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Thoughts on taking/not taking 25% tax free portion of SIPP please:
Keith Cobby
Posted: 03 June 2024 13:29:21(UTC)
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I'm three years off SP and have been taking the personal allowance on a use it or lose it.
4 users thanked Keith Cobby for this post.
Learner on 03/06/2024(UTC), Sheerman on 03/06/2024(UTC), SSJ on 03/06/2024(UTC), Dentmaster on 03/06/2024(UTC)
Thrugelmir
Posted: 03 June 2024 13:41:21(UTC)
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Keith Cobby;307609 wrote:
I don't see Labour reducing the TFLS but allow it to wither from inflation (same as Tories).


Already generous as in reality favours very few. Withering is an easy way of raising tax revenue without a murmour.
Learner
Posted: 03 June 2024 13:47:27(UTC)
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SSJ;307617 wrote:
Learner;307602 wrote:
So deplete all the SIPP and cough up the tax? Lordy.

I don't think anyone was suggesting that you cough up the tax!
Anyway, depleting without paying tax doesn't sound like an option for you anymore, so it's not easy to judge without knowing what your "other monies" are - in an ISA or any other tax shelter?

BTW, it sounds like there wouldn't be a summer budget because the OBR take their time and Labour wouldn't dare proceed without the OBR to hide behind. Whether that would prevent early, standalone changes to pension regulations, I don't know.


All other money is ISA or NS&I IL certificates.
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SSJ on 03/06/2024(UTC)
SSJ
Posted: 03 June 2024 17:30:55(UTC)
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Learner;307622 wrote:
SSJ;307617 wrote:
Learner;307602 wrote:
So deplete all the SIPP and cough up the tax? Lordy.

I don't think anyone was suggesting that you cough up the tax!
Anyway, depleting without paying tax doesn't sound like an option for you anymore, so it's not easy to judge without knowing what your "other monies" are - in an ISA or any other tax shelter?

BTW, it sounds like there wouldn't be a summer budget because the OBR take their time and Labour wouldn't dare proceed without the OBR to hide behind. Whether that would prevent early, standalone changes to pension regulations, I don't know.


All other money is ISA or NS&I IL certificates.

If you are depleting the ISA capital then there's a case for phased crystallisation of the SIPP to pay out just the TFLS to live off instead (and maybe add to ISAs). If you're unhappy with the political risks then you could take the full TFLS and use low-coupon Gilts and/or Premium Bonds to minimise the tax while you stuff your ISA.

If you're able to live off ISA dividends/TR and IHT is a concern and you're likely to die before 75 then there's a case to leave the SIPP untouched. I guess there are political risks with that too.

There are a number of threads on the subject of TFLS / SIPP / ISA trade-offs and it always comes down to personal context and outlook. You may well not want to spell out your income, outgoings, beneficiaries, marital status etc, but you might find your circumstances are covered in some of those posts.
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Learner on 04/06/2024(UTC)
Robin B
Posted: 03 June 2024 17:44:30(UTC)
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Keith Cobby;307609 wrote:
I don't see Labour reducing the TFLS but allow it to wither from inflation (same as Tories). I took my TFLS and my wife is taking hers imminently. The rest will stay invested and she will join me in taking the personal allowance each year tax free and topping up with the unearned income pension contribution of £2,880, this builds and subsequently enables another bite at the tax free cash (up to the £268k limit). I like to keep things simple rather than part crystallising.


I've never understood this unearned income pension contribution and why people do it, but I think you've filled the gap.

So am I right in saying that a pensioner can pay the £2880 into a SIPP from their savings, get tax relief added on, and then withdraw it again tax free providing it is within the £268k tax free limit?

But then there's the 25% tax free amount... is the 25% in relation to specific pension pots? So... don't add new money to a pot you've taken your 25% from already?
Thrugelmir
Posted: 03 June 2024 17:46:47(UTC)
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Joined: 01/06/2012(UTC)
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Robin B;307643 wrote:

So am I right in saying that a pensioner can pay the £2880 into a SIPP from their savings, get tax relief added on, and then withdraw it again tax free providing it is within the £268k tax free limit?



Only until aged 75.
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john brace on 05/06/2024(UTC)
Keith Cobby
Posted: 03 June 2024 18:36:55(UTC)
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You can pay in £2,880 and HMRC pay in £720 giving a maximum annual contribution of £3,600. From this you can withdraw 25%, so £900 as long as this doesn't take you over the £268,275 maximum. How the additional contributions are handled depends on your platform (another thread discusses this).
2 users thanked Keith Cobby for this post.
Robin B on 03/06/2024(UTC), Suburban Lesley on 02/07/2024(UTC)
Robin B
Posted: 03 June 2024 18:45:45(UTC)
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Joined: 01/04/2024(UTC)
Posts: 1,523

Keith Cobby;307659 wrote:
You can pay in £2,880 and HMRC pay in £720 giving a maximum annual contribution of £3,600. From this you can withdraw 25%, so £900 as long as this doesn't take you over the £268,275 maximum. How the additional contributions are handled depends on your platform (another thread discusses this).


So you can just immediately take out the 25% tax free amount and get free money? I'm assuming this compensates for the remainder which will be subject to income tax...
Evies Dad
Posted: 03 June 2024 18:50:45(UTC)
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I dont think the 25% tax free lump sum is at risk. It's such a central pillar of pension saving that I think it will be the last thing to go. Plenty of lower hanging fruit for them to pick at such as salary sacrifice contributions and higher rate tax relief.
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Learner on 04/06/2024(UTC)
SSJ
Posted: 03 June 2024 20:24:23(UTC)
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Robin B;307661 wrote:
Keith Cobby;307659 wrote:
You can pay in £2,880 and HMRC pay in £720 giving a maximum annual contribution of £3,600. From this you can withdraw 25%, so £900 as long as this doesn't take you over the £268,275 maximum. How the additional contributions are handled depends on your platform (another thread discusses this).


So you can just immediately take out the 25% tax free amount and get free money? I'm assuming this compensates for the remainder which will be subject to income tax...

It will take your platform and HMRC a month or so to add the basic rate tax. The remainder is indeed subject to income tax, so if you're already a basic rate tax payer then it's not exactly the tax dodge of the century - for every £80 pounds you put in, you'll net £85 on the way out, a 6.25% uplift and a max £180 of "free money" per year. Worth having but not life changing :) It's much more profitable if you can make use of the personal allowance in those "in between" years when other taxable income is low.
2 users thanked SSJ for this post.
Learner on 04/06/2024(UTC), Robin B on 04/06/2024(UTC)
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