SIPPs

[Arborbridge]

After you have started income drawdown, your annual allowance for contributions falls to the lower of £10,000 and your annual income.

Well, if they are correct, that puts the mockers on any plan to pay in more if you earnings are zero - as I expect mine and Dod's are.

That goes along with A J Bell who told me I couldn't pay in anymore after my 75th birthday.


Of course, this is all second hand information rather than from the horses' mouth, but it does not seem optimistic for those with any idea of paying in more to escape IHT. (Or nursing home fees???)

Arb.

[BullDog]

After you have started income drawdown, your annual allowance for contributions falls to the lower of £10,000 and your annual income.

Well, if they are correct, that puts the mockers on any plan to pay in more if you earnings are zero - as I expect mine and Dod's are.

That goes along with A J Bell who told me I couldn't pay in anymore after my 75th birthday.


Of course, this is all second hand information rather than from the horses' mouth, but it does not seem optimistic for those with any idea of paying in more to escape IHT. (Or nursing home fees???)

Arb.

You are, of course, correct that information from II's website isn't horse's mouth quality. But, II do have a significant interest in being right? Or right enough that nobody gets in trouble doing stuff.

[swill453]

This is what Interactive Investor says on the subject -

Can I pay into my pension after 75?

There is no age limit on contributing to a SIPP, although you will only receive tax relief on your contributions up to age 75.

If you do not start taking a regular income, you can continue to contribute up to £60,000 a year to your SIPP until you reach 75, providing you have sufficient earnings.

After you have started income drawdown, your annual allowance for contributions falls to the lower of £10,000 and your annual income. You can choose to start income drawdown at any time after reaching the age of 55 (57 from 2028).

Link -

https://www.ii.co.uk/ii-accounts/sipp/r ... rules-faqs

So taking that at face value, if you have no earnings and are over 75, you aren't allowed to contribute anything at all to a SIPP.

However the posts earlier in the thread are exploring the possibility that this is actually wrong, but to do so might incur a tax charge.

Scott.

[ursaminortaur]

This is what Interactive Investor says on the subject -



Link -

https://www.ii.co.uk/ii-accounts/sipp/r ... rules-faqs

So taking that at face value, if you have no earnings and are over 75, you aren't allowed to contribute anything at all to a SIPP.

However the posts earlier in the thread are exploring the possibility that this is actually wrong, but to do so might incur a tax charge.

Scott.

This Telegraph article suggests the exact opposite - that you can contribute as much as you like and won't get a tax charge because you aren't, once you are over 75, getting any tax relief on those contributions. Because you aren't getting tax relief you are not limited by your relevant earnings, the annual allowance or the money purchase annual allowance. Of course just because this is the view of the Telegraph's Pensions Doctor ( Kate Smith ) does NOT mean HMRC will definitely agree and as she notes not all SIPP providers may be prepared to accept such contributions.

https://archive.is/2023.12.18-162213/https://www.telegraph.co.uk/money/pensions/private-pensions/pension-rules-after-75-retirement-tax-relief/

Contributions made by you or a third party, other than your employer, to a money purchase pension scheme after your 75th birthday do not get tax relief. For this reason, they don’t count towards either allowance once you’re 75. This means that your contributions to your SIPP will not get tax relief, so you will not incur a tax charge if they exceed either of the above limits.
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It may be possible for you to continue making personal contributions after age 75, and without being limited to £3,600 per annum if you have no earnings, but obviously they will no longer be tax effective, as you will no longer receive tax relief.

Making contributions post age 75

If you do still wish to make contributions, you will need to check if your SIPP provider will accept contributions into the SIPP you hold. They may not be willing to do this as you don’t have any relevant earnings and you are not entitled to pension tax relief – but it’s worth finding out.

[Dod101]

It seems to open up a way of leaving funds to ge next generation without incurring IHT. Obviously the next generation will have a tax charge but provided they keep it at the basic rate that is a saving for them. Worth thinking about.

Dod

[genou]

It seems to open up a way of leaving funds to ge next generation without incurring IHT. Obviously the next generation will have a tax charge but provided they keep it at the basic rate that is a saving for them. Worth thinking about.

