SIPP & Pension guidance - IM Private Clients

[Intelligent Money]

chucklebutty said:

Thank you PM3. I’ll drop Nik a line tomorrow.

I’ve taken advice elsewhere but I’ve always heard good things about IM and had really wanted to give them a go.

I’ve got some consolation and am now self employed so my current pots are not efficiently managed across 3 platforms. Just after ideas to simplify and keep contributing. Things that should be easy.

Hi chucklebutty

Apologies if I missed your contact request. Just drop me a mail at [e-mail] and I'll be happy to help

Cheers

Nik

[Intelligent Money]

LastPoster said:

Hi IM team

Asking this question here as I'm possibly not the only one thinking about this

I'd like to make a pension contribution before the end of the FY into my IM scheme, I'm hoping to do this as late as possible to ensure that I offset all of my income taxed at 40% but don't end up offsetting some that would have only been taxed at 20%. My income for March isn't finalised yet (long story) so I'm unlikely to know much before the end of the month.

Whats the deadline for setting up a one off DD for April 1st, and will it definitely count as contribution this year. Previously I have found the DD always goes a couple of days after the due date? Missing the deadline would cost me about £750!

It doesn't help that April 1st is a Saturday so a couple of banking days lost there.

If it's possible that it won't go over in time, I will just have to take my chances and over estimate slightly and make the DD on March 15th

Hi Lastposter

To make the 1st April d/d it would ideally be set up by 24th March. As long as it it is correctly set up and we "call the funds" for the 1st it will fall into the 22/23 tax year.

You can also make a single contribution by bank transfer if it is over £5k. That usually goes same day if the bank doesn't hold the funds.

Cheers

Nik

[Intelligent Money]

Consigliere said:

Stevil said:

Nik isn't going anywhere as far as I'm aware, it's Coops who is leaving.

Yes, absolutely, i stand corrected. Will ping him an email.

What away to find out I'm leaving 😂 turns out PH has all the info before anybody else 😜

I'm still here drop me a message [e-mail]

Cheers

Nik

[Intelligent Money]

Speed1283 said:

I have what is probably a dumb question relating to working out the optimum SIPP contribution (non salary sacrifice) to stay below £99.9k.

In recent years I've managed to stay below that threshold by using a salary sacrifice 'top up' into my DB scheme. Unfortunately a quirk of the scheme limits the 'top up' annual limit. This year I'm unable to stay below the threshold by utilising this top up feature.

I still have plenty of headroom in terms of the £40k annual pension contribution limit, over the past three years.

My intention therefore is to set up a separate private SIPP with the intention of dumping the minimum amount in that I need to stay below £99.9k income for the year.

Usually my pension contributions are via salary sacrifice, this SIPP would be post tax and NI etc.

I.e. if hypothetically I were £5k over the £99k threshold, i would normally just make a £5k contribution via salary sacrifice to stay below £99k.

However, for a non-salary sacrifice SIPP contribution would it still be £5k I need to pay in, or is it £5k + 40%? (Apologies if this is a stupid question!)

Hi Speed1283

A couple of things to aware of. With a DB scheme your contribution test against the £40k is not based on the contributions you and your employer make, it is based on the "accrual in that year" i.e. how much your pension benefits grew in that year.

Your scheme administrator should be able to give you the "pension input" for any given tax year.

For the contribution, if you need to make a gross contribution of £5k you pay a net of £4,000. 20% is claimed back by the pension provider and is paid into the scheme so £5k goes into the pension. You claim the additional 20% via HMRC and that is paid back to you via coding or a refund.

Cheers

Nik

[Intelligent Money]

pete_esp said:

Hi IM,

I've popped a few questions in though my portal that haven't been picked up yet, mostly relating to who is dealing with my transfer in now that Coops has moved on. Can someone update me on who is taking over from him?

Cheers,

Pete

Hi Pete

It is likely to Rosie who is dealing with it.

Drop me a message, [e-mail] and I'll check for you.

Cheers

Nik

[Intelligent Money]

Countdown said:

Genuine question

If a parttime employee is paid, say, £5k per annum, how much can the Employer pay into their SIPP pension fund?

