Another pension question - adding money and drawing down
Another pension question - adding money and drawing down
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LemonTart

Original Poster:

1,491 posts

150 months

Saturday 23rd August
quotequote all
I have been reading the threads on retirement and pensions and have found them very informative, thank you to the posters and informed people responding.

As I seemingly rush into late 50s I have decided to put some plans together for taking money out rather than just stuffing money in my SIPP.

I have used up any carry forward to max out contributions in previous years and have been paying lumps in this tax year too.

I want to draw out the max tax free cash before the autumn statement so to do this I understand i need to put 4x that into drawdown. This will leave me with a SIPP a drawdown pot and a chunk of cash. That much I have decided upon but I have a few practical questions around this.

Is a drawdown pot mobile like a SIPP is?
Why? well I get a discount on current HL fees with my employer but that will cease when I retire so I would like to move to a cheaper platform.

If I am putting money into a drawdown pot and taking 25% tax free do I need to worry about timing of contributions?
Why? At the end of October I will be 7 months into this tax year so should the maximum amount I pay in be 7/12ths of £60k or can I put the full £60k in before I drawdown or doesn’t it matter as I am not taking any taxed money out?
Often the HMRC contribution follows several weeks after does it matter if this ends up being added after I have drawn down?

If I want to use a portion of my pot to buy an annuity should I buy this out of the money remaining in my SIPP or from the draw down pot or doesn’t it matter?

Lastly, as I am still working for a bit longer do I need to adjust my contributions into my SIPP to not pay in more than the £10k MPAA figure I have seen quoted?

Thanks in anticipation
Ed



LemonTart

Original Poster:

1,491 posts

150 months

A little bump if anyone in the know can assist.

Thanks

LeoSayer

7,560 posts

260 months

LemonTart said:
I have been reading the threads on retirement and pensions and have found them very informative, thank you to the posters and informed people responding.

As I seemingly rush into late 50s I have decided to put some plans together for taking money out rather than just stuffing money in my SIPP.

I have used up any carry forward to max out contributions in previous years and have been paying lumps in this tax year too.

I want to draw out the max tax free cash before the autumn statement so to do this I understand i need to put 4x that into drawdown. This will leave me with a SIPP a drawdown pot and a chunk of cash. That much I have decided upon but I have a few practical questions around this.

Is a drawdown pot mobile like a SIPP is?
Why? well I get a discount on current HL fees with my employer but that will cease when I retire so I would like to move to a cheaper platform.
Yes you can transfer a SIPP in drawdown to another platform. Take care when comparing fees across platforms because there's a lot of complexity with different caps, transaction fees and approach to fees on multiple pots (drawdown and non-drawdown).

LemonTart said:
If I am putting money into a drawdown pot and taking 25% tax free do I need to worry about timing of contributions?
Why? At the end of October I will be 7 months into this tax year so should the maximum amount I pay in be 7/12ths of £60k or can I put the full £60k in before I drawdown or doesn’t it matter as I am not taking any taxed money out?
Often the HMRC contribution follows several weeks after does it matter if this ends up being added after I have drawn down?
Not really. The 25% is based on the value of the pot at the time you instruct it, whilst the residual 75% goes into a drawdown pot. Any further contributions and tax relief received goes into a separate non-drawdown (ie. not crystallised) pot. You can take 25% tax free of that when you want.

LemonTart said:
If I want to use a portion of my pot to buy an annuity should I buy this out of the money remaining in my SIPP or from the draw down pot or doesn’t it matter?
The normal approach is to fund an annuity with the drawdown pot.

LemonTart said:
Lastly, as I am still working for a bit longer do I need to adjust my contributions into my SIPP to not pay in more than the £10k MPAA figure I have seen quoted?
The MPAA only applies once you take taxable income from the SIPP.

Please be aware of:
- Pension recycling rules
- The contribution limits ie.. you can't receive tax relief on contributions higher than your relevant earnings in a tax year, regardless of previous years carry-forward.
- The potential tax impact (CGT, IHT, Income tax etc.) of bringing large sums out of a pension
- The Lump Sum Allowance (LSA) and related allowances

LemonTart

Original Poster:

1,491 posts

150 months

Thanks Leo, that’s very useful.