The Lemon Fool

GoSeigen wrote:

runnygum wrote:Its not huge, but you can ALWAYS pay £2880 into a pension and get it topped up to £3600 pounds even if you have paid zero tax. This is an allowance by HMRC for those who are unemployed. Work part time etc. But its there to be used.

https://www.gov.uk/tax-on-your-private- ... tax-relief

runnygum, ashamed to say I have never looked into this. Would this apply to payments into a SIPP too? If so can both adults and children have SIPPs?

Is income inside of ISA's relevent to the £2880 allowance?

Sorry for the dumb questions.


GS

Definitely applies to SIPP and definitely both children and adults can use this. It's specifically for non earners. I think you can probably (but check) put in three year's worth if you had no earnings in those years and haven't made any other pensions contributions - if you had earnings, you can put in all your earnings up to £40k pa (and use up to three past years' allowances of £40k).

I don't understand the ISA income question though. I don't think ISA income counts as income for pensionable income purposes if that is what you mean.

The OP might have done better to have paid into a pension from the company directly but if the business is sold, that can't happen now.

Mel

melonfool wrote:

GoSeigen wrote:...
Would this apply to payments into a SIPP too? If so can both adults and children have SIPPs?

Definitely applies to SIPP and definitely both children and adults can use this. It's specifically for non earners. I think you can probably (but check) put in three year's worth if you had no earnings in those years and haven't made any other pensions contributions - ...

The carry forward rules for SIPPs are slightly complicated but AJ Bell have a good guide on subject:

https://www.youinvest.co.uk/sites/defau ... _guide.pdf

More generally for GoSeigen, a good place to ask further about SIPPs would be at Pensions - Practical Problems viewforum.php?f=17 where there have been a number of SIPP related threads.

PinkDalek wrote:... More generally for GoSeigen, a good place to ask further about SIPPs would be at Pensions - Practical Problems viewforum.php?f=17 where there have been a number of SIPP related threads.

I'm a minute too late to edit but this thread over there may be of interest, in particular the last post by ursaminortaur:

viewtopic.php?f=17&t=10706

melonfool wrote:I don't understand the ISA income question though. I don't think ISA income counts as income for pensionable income purposes if that is what you mean.

Mel

The vast majority of our family's income is derived from assets held within ISAs. Under Income Tax rules this income is not taxable; it also does not need to be reported when claiming Child Tax Credits.

So I was wondering whether income earned within an ISA is relevant for the purposes of assessing eligibility for this £2880 allowance, or is it exempt/ignored similarly to Income Tax and Child Tax Credits?


Someone said children can use this allowance too. On whose income is the child's eligibility to the allowance assessed:
-their own or
-their parents' or
-the contributor of the payment into their SIPP?

Or perhaps the question I am asking is whether childrens' SIPPs are eligible for the allowance and at what age?

Sorry, clearly a subject I need to read about more.

GS

GoSeigen wrote:

melonfool wrote:I don't understand the ISA income question though. I don't think ISA income counts as income for pensionable income purposes if that is what you mean.

Mel

The vast majority of our family's income is derived from assets held within ISAs. Under Income Tax rules this income is not taxable; it also does not need to be reported when claiming Child Tax Credits.

So I was wondering whether income earned within an ISA is relevant for the purposes of assessing eligibility for this £2880 allowance, or is it exempt/ignored similarly to Income Tax and Child Tax Credits?


Someone said children can use this allowance too. On whose income is the child's eligibility to the allowance assessed:
-their own or
-their parents' or
-the contributor of the payment into their SIPP?

Or perhaps the question I am asking is whether childrens' SIPPs are eligible for the allowance and at what age?

Sorry, clearly a subject I need to read about more.

GS

I lost my previous reply so merely trying to include links to https://www.rossmartin.co.uk/private-cl ... s-purposes (ISA income is not relevant earnings) and http://www.hl.co.uk/pensions/vantage-junior-sipp .

Also please see my previous reply as to where best to discuss (that's where I learnt about SIPPs and the £2,880 etc).

GoSeigen wrote:

melonfool wrote:I don't understand the ISA income question though. I don't think ISA income counts as income for pensionable income purposes if that is what you mean.

Mel

The vast majority of our family's income is derived from assets held within ISAs. Under Income Tax rules this income is not taxable; it also does not need to be reported when claiming Child Tax Credits.

So I was wondering whether income earned within an ISA is relevant for the purposes of assessing eligibility for this £2880 allowance, or is it exempt/ignored similarly to Income Tax and Child Tax Credits?


Someone said children can use this allowance too. On whose income is the child's eligibility to the allowance assessed:
-their own or
-their parents' or
-the contributor of the payment into their SIPP?