For example, a situation which some Contractors might face - their husband/wife/family member does admin work for them and gets paid a small amount of cash PAYE. How much can the LtdCo pay into the pension fund on their behalf?

I assume that, as it's the LtdCo making the payment, there is no Annual Allowance restriction?

Hi Countdown

The typical maximum employer contribution is the Annual Allowance, so now £60k. While an employers contribution is not linked to the salary of the employee the revenue phrase is that the pension contribution should be commensurate with the role the individual plays in the business.

Cheers

Nik

[Intelligent Money]

Spuffington said:

Sorry, I have had a look through older posts but still confused on where I stand on Annual Taper Allowance.

Gov has increased the annual contribution allowance but does the taper still apply?

My earnings vary between £250k-380k. Company offers 12% pension contributions but worried I’m going to get a big tax bill soon if I don’t get into the weeds of this.

Plus where else to invest if I’m tapped out on pension? I’ll need to take the cash and invest it somewhere and ISA already maxed.

Hi Spuffington

Yes Taper Relief still applies, With threshold income of over £200k an assessment is made to calculate your adjusted income. If that is over £260k then taper applies. You lose £1 for £2 earned over £260k. The minimum allowance is £10k p.a.

Cheers

Nik

[Intelligent Money]

cgx said:

Hopefully a really simple question that only needs a 'yes' or 'no' answer, although trying to find this on the 'net is proving hard so maybe its more complicated than I think.

I have 20 years of a deferred defined benefits contribution in a Local Government Pension Scheme, I have not worked for them since 2012 and just turned 55. Am I able to take this pension now (albeit hugely reduced) and carry on working full time for an employer that has nothing to do with the LGPS?

Almost all of the info I can find is about retiring and taking it - I have no plans to retire - even completing the quote for LGPS is 'on what date do you plan to retire'. Have sent a message to the scheme (cant ring, obviously) and am at day 11 waiting for a response, wondered if it would be quicker here :-)

Hi CGX

There is nothing within pension legislation that would prevent you from taking the LGPS benefits while still working for an unrelated employer.

However the scheme rules for a DB scheme can vary so only the LGPS administrates can give you the yes/no you are looking for!

Cheers

Nik

[Intelligent Money]

ferrisbueller said:

I'd like to set up a SIPP to use up my pension allowance.

Please can someone explain to me like I'm a five year old how to calculate how much I can put into the SIPP this tax year and how to calculate the three year's back dated allowance I could claim, too? I'm getting myself in a muddle with all the calcs and it looks easy to make a mistake. Thanks

Hi Ferrisbueller

For this year you can pay a gross contribution of £60,000. or 100% of your taxable earnings whichever is the lower.

If you are making a personal contribution you will receive tax relief of 20% on this contributions at source, so that relief is added to your pension contribution.

Assuming earnings over £60k, you would pay net £48,000, £12,000 of tax relief will be added so that makes the contribution up to £60,000

If you are a higher rate tax payer then additional tax relief can be claimed via self assessment.

Once you have made the maximum contribution for this year you can go back 3 years and top up previous years if you didn't maximise your contribution in that year.

This is subject to the fact that could have contributed to a pension in that tax year so you would need to have a scheme available to you in that year.

So first go back to tax year 20/21The maximum gross contribution for that year was £40k. Take any contribution away that you made in that year and you are left with amount you can top up

So if you made pension contributions of £10k gross in 20/21 you take the £10k from the £40k max and have £30k gross that you can "carry forward" and contribute in this tax year 23/24

You then do the same for tax year 21/22 and 22/23

You should also note that you will only receive tax relief on contributions up to 100% of your taxable earnings in the year of contribution.

So if with all your carry forward you could make a contribution of £100k in tax year 23/24 but your earnings were £80k you will only get tax relief on a contribution of £80k

Hope that helps, drop me a message at [e-mail] if you want any help with your numbers.

Nik

[Intelligent Money]

6speedmanual said:

I suspect this question may be covered already in this thread, so apologies, but I have not managed to locate it.

So: Combining SIPPs from two different providers and platforms.

