SIPP & Pension guidance - IM Private Clients

[skilly1]

I can do what I want with the bonus. Take it as cash, pension or anything else. However the company is topping up the bonus by 15% as they don’t have to pay PAYE etc on Pension contribution.

Not really sure what I can do in nest, not looked into it. However I have full control of the nest account so in theory I can do anything I want as I am a director of the company.

[SunsetZed]

skilly1 said:

I can do what I want with the bonus. Take it as cash, pension or anything else. However the company is topping up the bonus by 15% as they don’t have to pay PAYE etc on Pension contribution.

Not really sure what I can do in nest, not looked into it. However I have full control of the nest account so in theory I can do anything I want as I am a director of the company.

Nest is a lot more restricted in terms of fund choices versus a SIPP and also (currently!) less advantageous than a SIPP for inheritance tax purposes so I'd be putting it in a SIPP.

[Carbon Sasquatch]

Can you do partial transfers from Nest into a SIPP ?

So make the Nest contribution & then transfer at your leisure ? I don't know much about Nest......

[skilly1]

I don’t really understand from a personal tax point of view how SIPPS work. Can I transfer money into a SIPP out of the company with no personal tax payable? Also I think there is a limit of £20k ?

[Carbon Sasquatch]

skilly1 said:

I don’t really understand from a personal tax point of view how SIPPS work. Can I transfer money into a SIPP out of the company with no personal tax payable? Also I think there is a limit of £20k ?

A SIPP is just a pension wrapper. Most private pensions are SIPPs

The limit for pension contributions is 40k as long as you have earnings to cover that - you can't pay in more than you earn. You can also go back 3 years and make up for missed contributions from prior years - as long as you have relevant income this year to cover them.

Companies can pay directly into SIPPs, but I'm not sure that all SIPP providers will support that and/or have minimum levels to make it worthwhile.

[The Hypno-Toad]

Quick question from someone who is a little confused.

At the moment I earn roughly £30k and £40k a year which means I am at standard rate of tax. I know that if I draw down a lump sum over 20k from my pension I will pay tax on it. But what I don't understand is if the tax on this is paid by pension provider at the time when I draw the funds down, does the balance of that amount get added onto my wages and I then have to pay tax on that final figure as extra income which could possibly put me into a higher tax band?

Because that sounds like I would be paying tax twice on the figure that I drew down plus I would be paying more on my normal wages for at least a year? Or as I mentioned, once the provider has paid the tax is that it?

Err..... help!

[Carbon Sasquatch]

The Hypno-Toad said:

Quick question from someone who is a little confused.
!

So you are over 55 and looking to start SIPP withdrawals whilst still working ?

You can take 25% of it tax free which may be the way to go - then take the remaining taxable 75% later once you've finished working.

[pingu393]

Carbon Sasquatch said:

The Hypno-Toad said:

Quick question from someone who is a little confused.
!

So you are over 55 and looking to start SIPP withdrawals whilst still working ?

You can take 25% of it tax free which may be the way to go - then take the remaining taxable 75% later once you've finished working.

Will doing this whilst employed not create a problem as you are limited to a £4k max contribution?

Not much of a problem if you are self-employed, but a bit of a headache for any employer.

[Carbon Sasquatch]

pingu393 said:

Will doing this whilst employed not create a problem as you are limited to a £4k max contribution?

Not much of a problem if you are self-employed, but a bit of a headache for any employer.

Only when you start taking the 75%.

You can take the tax free 25% without impact, but take another 1p and you're correct - what you can pay in drops to 4k

[pingu393]

Carbon Sasquatch said:

pingu393 said:

Will doing this whilst employed not create a problem as you are limited to a £4k max contribution?

Not much of a problem if you are self-employed, but a bit of a headache for any employer.

Only when you start taking the 75%.

You can take the tax free 25% without impact, but take another 1p and you're correct - what you can pay in drops to 4k

School day

[Carbon Sasquatch]

pingu393 said:

School day

It's a slightly strange one, but the PCLS (25%) isn't deemed part of flexibly accessing your SIPP.....

https://www.youinvest.co.uk/pensions-and-retiremen...

[skilly1]

skilly1 said:

Hopefully someone can help me.

