SIPP & Pension guidance - IM Private Clients
Discussion
JulianPH said:
Armitage.Shanks said:
Question on tax taking all the money ouot of the pension.
My wife has a small pension that was accrued when she contracted out of SERPS in the 90s. She can draw on it later this year where the fund value is c£4,500 so that's hardly going to ensure a champagne lifestyle. Equally its hardly worth investing - in anything!
My pension and our investments more than provide for what we will need and I will get the full SP when/if I get there. Not sure what Mrs Shanks will get as she gave up work when our daugther was born and never went back so I've asked for a forecast on what is likely 30yrs NI if the Govt paid for the 16yrs child allowance.
As Mrs Shanks is a non taxpayer, accepting the 25% one off lump (all of £1,000
) will be tax free, will the remainder if she takes it all given her non tax status?
Hello! Providing the remainder doesn't put her into the basic rate tax band (i.e. together with any other income she has in the tax year she is still in the nil rate band) then there will be no income tax to pay. It is likely the case it will be deducted by the pension provider initially though an emergancy tax code (normal for first pension withdrawals), but it will then be claimed back.My wife has a small pension that was accrued when she contracted out of SERPS in the 90s. She can draw on it later this year where the fund value is c£4,500 so that's hardly going to ensure a champagne lifestyle. Equally its hardly worth investing - in anything!
My pension and our investments more than provide for what we will need and I will get the full SP when/if I get there. Not sure what Mrs Shanks will get as she gave up work when our daugther was born and never went back so I've asked for a forecast on what is likely 30yrs NI if the Govt paid for the 16yrs child allowance.
As Mrs Shanks is a non taxpayer, accepting the 25% one off lump (all of £1,000
) will be tax free, will the remainder if she takes it all given her non tax status? There are also small pots rules, but it doesn't sound like you will need them. Just shout with anything further!
Jockman said:
Yes, so long as you follow the approved process ie current year then 3rd year, 2nd year etc.
Minus any contributions made in those years of course.
From a bit of reading it looks like a scheme (of any sort, apparently) has to have been in place for prior years. Minus any contributions made in those years of course.
I was wondering if I could set up a SIPP for my wife and dump a load of (company) money into it. She currently already receiving a (very) small Civil Service pension and has no other arrangements. She is employed by our company.
Sheepshanks said:
Jockman said:
Yes, so long as you follow the approved process ie current year then 3rd year, 2nd year etc.
Minus any contributions made in those years of course.
From a bit of reading it looks like a scheme (of any sort, apparently) has to have been in place for prior years. Minus any contributions made in those years of course.
I was wondering if I could set up a SIPP for my wife and dump a load of (company) money into it. She currently already receiving a (very) small Civil Service pension and has no other arrangements. She is employed by our company.
We are >very< careful about spouse contributions as none are employed by our Companies. As Directors they do however have certain fiduciary responsibilities and can be remunerated accordingly to a point. Your situation is different but in our case we would not use carry forward for spouses.
Sheepshanks said:
From a bit of reading it looks like a scheme (of any sort, apparently) has to have been in place for prior years.
I was wondering if I could set up a SIPP for my wife and dump a load of (company) money into it. She currently already receiving a (very) small Civil Service pension and has no other arrangements. She is employed by our company.
Hi SheepshanksI was wondering if I could set up a SIPP for my wife and dump a load of (company) money into it. She currently already receiving a (very) small Civil Service pension and has no other arrangements. She is employed by our company.
The requirement is that a scheme must of been place that she could of contributed to, or was a deferred member of. If the only scheme she has is a Civil Service plan and that is in payment then Carry Forward could not be used for the years that it has been in payment.
Cheers
Nik
Thanks Nik.
Another question, if I may - I've Googled this but don't see a straight answer.
I'm 66 shortly and decided I might as well take the state pension even though I'm still working. I could stop working at any time but we're working towards a goal.
For the last couple of years the company has paid £40K/yr into my pension - can that continue tax free once I'm receiving state pension?
In case it matters, I am also receiving a very small occupational pension from my first job. That started paying when I was 65.
Another question, if I may - I've Googled this but don't see a straight answer.
I'm 66 shortly and decided I might as well take the state pension even though I'm still working. I could stop working at any time but we're working towards a goal.
For the last couple of years the company has paid £40K/yr into my pension - can that continue tax free once I'm receiving state pension?
In case it matters, I am also receiving a very small occupational pension from my first job. That started paying when I was 65.
Jockman said:
Sheepshanks said:
Can an employer use the carry forward / backwards rules to put in 3yrs contributions in one go?
Yes, so long as you follow the approved process ie current year then 3rd year, 2nd year etc. Minus any contributions made in those years of course.