What I would like to know is how chrystalised % is carried accross and recalculated in the combined (destination) SIPP.
What is the calculation?
Who does it? (I am thinking the receiving SIPP, based on info sent from the transferring SIPP?)

Example:

Person has 2 SIPPs
Both originally held £100k

SIPP1 has had withdrawals of 3 x £5,000 as TFLS totalling £15k and representing 3/5ths of the 25% Tax Free amount allowed and a 60% chrystalisation of the SIPP.

SIPP 2 has never been touched so is unchrystalised.

If SIPP 1 is transferred into SIPP 2, what does the resulting level of chrystalisation look like in the combined (destination) SIPP? How is it calculated and who performs the calculation?

Many thanks in anticipation!

Hi 6speed

The seeding schemes (SIPP 1 and 2) will "label" the existing funds as crystallised and un-crystallised so SIPP 3 (combined SIPP) will know on receipt which funds fit in each category.

SIPP3 will then be established with a crystallised pot of £x and an uncrystallised pot of £y

Hope that helps

Nik

[Intelligent Money]

JulianPH said:

alfaspud said:

Thanks Julian.

Re-reading my OP I wasn’t clear that these are two scenarios separate in both purpose and timing.

The first scenario would be to take a small sum to use/take advantage of this year’s personal allowance. My thought was to use UFPLS for this, and it appears to fit well with “you take whatever amount you require, with 25% of this being treated as coming from your tax free cash”.

The second would be in about a year’s time, and flexi-drawdown as outlined by yourself above would be appropriate. My question is to confirm that accessing one type of benefit - e.g. UFPLS as above – does not prevent me accessing the remaining uncrystallised funds using another e.g.flexi-drawdown, or another UFPLS. My understanding the IM SIPP allows this – is that correct?

Dave

Hi Dave

No, you have to pick the one you want to use at outset.

You can take as much as you like, whenever you like, using either. The only difference is how it is treated for tax.

• With UFPLS everything is deemed to be a combination of tax free cash and taxable income.

• With drawdown you decide what you are withdrawing from the tax free cash pot and what is coming from the taxable income pot.

Drawdown therefore offers greater tax planning flexibility, which may be what you are seeking.

Hope that helps!

I think there is a bit of confusion between the question and the answer here. Let me use an example to try and bring some clarity

£100k total pension pot

£20k drawn as UFPLS (£5k is tax free £15k taxed as income)

£80k of the pot remains uncrystallised

This remaining £80k pot can be accessed at any time in the future in whatever format you want, so you could take another UFPLS, you could take all or some of it into drawdown, purchase an annuity etc

Hope that helps

Nik

[Intelligent Money]

alfaspud said:

Intelligent Money said:

I think there is a bit of confusion between the question and the answer here. Let me use an example to try and bring some clarity

£100k total pension pot

£20k drawn as UFPLS (£5k is tax free £15k taxed as income)

£80k of the pot remains uncrystallised

This remaining £80k pot can be accessed at any time in the future in whatever format you want, so you could take another UFPLS, you could take all or some of it into drawdown, purchase an annuity etc

Hope that helps

Nik

Hi Nik,

Thanks for clarifying – your example reflects my intent and answers my concerns / questions

I have a related question to this - what’s the latest date I can request a UFPLS payment for this tax year, or has that date already passed?

Dave

Hi Dave

Now would be good! Early Easter this year isn't helping with timelines to get things completed before Tax Year end!

Nik

[Intelligent Money]

alscar said:

pingu393 said:

There are LOTS of people who haven't touched their pensions, but could if they wanted.

Many people in their 60s are putting off the day, and haven't needed to crystallise. If the 25% allowance is going to be removed, they will crystallise. That's LOTS of people withdrawing 25% of their pensions in a VERY short time. The only penalty will be that they can only invest £4k from then on.

We may also end up with those aged 60 to 67/68 not working and then they will not be paying income tax nor NI. They probably have enough NI years already to get the full state pension, so no harm to them.

Personally, I'd crystallise the 25% of my SIPP, take my civil service pension (I was contemplating deferring it) and live a tax-free life without working.