I have a standard Nest pension, but I need to make a large pension contribution (30k+) in the next 2 weeks as part of a bonus scheme at work. I decided to take pension instead of salary. I have never paid more than legally required into my pension pot.

I am worried about the stock market taking a dive and affecting the pension in the next few months, Ideally i would 'park' the money and then put it into a scheme when I markets have settled a bit.

I have also been looking at getting a IM pension so I can put it into a specific fund. What should I do, put it in Nest in the short term and then move it? I only have 2 weeks to take it due outside factors.

I don't have any other savings, SIPPS etc.

I never really got any suggestions for this, can anyone help?!

[LeoSayer]

skilly1 said:

skilly1 said:

Hopefully someone can help me.

I have a standard Nest pension, but I need to make a large pension contribution (30k+) in the next 2 weeks as part of a bonus scheme at work. I decided to take pension instead of salary. I have never paid more than legally required into my pension pot.

I am worried about the stock market taking a dive and affecting the pension in the next few months, Ideally i would 'park' the money and then put it into a scheme when I markets have settled a bit.

I have also been looking at getting a IM pension so I can put it into a specific fund. What should I do, put it in Nest in the short term and then move it? I only have 2 weeks to take it due outside factors.

I don't have any other savings, SIPPS etc.

I never really got any suggestions for this, can anyone help?!

You will always be able to find reasons to invest if you look for them but the evidence says that better outcomes are generally achieved if you don't try and time the market.

How many years before you start drawing on this pension?

[skilly1]

About 20 years

If I do invest, I just open a SIPP account and the company transfers money into it ?

[Carbon Sasquatch]

skilly1 said:

About 20 years

If I do invest, I just open a SIPP account and the company transfers money into it ?

You'd need to talk to a SIPP provider and see if they will accept gross contributions direct from a company.

Otherwise you pay it to yourself through payroll and then put the net amount into a SIPP and then reclaim the tax. The SIPP provider will reclaim 20% and if you pay at a higher rate, you claim the rest back on your tax return.

The company direct route helps save NI contributions if you can manage that way.

[LeoSayer]

skilly1 said:

About 20 years

Any market volatility right now will probably be a distant memory in 20 years time.

[skilly1]

Thanks for your replies. Think I’m going to put money in Nest and then I can move it into a SIPP as and when. But in the short term it gets over the issue of investing the money in the next two weeks.

[JulianPH]

skilly1 said:

Thanks for your replies. Think I’m going to put money in Nest and then I can move it into a SIPP as and when. But in the short term it gets over the issue of investing the money in the next two weeks.

Hi skilly1, sorry that Nik and I have both been away the last few days. Carbon Sasquatch has been very helpful and imformative (as always) and I can get back to you tomorrow have read everything to give you a summary and fill in any missing parts.

Nik and I will go though other posts over the last few days too, doing the same there.

Cheers

Julian

[Carbon Sasquatch]

JulianPH said:

Carbon Sasquatch has been very helpful

I try my best - but consider me as some bloke down at the pub - always a relief when the experts arrive

[Intelligent Money]

Keep it stiff said:

Nik, I would appreciate clarity on the issue of lifetime allowance

My DB scheme matured 18 months ago and I calculate the lifetime value as £615k made up as gross annual pension x 20 plus lump sum. I also have a SIPP, present value approx. £400k, I was not planning to draw from this for several years however I'm concerned that the combined value is approaching the lifetime allowance figure of £1,073,100.

Am I correct in thinking that that to keep within the lifetime allowance figure I will need to crystallize the SIPP and commence drawdown before the value gets to £460k? If so, if I commence drawdown for a nominal sum and the SIPP later grows beyond £460k will that leave me clear of falling into the higher tax status?

Hi Keep it Stiff

Carbon Sasquatch is on the money with this one. The assessment is done when you crystallise the pot. As an example you may take the tax free cash element and place the rest into drawdown but not yet take any income. When any income is drawn it will be assessed and taxed as income as it is drawn.

There is a second test at age 75. The value of the funds at age 75 is compared with the amount that was originally crystallised (after the payment of any tax free cash). If the value at age 75 is higher, the difference between the two figures is treated as a further crystallisation and is tested against the available LTA.

Hope that helps

Cheers

Nik