pensions for an idiot re sipp

[petemurphy]

so i know nothing about pensions having adopted the head in the sand route neither does other half.

other half hasnt worked all year but will start next week.

does it make a difference if she takes out a sipp now cw when she starts working? thinking of adding 10k to a sipp. how does her having a employers pension when she starts affect it?

if she was to transfer an existing pension to a sipp do you get any tax relief or is it a straight swap?

if you transfer an existing pension to a sipp can you then transfer another one to it at a later date?

anything to be gained / lost by waiting till april?

thanks

[Mr Pointy]

petemurphy said:

so i know nothing about pensions having adopted the head in the sand route neither does other half. Other half hasnt worked all year but will start next week.

does it make a difference if she takes out a sipp now cw when she starts working? thinking of adding 10k to a sipp. how does her having a employers pension when she starts affect it?

You are limited to how much you can contribute to pensions (employer & personal) in a tax year - in general it's your net earnings up to a limit of £40k. If you haven't worked you can still contribute £2880 which is grossed up to £3600 by your SIPP provider. You can't just chuck in £10k if you don't have £10k of earnings, although you can put it into an ISA of course.

petemurphy said:

if she was to transfer an existing pension to a sipp do you get any tax relief or is it a straight swap?

You don't get more tax relief on a transfer.

petemurphy said:

if you transfer an existing pension to a sipp can you then transfer another one to it at a later date?

Yes

petemurphy said:

anything to be gained / lost by waiting till april?

A year's worth of tax relief & time in the market (very important). If you suddenly earned over £40k next year you could also use this year's pension allowance (called carry forward).

[xeny]

Answering in turn:

Makes no difference if she's working or not when she opens it.

Her having an employers pension unlikely to make a difference There's a limit to the amount you can contribute in a tax year but we're so far through it now she's unlikely to encounter the limit. If her employer's pension allows overpayments, it may be cheaper (lower) fees to over contribute to that compared to running a SIPP.

10K straight into a SIPP may not be a smart move, depending on if you've paid enough income tax to get it back when the money goes into the pension.

Typically you get no tax relief moving an existing pension to a SIPP (because you got the tax relief when you put the money in the original pension), but there are rules governing what you can and con not do depending on the size of the existing pension. Think if this is actually beneficial depending on the fees on the existing pension.

You can generally transfer several pensions into a SIPP.

With the 10K, and if it is worth waiting until April or not, have a read of https://www.drewberryinsurance.co.uk/pensions-advi... - looks as if it might be worth you acting before April to take advantage of that for this tax year?

[Stay in Bed Instead]

Can I respectfully suggest you seek some independent financial advice.

You claim to know nothing about pensions, so I assume that goes for investments too, and you are contemplating the product that requires the most involvement from you.

[petemurphy]

thanks all - so the 10k has to be out of earnings you cant just transfer it from savings? if thats the case is it different if you are not earning ie you can transfer the 2k odd into it from savings?

thanks

[i4got]

petemurphy said:

thanks all - so the 10k has to be out of earnings you cant just transfer it from savings? if thats the case is it different if you are not earning ie you can transfer the 2k odd into it from savings?

thanks

This answers all the basic questions I think

https://www.onlinemoneyadvisor.co.uk/pensions/sipp...

[Mr Pointy]

petemurphy said:

thanks all - so the 10k has to be out of earnings you cant just transfer it from savings? if thats the case is it different if you are not earning ie you can transfer the 2k odd into it from savings?

The £10k can come from anywhere, it's just that you can only contribute as much as you earned in the year. If you earned £15k, then £15k is the most you can contribute. If you weren't earning then you can still contribute £2880.

[petemurphy]

Mr Pointy said:

The £10k can come from anywhere, it's just that you can only contribute as much as you earned in the year. If you earned £15k, then £15k is the most you can contribute. If you weren't earning then you can still contribute £2880.

ah i see thanks. can you stick in the 10k now as you will have earnt that by the end of the tax year or do you have to have earnt it already? thanks

if you're not earning now can you stick in 2880 and then add to it when you start earning?

[Mr Pointy]

petemurphy said:

Mr Pointy said:

The £10k can come from anywhere, it's just that you can only contribute as much as you earned in the year. If you earned £15k, then £15k is the most you can contribute. If you weren't earning then you can still contribute £2880.

ah i see thanks. can you stick in the 10k now as you will have earnt that by the end of the tax year or do you have to have earnt it already? thanks

if you're not earning now can you stick in 2880 and then add to it when you start earning?

I don't see why you can't put £10k in now if you're sure you will have enough relevant earnings by April 5th. You can also put the £2880 in now & then add to it later. In general it's not that you cannot pay in more than you earn, it's that the excess doesn't attract tax credit & may be taxed.

[cloud_dog]

petemurphy said:

ah i see thanks. can you stick in the 10k now as you will have earnt that by the end of the tax year or do you have to have earnt it already? thanks

You can do but, if anything untoward were to happen and they didn't have sufficient pensionable earnings by 5 April, they would then have to engage with Mr Tax Man, or see if their pension provider can 'reclassify' an amount as not receiving tax relief.

What you could do is put an amount in now (50%????) and then add more as you become more confident in the final earnings for the FY. Just in case you didn't pick up on this bit, you need to ensure you include any workplace personal contributions, and when talking about pension contributions it is always worth talking and calculating in terms of the gross amount, i.e. if your wife earns £9k, the workplace scheme will use up 5%/£450 (assumes a standard percentage) so, the remaining contribution you could make (actually pay in) is 80% of £8550, which is £6850.

Edited by cloud_dog on Monday 11th January 12:24

[petemurphy]

cool thanks