I'm about to use all mine up, and i've run the numbers via that calculator and think i can put in X but i don't want to fall foul of something i missed later on. I guess if I can show my workings out and its an honest mistake HMRC should take pity on me
Sheepshanks said:
Thanks Nik.
Another question, if I may - I've Googled this but don't see a straight answer.
I'm 66 shortly and decided I might as well take the state pension even though I'm still working. I could stop working at any time but we're working towards a goal.
For the last couple of years the company has paid £40K/yr into my pension - can that continue tax free once I'm receiving state pension?
In case it matters, I am also receiving a very small occupational pension from my first job. That started paying when I was 65.
You don’t get tax free employer contributions. The company gets the tax relief. Another question, if I may - I've Googled this but don't see a straight answer.
I'm 66 shortly and decided I might as well take the state pension even though I'm still working. I could stop working at any time but we're working towards a goal.
For the last couple of years the company has paid £40K/yr into my pension - can that continue tax free once I'm receiving state pension?
In case it matters, I am also receiving a very small occupational pension from my first job. That started paying when I was 65.
bmwmike said:
Jockman said:
Sheepshanks said:
Can an employer use the carry forward / backwards rules to put in 3yrs contributions in one go?
Yes, so long as you follow the approved process ie current year then 3rd year, 2nd year etc. Minus any contributions made in those years of course.
I'm about to use all mine up, and i've run the numbers via that calculator and think i can put in X but i don't want to fall foul of something i missed later on. I guess if I can show my workings out and its an honest mistake HMRC should take pity on me
That aside I was pretty sure of my calculations in 2014 and I even had to contend with a £50k allowance during one of those years IIRC. Never used carry forward since.
You will receive notification from your Administrator once you breach the £40k but I simply ignored it and kept robust records of the transaction.
Phooey said:
Say for example someone had a 50k pot at turning 55yrs and decided they wanted to withdraw it all in one go - what tax would they pay? Thanks
If they don't have any other income,25% would be tax free, 12500
Personal allowance 12750 tax free
Leaves 24750 due tax at 20%
So a tad under 5k ish tax....
Phooey said:
Say for example someone had a 50k pot at turning 55yrs and decided they wanted to withdraw it all in one go - what tax would they pay? Thanks
The income tax would be £4,986 as follows (assuming no other income):£0 on £12,500 25% tax free lump sum
£0 on £12,570 personal allowance
£4,986 on the residual £24,930 taxed at basic rate 20%
However the withdrawal is likely to be taxed at a higher rate by the pension provider which you will have to claim back from the HMRC.
Phooey said:
Brill thanks guys. So providing they don't need it all at one the obvious way to do it would be to withdraw over a few years up to their personal allowance (providing they aren't working)
Don't forget they might trigger the MPAA so would permanantly be limited how much they can contribute in future. Jockman said:
Hi Mike I never needed to account for adjusted income or threshold income so I can’t help you on that but I’m pretty sure Nik can.
That aside I was pretty sure of my calculations in 2014 and I even had to contend with a £50k allowance during one of those years IIRC. Never used carry forward since.
You will receive notification from your Administrator once you breach the £40k but I simply ignored it and kept robust records of the transaction.
Thanks Jockman. Decided I'm going to go with what that calculator tells me. I've run the numbers several times and am confident I can use the final amount this year leaving 1k for margin of error. That aside I was pretty sure of my calculations in 2014 and I even had to contend with a £50k allowance during one of those years IIRC. Never used carry forward since.
You will receive notification from your Administrator once you breach the £40k but I simply ignored it and kept robust records of the transaction.
Hi, can anyone help me please with my earlier question, thanks :
kick buttowski said:
Question about cashing in a defined contribution pension :
I have two small defined contribution pensions from Network Rail and a Local Authority from some work I did in the late 1990s and early 2000s.
When I was 60 last year, I drew down the 25% lump sums and the small pension has been dribbling through since then, taxed at 40% because I am still working.
The monthly pensions are so small that I enquired about cashing in both pensions, accepting I would pay 40% tax but the lump sum would be more useful to reduce the mortgage.
However, I have had letters from both pensions saying that this is against HMRC rules and I am not allowed to cash them in.
My question is, is this correct, because I understood I can access a defined contribution pension pot? And if this is correct, is there anything else I can do to make this more tax efficient?
Both pots are now valued at c£25k each after receiving the lump sum.
Many thanks for any help.
Chris.
I have two small defined contribution pensions from Network Rail and a Local Authority from some work I did in the late 1990s and early 2000s.
When I was 60 last year, I drew down the 25% lump sums and the small pension has been dribbling through since then, taxed at 40% because I am still working.
The monthly pensions are so small that I enquired about cashing in both pensions, accepting I would pay 40% tax but the lump sum would be more useful to reduce the mortgage.