I think the issue more than potential collapse of some funds ( which I am not sure I see particularly ) is timing.
If Labour win and if they decided to either play with the LTA and / or Tax fee element would that be retroactive ,immediate or at some future date ?
I am having this conversation with my FA now as whilst no-one knows if there is a chance to do some proactive planning then I would rather do it now !

Very difficult to do any proactive planning when you don't know what you are planning for!

As you say no one knows what may be included in a Labour finance bill. Any previous changes to pension legislation have always been applied with the ability for you to protect benefits that have already accrued so I would think that any changes made will follow that pattern.

That would mean that you have adequate time to plan after the details of the changes have been released. As an example should the 25% tax free element be changed (and rumours of its change have only been around for the last 15 years) then it is likely that you will have the option to protect access to any tax free cash that you have accrued before the changes are implemented. Any benefits that accrue after that date will be subject to the new rules.

LTA is a prime example of this. When it was introduced in 2006 there were two types of protection included in the legislation to help anyone with benefits above the LTA at the time and make sure they weren't disadvantaged by the changes.

Cheers

Nik

[Intelligent Money]

MRS S said:

Hi - new to the forum, please be kind ! I am 57 and wish to take early retirement 10 years before state pension kicks in. Whilst we have a large amount of savings available, we also have a similar volume in company pensions. Is it best for me to take a lump sum (25%) out of my pension pot to enhance my annual income and avoid tax OR would I be better leaving the pension pot alone and supporting my annual income out of my healthy savings current account. My pensions are with Mercer and Scottish Widows - could I go to one of these providers myself to merge the pensions into a SIPP. Have spoken to an IFA but 1.75% initial fee, ongoing 0.6% fee and adviser fee (£1700) chucked in towards the end of the conversation ! Many thanks for any advice

Hi Mrs S

There are a lot of variables at play with any de-cumalation plan so unfortunately "rules of thumb" and general wisdom seldom helps.
I'm happy to set a call up and chat through your situation and offer any guidance that I can that may help you decide what is the right option for you.
No cost to you and no obligation. Just drop me a message at [e-mail] and I will see if I can help

Nik

[Intelligent Money]

Autolycus said:

I am fully retired, in receipt of a DB pension, and have received in the present tax year a State pension lump sum. My pension provider initially told me they operate a Payroll Giving Scheme, so I asked to donate a modest sum each month to one of their named charities. I’ve also re-deferred my State Pension weekly payment for this year.

My pension provider has now told me they do not operate Payroll Giving after all. Main pension plus a few tens of pounds bank interest takes me around £3500 over my Personal Allowance. My understanding of EIM75750 - The taxation of pension income, is that unless I can, at this late stage of the tax year reduce my taxable interest, I’ll have 20% income tax to pay on my State Pension lump sum.

Might a SIPP for (say) £2880 from me, plus £720 from that nice Mr Hunt, do any good? Or am I too late?

Hi

As Julian has said you can make a pension contribution to reduce your taxable income, with no "relevant earnings" you can make a contribution of £2,880 topped up to £3,600 with the tax relief.

As long as the contribution is made this tax year it will count for your 23/24 assessment. There should be time for you get this set up with your provider of choice before the end of this tax year, but be aware that the easter break may cause some issues so if it is your preferred option I would set it up sooner rather than later.

Nik

[Intelligent Money]

Autolycus said:

Thank you, Nik
As I understand it, paying income tax on my lump sum is a cliff edge situation: if my employer pension exceeds my personal allowance, I'll pay £14k tax, if it doesn't, I pay zero. Which figure would added to my personal allowance for this purpose - £3600 or £2880? It's that close! I assume my few tens of pounds bank interest is completely covered by my £1000 savings band.

I'm happy to make a Gift Aid donation if that would help.

Thanks again.

It is the Gross £3,600 that is used

Nik

[Intelligent Money]

IJWS15 said:

Not sure if this has been answered, I know there are some restrictions on what I can contribute into a private pension if I start drawing down but are there any restrictions on employer contributions?

Edited by IJWS15 on Friday 22 March 09:49

Hi IJWS15

If you have drawn income, i.e. a taxable payment, from a defined contribution pension then MPPA applies which limits contributions to £10k p.a. gross

Cheers

Nik