Dod

I'm not commenting on the ability to contribute issue. But HMRC can, and have done so previously, take the point that putting money into a SIPP with the intention that it will pass to your heirs is, in itself, a chargeable IHT transfer. Depending on the numbers, that may take the shine off the idea.

[Lootman]

It seems to open up a way of leaving funds to ge next generation without incurring IHT. Obviously the next generation will have a tax charge but provided they keep it at the basic rate that is a saving for them. Worth thinking about.

I'm not commenting on the ability to contribute issue. But HMRC can, and have done so previously, take the point that putting money into a SIPP with the intention that it will pass to your heirs is, in itself, a chargeable IHT transfer. Depending on the numbers, that may take the shine off the idea.

Hmm, how could they possibly prove that was the intent, unless the donor admits it?

I imagine that the taxman would only attempt that in the most egregious of cases.

[Dod101]

I'm not commenting on the ability to contribute issue. But HMRC can, and have done so previously, take the point that putting money into a SIPP with the intention that it will pass to your heirs is, in itself, a chargeable IHT transfer. Depending on the numbers, that may take the shine off the idea.

Hmm, how could they possibly prove that was the intent, unless the donor admits it?

I imagine that the taxman would only attempt that in the most egregious of cases.

I could imagine that there might be a presumption almost that a significant contribution to a SIPP at say the age of80 does not make a lot of sense other than for IHT and HMRC might challenge it. What other reason could I have? I think the idea is probably a non starter, especially when I assume that I would be taxed if I extract some funds at a letter date.

Dod

[Lootman]

Hmm, how could they possibly prove that was the intent, unless the donor admits it?

I imagine that the taxman would only attempt that in the most egregious of cases.

I could imagine that there might be a presumption almost that a significant contribution to a SIPP at say the age of 80 does not make a lot of sense other than for IHT and HMRC might challenge it. What other reason could I have? I think the idea is probably a non starter, especially when I assume that I would be taxed if I extract some funds at a letter date.

Yeah, that would count as an egregious case. But the risk that Genou alleges cannot possibly be a general case. And in any event would not happen whilst you are alive since nothing IHT-related does.

[genou]

I could imagine that there might be a presumption almost that a significant contribution to a SIPP at say the age of 80 does not make a lot of sense other than for IHT and HMRC might challenge it. What other reason could I have? I think the idea is probably a non starter, especially when I assume that I would be taxed if I extract some funds at a letter date.

Yeah, that would count as an egregious case. But the risk that Genou alleges cannot possibly be a general case. And in any event would not happen whilst you are alive since nothing IHT-related does.

It is by far from the general case. Normally what is caught is pension transfers rather than contributions. Google HMRC v Staveley if your are deeply gripped. I wouldn't expect them to take the point often, but contributing to a pension with no, or trivial, taking of benefits would, if it became a common thing, surely trigger some response.

IHT can be levied on the living where there is a chargeable lifetime transfer ( commonest case would be a transfer into a discretionary trust ) that exceeds the exempt amount. Charged at 20%.

[PrefInvestor]

My understanding is that the maximum you can pay into a SIPP if you aren’t working is £2,880 a year - however old you are.

I know that some people religiously deposit their £2,880 a year to get the £720 tax contribution, and of course both parties in a couple can do that. But at age 75 that tax contribution ends I believe. And any withdrawal that you make is subject to tax at your marginal rate so that scheme is not a great money earner as far as I can see, I make it £5,760 per person for 10 years worth of contributions for a 20% tax payer. Enough for a nice holiday at age 75 I suppose !.

Of course you might do better than that if you invest within the SIPP. But I see that as offering no advantage over an ISA so I discount this feature personally.

And if you don’t start contributing to a SIPP until after you are retired I can’t see that you can build up a big enough pot to be useful for IHT purposes ?. However if you contribute while you are still working then large annual contributions are possible, so early planning and commitment would seem to be required to take maximum advantage.

But I can’t claim to be any kind of expert on SIPPs though I have have read up on the contribution rules, so DYOR etc.