However, I have had letters from both pensions saying that this is against HMRC rules and I am not allowed to cash them in.
My question is, is this correct, because I understood I can access a defined contribution pension pot? And if this is correct, is there anything else I can do to make this more tax efficient?
Both pots are now valued at c£25k each after receiving the lump sum.
Many thanks for any help.
Chris.
Phooey said:
Brill thanks guys. So providing they don't need it all at one the obvious way to do it would be to withdraw over a few years up to their personal allowance (providing they aren't working)
Cheers
Yes they could take £16760 tax free a year until it’s all gone assuming no other taxable income (25% tax free and the rest is bang on the income tax allowance). As mentioned the 4K MPAA will be triggered.Cheers
kick buttowski said:
Hi, can anyone help me please with my earlier question, thanks :
Have they said which HMRC rule?kick buttowski said:
Question about cashing in a defined contribution pension :
I have two small defined contribution pensions from Network Rail and a Local Authority from some work I did in the late 1990s and early 2000s.
When I was 60 last year, I drew down the 25% lump sums and the small pension has been dribbling through since then, taxed at 40% because I am still working.
The monthly pensions are so small that I enquired about cashing in both pensions, accepting I would pay 40% tax but the lump sum would be more useful to reduce the mortgage.
However, I have had letters from both pensions saying that this is against HMRC rules and I am not allowed to cash them in.
My question is, is this correct, because I understood I can access a defined contribution pension pot? And if this is correct, is there anything else I can do to make this more tax efficient?
Both pots are now valued at c£25k each after receiving the lump sum.
Many thanks for any help.
Chris.
I have two small defined contribution pensions from Network Rail and a Local Authority from some work I did in the late 1990s and early 2000s.
When I was 60 last year, I drew down the 25% lump sums and the small pension has been dribbling through since then, taxed at 40% because I am still working.
The monthly pensions are so small that I enquired about cashing in both pensions, accepting I would pay 40% tax but the lump sum would be more useful to reduce the mortgage.
However, I have had letters from both pensions saying that this is against HMRC rules and I am not allowed to cash them in.
My question is, is this correct, because I understood I can access a defined contribution pension pot? And if this is correct, is there anything else I can do to make this more tax efficient?
Both pots are now valued at c£25k each after receiving the lump sum.
Many thanks for any help.
Chris.
Are your DC pensions in any way linked to a related DB pension?
Do your DC pensions have any special guarantees or links eg. to minimum annuity rates?
Mazinbrum said:
Phooey said:
Brill thanks guys. So providing they don't need it all at one the obvious way to do it would be to withdraw over a few years up to their personal allowance (providing they aren't working)
Cheers
Yes they could take £16760 tax free a year until it’s all gone assuming no other taxable income (25% tax free and the rest is bang on the income tax allowance). As mentioned the 4K MPAA will be triggered.Cheers
kick buttowski said:
Hi, can anyone help me please with my earlier question, thanks :
Hi Chris, the short answer regarding DC pension schemes in this circumstance is that you are completely correct and they are completely wrong.kick buttowski said:
Question about cashing in a defined contribution pension :
I have two small defined contribution pensions from Network Rail and a Local Authority from some work I did in the late 1990s and early 2000s.
When I was 60 last year, I drew down the 25% lump sums and the small pension has been dribbling through since then, taxed at 40% because I am still working.
The monthly pensions are so small that I enquired about cashing in both pensions, accepting I would pay 40% tax but the lump sum would be more useful to reduce the mortgage.
However, I have had letters from both pensions saying that this is against HMRC rules and I am not allowed to cash them in.
My question is, is this correct, because I understood I can access a defined contribution pension pot? And if this is correct, is there anything else I can do to make this more tax efficient?
Both pots are now valued at c£25k each after receiving the lump sum.
Many thanks for any help.
Chris.
I have two small defined contribution pensions from Network Rail and a Local Authority from some work I did in the late 1990s and early 2000s.
When I was 60 last year, I drew down the 25% lump sums and the small pension has been dribbling through since then, taxed at 40% because I am still working.
The monthly pensions are so small that I enquired about cashing in both pensions, accepting I would pay 40% tax but the lump sum would be more useful to reduce the mortgage.
However, I have had letters from both pensions saying that this is against HMRC rules and I am not allowed to cash them in.
My question is, is this correct, because I understood I can access a defined contribution pension pot? And if this is correct, is there anything else I can do to make this more tax efficient?
Both pots are now valued at c£25k each after receiving the lump sum.
Many thanks for any help.
Chris.
So... This does make me wonder if something else is out/missing here for you to get two letters from two different companies telling you you can't do this.
Probably best to send Nik an email (nik.burrows@intelligentmoney.com) and let him see the paperwork. Alternatively just PM me. Something is not quite right here!
Cheers
Julian
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