52 years old, worth opening a SIPP?

[texaxile]

Hi,
Luckily I am in a final salary pension scheme (25 years) , and the wife is NHS 24 years.

Mortgage free, although we used some of our savings to help our daughter get on the housing ladder rather than let inflation erode it.

I was looking to put £450 to £500 pcm into a SIPP for myself, increasing that yearly by around 5%, and the Mrs to open her own and put in around £300 and also increase the amount by 5% or so each year. I (health allowing) plan to work until I am 63, the wife being slightly younger will work until she is 60 so, if we decide to, it'll be around 10 years of contributions each into a SIPP.

The Mrs is also a higher rate Taxpayer, while I am not.

Thanks in advance, and if it is a good idea, any pointers would be most appreciated.

Edited by texaxile on Saturday 19th March 12:21

[anonymous-user]

Have you considered an ISA instead, especially for yourself as you don't pay higher rate tax.

[texaxile]

Rufus Stone said:

Have you considered an ISA instead, especially for yourself as you don't pay higher rate tax.

Yep, we both have ISA's and maxxed them both for this Tax year, I just wondered if a SIPP might be more beneficial in the timeframe of 10 years.

[PistonHead007]

I would max this out first, assuming she's still an active member of the NHS scheme: https://www.nhsbsa.nhs.uk/member-hub/increasing-yo...

Up to an extra £5,000pa of guaranteed, inflation linked income at a rate better than any annuity.

After that, yes it's worth doing a SIPP especially if you can get a higher rate of tax relief than the level of tax you expect to pay in retirement.

[texaxile]

PistonHead007 said:

I would max this out first, assuming she's still an active member of the NHS scheme: https://www.nhsbsa.nhs.uk/member-hub/increasing-yo...

Up to an extra £5,000pa of guaranteed, inflation linked income at a rate better than any annuity.

After that, yes it's worth doing a SIPP especially if you can get a higher rate of tax relief than the level of tax you expect to pay in retirement.

Blimey, I had never even considered that (in fact, I didn't even know it was an option! - as you may correctly assume, I'm, not particularly clued up on pensions )

Thanks you very much for the link, that is definitely something she will follow up.

For myself then, being a lower rate taxpayer albeit not far from the threshold and with £400 - £500 pcm to go somewhere, is a SIPP a wise idea?.

Regarding the ISA - the next Tax year's entitlement won't be maxxed out on my part so that's an option.

Like many of us, I'm conscious of having some savings to cover an emergency, but also not having too much cash sitting idle getting eroded at what is now, an alarming rate.

[funinhounslow]

I also have a final salary DB pension that kicks in at 60.

I’m 55 and started a SIPP last year for the tax relief.

My plan is to leave the job at 57 and use the SIPP to bridge the gap from then till my work pension kicking in. Don’t want to take it early at a reduced rate.

Also mortgage free and money in ISA…

Seems to make sense from my point of view…

[texaxile]

funinhounslow said:

I also have a final salary DB pension that kicks in at 60.

I’m 55 and started a SIPP last year for the tax relief.

My plan is to leave the job at 57 and use the SIPP to bridge the gap from then till my work pension kicking in. Don’t want to take it early at a reduced rate.

Also mortgage free and money in ISA…

Seems to make sense from my point of view…

That's some useful info mate. I'm going 2 years early so will get a hit on that @5% a year according to current figures, not that that particularly worries me (at the moment).
None of my business what you are putting in, but do you think that my £400 - £500 (probably £500) pcm is reasonable enough and will I see a benefit from that?.

[loskie]

I know little worth knowing about pensions BUT if your wife is a higher rate tax payer is it worth the funds ALL being paid from her salary so you benefit from the 40% tax relief? Does it work like that?

Use your salary for living expenses.

Obviously you have to trust, hope, believe that your marital status stays the same.

[Phooey]

Too old to open a Sip. Next 5-10yrs look bleak.

[tighnamara]

Phooey said:

Too old to open a Sip. Next 5-10yrs look bleak.

What do you mean by “too old to open a SIP” ?

[Doofus]

tighnamara said:

Phooey said:

Too old to open a Sip. Next 5-10yrs look bleak.

What do you mean by “too old to open a SIP” ?

I think he means "I'm talking bks".

[Vanity Projects]

loskie said:

I know little worth knowing about pensions BUT if your wife is a higher rate tax payer is it worth the funds ALL being paid from her salary so you benefit from the 40% tax relief? Does it work like that?

Use your salary for living expenses.

Obviously you have to trust, hope, believe that your marital status stays the same.

Yes it does. If the pensions contributions are made into a 40% tax earner, the full tax relief at 40% can be claimed. 20% will be added by your sipp provider, the other will need to be amended via your tax code (just tell hmrc her annual contributions).

Despite the prospects of share returns being unknown, ignore the ‘too late’ poster. As a SIPP investor if you paid in and left it as cash and therefore I invested, you’d still make 20% on anything invested (though at point of deposit, not annually). To suggest there’s no benefit to a sipp for you is flat wrong.

Shares may go up and down, etc but it makes sense to pay in to it and even investing conservatively won’t hurt. Plus as a second pension, you’re entitled to take a 25% lump sum at the point of maturity tax free so it gives you flexibility in other ways too.

I also don’t know the kid situation but it’s worth remembering that if you don’t spend all the sipp before you get to using your final salary pension, the remainder of the sipp forms part of your estate and can pass to children or beneficiaries if you do wish up on death, etc.

[funinhounslow]

texaxile said:

funinhounslow said:

I also have a final salary DB pension that kicks in at 60.

I’m 55 and started a SIPP last year for the tax relief.

My plan is to leave the job at 57 and use the SIPP to bridge the gap from then till my work pension kicking in. Don’t want to take it early at a reduced rate.

Also mortgage free and money in ISA…

Seems to make sense from my point of view…

That's some useful info mate. I'm going 2 years early so will get a hit on that @5% a year according to current figures, not that that particularly worries me (at the moment).
None of my business what you are putting in, but do you think that my £400 - £500 (probably £500) pcm is reasonable enough and will I see a benefit from that?.

It has belatedly occurred to me that my savings in premium bonds are a complete and utter waste of time

So I am gradually cashing them in and sticking them in a Vanguard SIPP

My plan is to put £40k in there eventually which tax relief will turn into £50k by the time I’m 57

I can get £16,500 out each year for three years tax free from 57 - 60 (25% tax free lump sum and the rest my personal tax allowance).

And at 60 my DB pension kicks in.

So in effect I am using a SIPP as a “bridge” between stopping work early and taking my work pension.

If (what a big if!) I’d made better decisions when I was younger I would have made additional contributions to my work pension rather than buy those sodding premium bonds but that ship has sailed…

If there’s a big stock market crash in the next few years I will have to rethink my plans otherwise I should be ok.

Your proposed £500/month will get £125 from the government. You will need to consider if that is better than making additional contributions to your work pension

Hope that makes sense!

[TwigtheWonderkid]

funinhounslow said:

I can get £16,500 out each year for three years tax free from 57 - 60 (25% tax free lump sum and the rest my personal tax allowance).

Currently £16,760.

[funinhounslow]

TwigtheWonderkid said:

Currently £16,760.

Thank you!