OH only receives his state pension at moment as we don’t need to touch his private pension yet. He does (I do) pay into the SIPP each year to get this tax relief and withdraws the full amount each year which means he makes full use of his personal tax allowance.
You can only contribute the £4,000 if you've flexibly accessed a pension. For people who haven't flexibly accessed a pension, it's just £3,600 which is made up by our contribution of £2,880 and is topped up with £720 by the government, making £3,600. It's also profitable for those people who are working too but everyone's circumstances are different and it all depends on how much state/private pension you'll have at retirement and how much you'll get taxed when you drawdown the SIPP.
Copied from the main thread as this is what people need to read up on if interested in investing in a SIPP. There are very helpful people on the MSE thread who do offer advice (I'm certainly not qualified for this as everyone has different circumstances).
Anyone can pay into one, up until the age of 75. It works well for me as I retired from work early. Link to Hargreaves Lansdown, which also explains it. You do need time to digest all the information:
Have you earned £4320 this tax year? If not you are limited to gross earnings or £3600 gross so only need to put away £2880.
Thanks No earnings at all Some unearned income from rentals and will have my OAP which started last month DH had earnings but not calculated yet as self employed
I would never get my head round this without help Cheers Oh will probably be back later
You can only contribute the £4,000 if you've flexibly accessed a pension. For people who haven't flexibly accessed a pension, it's just £3,600 which is made up by our contribution of £2,880 and is topped up with £720 by the government, making £3,600. It's also profitable for those people who are working too but everyone's circumstances are different and it all depends on how much state/private pension you'll have at retirement and how much you'll get taxed when you drawdown the SIPP.
Thank you Heatherlea. Like you say everyone’s circumstances are different so it is essential that people look carefully for themselves rather than assuming that because someone else has done something it is appropriate for them. OH had historically drawn down a lump sum so this applies to him. (I hope).
Post by mhocelitemoneysaving on Feb 1, 2020 13:34:36 GMT
Please can I ask is it a one time thing? I did SIPP in a previous year with HL but never since - the most fraught thing I have ever done.
I still have my HL account as far as I know.
Create all the happiness you are able to create; remove all the misery you are able to remove. Every day will allow you, will invite you to add something to the pleasure of others,or to diminish something of their pains
Please can I ask is it a one time thing? I did SIPP in a previous year with HL but never since - the most fraught thing I have ever done.
I still have my HL account as far as I know.
I've never seen it mentioned that you can't contribute to a SIPP again if you've withdrawn all monies from it. I would give HL a ring - they've always been very helpful with me when I've phoned and understood me even when I don't know what I'm talking about. I know what you mean about it being fraught - it's like another language, especially when having to complete a form and you're petrified that you've ticked the wrong box or declared something incorrectly. It's worth the effort though for the free money.
Post by mhocelitemoneysaving on Feb 1, 2020 14:29:58 GMT
Yes I will give them a ring - I will be very glad if its a one time offer as it was bad enough doing it the once. Yes I withdrew everything and then I got the tax refunded a while later
Create all the happiness you are able to create; remove all the misery you are able to remove. Every day will allow you, will invite you to add something to the pleasure of others,or to diminish something of their pains
Yes I will give them a ring - I will be very glad if its a one time offer as it was bad enough doing it the once. Yes I withdrew everything and then I got the tax refunded a while later
Mhoc, you can do this every year. Not sure you wanted to hear that. I’ve done this for a few years now for OH who is retired.
For us there are two main benefits
1) you get the tax relief added on your contribution so if you pay in £2880 you end up with £3600 in your pension pot.
2) OH only gets his state pension so is not making full use of his personal tax allowance. (He has transferred some of his allowance to me but that is perhaps a different subject). Each fiscal year, after the tax relief has been paid into his HL account, we withdraw enough to take his annual income/earnings up to his personal allowance. in reality this is the full amount of £3,600.
So we have paid in £2880 and withdrawn £3600. I have found in previous years that HL have stopped a small amount of tax on the £3600 withdrawn (not sure why) but this has always been repaid my HMRC. The first year I requested it through the online hmrc tax portal but since then it has been done automatically and paid directly into his bank account. (I probably didn’t need to claim it in the first place ).
HL require you to keep a balance of £1000 min in your account to keep it open so the first year we only withdrew £2600 of the £3600 and each year since withdrawn the £3600.
whilst I hope this helps you need to research your own situation.