Or perhaps the question I am asking is whether childrens' SIPPs are eligible for the allowance and at what age?

Sorry, clearly a subject I need to read about more.

GS

The income you get from the ISA does not 'count' as income/earnings for pension purposes, no. So, if all your income is from ISA then you have no income as far as pension rules are concerned.

https://www.rossmartin.co.uk/private-cl ... s-purposes

In terms of who can have a SIPP - anyone can, from birth (to age 75 I think). Or any pension (though there are other rules if you already have a pension in drawdown). And, if that person has no income, then they can pay in £2,880pa and get tax relief on it.

https://www.youinvest.co.uk/investing-f ... unior-sipp

The £2,880pa is most definitely something any couple with a non-income earning partner should be doing, in my view.

Mel

PinkDalek wrote:
I lost my previous reply so merely trying to include links to https://www.rossmartin.co.uk/private-cl ... s-purposes (ISA income is not relevant earnings) and http://www.hl.co.uk/pensions/vantage-junior-sipp .

Also please see my previous reply as to where best to discuss (that's where I learnt about SIPPs and the £2,880 etc).

Oooh, we found the same link via Google!

Mel

Yes, Nichola Ross Martin’s website is one of the best anyway (no connection etc - merely a regular reader).

BobbyD wrote:You could recreate the situation in which you were less daunted by paying off the mortgage and investing your monthly mortgage payment instead.

You'd be back to making smaller decisions each of which have less importance for your family's future, you could maintain the discipline of the monthly payments, would constantly have your eye across your investments as you looked for the next purchase, invest across a far longer time horizon taking away your fears about market timing, and should anything close to the worst ever strike you you know you have the security of already owning your home.

Thank you, that's quite a good way of looking at it!

cartsman2 wrote:Thank you, that's quite a good way of looking at it!

Hope it helps.

I think it makes sense from a financial point of view, but you also can't underestimate the value of a good nights sleep - something which major financial decisions with significant impacts on your family's future are unlikely to encourage. Putting yourself in a stressful situation with so much riding on so few decisions is also unlikely to result in you making the best decisions you can.

swill453 wrote:

runnygum wrote:Its not huge, but you can ALWAYS pay £2880 into a pension and get it topped up to £3600 pounds even if you have paid zero tax. This is an allowance by HMRC for those who are unemployed. Work part time etc. But its there to be used.

That's probably worth doing, but bear in mind that if your pension is taxed on the way out (and most will be), then the net benefit is only £180 per year (the tax saved on 25% of £3600).

Scott.

Not quite. Dont forget the compounding for the decades its in there growing tax free.

runnygum wrote:

swill453 wrote:

runnygum wrote:Its not huge, but you can ALWAYS pay £2880 into a pension and get it topped up to £3600 pounds even if you have paid zero tax. This is an allowance by HMRC for those who are unemployed. Work part time etc. But its there to be used.

That's probably worth doing, but bear in mind that if your pension is taxed on the way out (and most will be), then the net benefit is only £180 per year (the tax saved on 25% of £3600).

Scott.

Not quite. Dont forget the compounding for the decades its in there growing tax free.

I didn't forget. That's not a benefit of the tax relief, if it's taxed on the way out at the same rate.

Example:
£80 invested outside a pension, say it grows by 200% over the years, final amount £240, no income tax to pay.
vs.
£80 + £20 tax relief within a pension = £100 invested. Grows by same 200% to make £300 inside pension. Income tax at 20% on way out = net £240.

Scott.

swill453 wrote:Example:
£80 invested outside a pension, say it grows by 200% over the years, final amount £240, no income tax to pay.
vs.
£80 + £20 tax relief within a pension = £100 invested. Grows by same 200% to make £300 inside pension. Income tax at 20% on way out = net £240.

A very clear example. A SIPP does, however, also shelter you from CGT. Nonetheless, you may not have paid CGT outside a tax shelter anyway.

GeoffF100 wrote:

swill453 wrote:Example:
£80 invested outside a pension, say it grows by 200% over the years, final amount £240, no income tax to pay.
vs.
£80 + £20 tax relief within a pension = £100 invested. Grows by same 200% to make £300 inside pension. Income tax at 20% on way out = net £240.

A very clear example. A SIPP does, however, also shelter you from CGT. Nonetheless, you may not have paid CGT outside a tax shelter anyway.

Afternoon all

I think of it's in a SIPP 25% can be deducted tax free which means (using your example above) £75 of the £300 would be tax free, leaving £225 that would have tax deducted at 20% (£45). So, £300-£45(tax) = £255 net.

Thanks that's right..cheers, OLTB.

If you receive tax relief in a fund the growth will be higher. In a SIPP, you escape the dividend tax and income tax on bond interest.