ATB

Pref

[Lootman]

My understanding is that the maximum you can pay into a SIPP if you aren’t working is £2,880 a year - however old you are.

I know that some people religiously deposit their £2,880 a year to get the £720 tax contribution, and of course both parties in a couple can do that. But at age 75 that tax contribution ends. And any withdrawal that you make is subject to tax at your marginal rate so that scheme is not a great money earner as far as I can see, I make it £5,760 per person for 10 years worth of contributions for a 20% tax payer. Enough for a nice holiday at age 75 I suppose !.

And if you don’t start contributing to a SIPP until after you are retired I can’t see that you can build up a big enough pot to be useful for IHT purposes ?. However if you contribute while you are still working then large annual contributions are possible, so early planning and commitment would seem to be required to take maximum advantage.

But I’m can’t claim to be any kind of expert on SIPPs though I have have read up on the contribution rules, so DYOR etc.

Yep, I have no interest in SIPPs for IHT avoidance as there are better methods of doing that. And I prefer ISAs to SIPPs as investments anyway.

Ultimately any kind of pension money is captive funds, forever subject to governmental whim.

[Dod101]

My understanding is that the maximum you can pay into a SIPP if you aren’t working is £2,880 a year - however old you are.

I know that some people religiously deposit their £2,880 a year to get the £720 tax contribution, and of course both parties in a couple can do that. But at age 75 that tax contribution ends. And any withdrawal that you make is subject to tax at your marginal rate so that scheme is not a great money earner as far as I can see, I make it £5,760 per person for 10 years worth of contributions for a 20% tax payer. Enough for a nice holiday at age 75 I suppose !.

And if you don’t start contributing to a SIPP until after you are retired I can’t see that you can build up a big enough pot to be useful for IHT purposes ?. However if you contribute while you are still working then large annual contributions are possible, so early planning and commitment would seem to be required to take maximum advantage.

But I’m can’t claim to be any kind of expert on SIPPs though I have have read up on the contribution rules, so DYOR etc.

Yep, I have no interest in SIPPs for IHT avoidance as there are better methods of doing that. And I prefer ISAs to SIPPs as investments anyway.

Ultimately any kind of pension money is captive funds, forever subject to governmental whim.

Thanks for the discussion. It does I think rule out a SIPP as an effective route to IHT avoidance. It is helpful though to have the matter argued out. About the best we can do is what I am doing; withdrawing nothing from my SIPP and tending it with care for the next generation.

Dod

[Charlottesquare]

My understanding is that the maximum you can pay into a SIPP if you aren’t working is £2,880 a year - however old you are.

I know that some people religiously deposit their £2,880 a year to get the £720 tax contribution, and of course both parties in a couple can do that. But at age 75 that tax contribution ends. And any withdrawal that you make is subject to tax at your marginal rate so that scheme is not a great money earner as far as I can see, I make it £5,760 per person for 10 years worth of contributions for a 20% tax payer. Enough for a nice holiday at age 75 I suppose !.

And if you don’t start contributing to a SIPP until after you are retired I can’t see that you can build up a big enough pot to be useful for IHT purposes ?. However if you contribute while you are still working then large annual contributions are possible, so early planning and commitment would seem to be required to take maximum advantage.

But I’m can’t claim to be any kind of expert on SIPPs though I have have read up on the contribution rules, so DYOR etc.

Yep, I have no interest in SIPPs for IHT avoidance as there are better methods of doing that. And I prefer ISAs to SIPPs as investments anyway.

Ultimately any kind of pension money is captive funds, forever subject to governmental whim.

Agree- I only pay funds into pensions if I get minimum 40% relief on contribution and expect to pay 20% tax when I draw, or where my paying elicits an employer paying (like my current AE pension), other than that ISAs all the way. Why pass more into the control of future governments as imho they will loot your fund if the opportunity presents?

In addition when I do retire (2 more years) I intend to loot my schemes as fast as possible using up my 20% band and at a minimum stuff the 25% tax free, but hopefully more, into my ISAs. (assuming we can live on two state pensions, my wife's indexed linked occupational pension and our other investment income)