has to be SURPLUS income and you have to keep records to prove that it truly is surplus and that gifting it in no way impacts your standard of living.

Secondly, it has to be REGULAR gifts and you have to keep records to prove that is the case. It's no good drawing all the money from your SIPP and giving it all away to your children in one go.

You can though gift £3,000 per year without being subject to the above 2 rules. That's £3,000 in total, not per beneficiary. There is also a carry forward rule.

[hiriskpaul]

Gifting money from income isn't as easy as it first seems.

Firstly, it has to be SURPLUS income and you have to keep records to prove that it truly is surplus and that gifting it in no way impacts your standard of living.

Secondly, it has to be REGULAR gifts and you have to keep records to prove that is the case. It's no good drawing all the money from your SIPP and giving it all away to your children in one go.

You can though gift £3,000 per year without being subject to the above 2 rules. That's £3,000 in total, not per beneficiary. There is also a carry forward rule.

Yes, the paper trail is important. Regular can mean annual though and it is the intention that matters, so a signed note saying something like "I have more income than I need, so I have decided to give away my after tax pension income arising from my SIPP with xxxx to x, y, z" should be sufficient, even if only a single payment ends up being made due to a change in circumstances.

[Dod101]

I can pass the surplus income test easily enough since I have drawn nothing from my SIPP for the last several years, but to be worthwhile I would need to give away quite a lot in one year which might put me in a higher tax bracket. I am not sure that it would work but I like the idea.

Of course I give significant amounts to grandchildren anyway all out of income. We spend a lifetime planning for a decent retirement and then find we have surplus income. Difficult to know how to plan.

Dod

[Laughton]

Ah yes, Grandchildren. I didn't notice that you mentioned them.

Could be a good idea to think again about keeping the SIPP then. It's a way of passing down money through generations - and if they're still young when it matters then they could take reasonable drawings without getting above the IT threshold. (That's how SSASs work but assume the same goes for SIPPs).

[Dod101]

Ah yes, Grandchildren. I didn't notice that you mentioned them.

Could be a good idea to think again about keeping the SIPP then. It's a way of passing down money through generations - and if they're still young when it matters then they could take reasonable drawings without getting above the IT threshold. (That's how SSASs work but assume the same goes for SIPPs).

I doubt that I will do anything with my SIPP except leave it to quietly accumulate. I like the various ideas mentioned here but in the end I am not sure how practical they really are.

Dod