Post by mhocelitemoneysaving on Feb 2, 2020 14:49:21 GMT
Thanks for this. I will give them a ring in the morning. This was one of the casualties of swapping over computer systems as I've lost all the previous emails - OH will say yes its all still there on the old hard drive which is not a lot of use. I would def have put all paperwork into a folder but nothing is in the file boxes or in the historic archives But I have been able to log onto my account so thats a good start
Create all the happiness you are able to create; remove all the misery you are able to remove. Every day will allow you, will invite you to add something to the pleasure of others,or to diminish something of their pains
Huge thanks for this - have opened my SIPP & deposited £2880 today
Pandora,
I don’t know if you had planned on withdrawing money this financial year to make use of your personal allowance.
We wanted to withdraw as much as possible but also wanted to leave the account open for the next year which required us to leave a £1000 balance . Because we put the money in late in the fiscal year the tax relief was not due to be credited until after the year end. I made a phone call to HL and explained the situation. They allowed us to leave just £280 in the account pending receipt of the £720 tax relief.
Huge thanks for this - have opened my SIPP & deposited £2880 today
Pandora,
I don’t know if you had planned on withdrawing money this financial year to make use of your personal allowance.
We wanted to withdraw as much as possible but also wanted to leave the account open for the next year which required us to leave a £1000 balance . Because we put the money in late in the fiscal year the tax relief was not due to be credited until after the year end. I made a phone call to HL and explained the situation. They allowed us to leave just £280 in the account pending receipt of the £720 tax relief.
HTH
SnS
They have said that the £720 bonus should be received on the 21st March. I intend to leave £1000 in the account to keep it open x
When you take it out £900 (25%) is classed as capital and the £2700 is classed as income.
Capital is not counted for self assessment or where benefits/grants are based on income.
Effectively people can enter drawdown, take the 25% and leave the rest in until a more optimum time to withdraw.
Once you enter drawdown you are limited to adding £4000 (gross) a year to your pension but there's also the small pots rule which means you can withdraw 3x less than 10k and not enter drawdown, HL will facilitate this by splitting a large pot.
For me it was important to understand the rules so I could optimise it for my own and my friends circumstances so do check with financial people on the MSE thread.
Huge thanks for this - have opened my SIPP & deposited £2880 today
Have I still got time to do this for this tax year please? Did you just open and deposit online or is it more complex than that? Just taking some time out to read and hopefully digest.
SippFeb 7, 2020 11:08:52 GMTvia mobilepandora and curly like this
Post by BusyBee on Feb 7, 2020 11:08:52 GMT
It needs to be done by the end of the tax year.
The relief will actually be credited to your account about six weeks after your 'deposit' but will still be counted towards 19-20 contributions.
If you also want to withdraw this year you will need to do it sooner. Do you want to withdraw it all? Or just the tax free 25%? Do you want to limit future contributions to 4k gross?
Huge thanks for this - have opened my SIPP & deposited £2880 today
Have I still got time to do this for this tax year please? Did you just open and deposit online or is it more complex than that? Just taking some time out to read and hopefully digest.
I just did it online Curly, it was very easy. I did read up on the mse thread first
If your money is currently earning interest, you may as well hold onto it until the beginning of next month (unless you'd rather do it now/aren't bothered about the bit of interest). This is from the HL website:
We request basic-rate tax relief from HM Revenue & Customs (HMRC) on a monthly basis for all personal contributions made between the 6th of the previous month and the 5th of the current month (inclusive). We receive the tax relief from HMRC and apply it to clients' accounts on the 21st of the following month (or the next working day if the 21st is not one), so this is always 6-11 weeks after the date of the initial contribution.
If your money is currently earning interest, you may as well hold onto it until the beginning of next month (unless you'd rather do it now/aren't bothered about the bit of interest). This is from the HL website:
We request basic-rate tax relief from HM Revenue & Customs (HMRC) on a monthly basis for all personal contributions made between the 6th of the previous month and the 5th of the current month (inclusive). We receive the tax relief from HMRC and apply it to clients' accounts on the 21st of the following month (or the next working day if the 21st is not one), so this is always 6-11 weeks after the date of the initial contribution.
So I've missed the opportunity to open/withdraw this tax year then?
Thanks for replying ladies. I keep getting distracted today and need to read up later.
If your money is currently earning interest, you may as well hold onto it until the beginning of next month (unless you'd rather do it now/aren't bothered about the bit of interest). This is from the HL website:
We request basic-rate tax relief from HM Revenue & Customs (HMRC) on a monthly basis for all personal contributions made between the 6th of the previous month and the 5th of the current month (inclusive). We receive the tax relief from HMRC and apply it to clients' accounts on the 21st of the following month (or the next working day if the 21st is not one), so this is always 6-11 weeks after the date of the initial contribution.
So I've missed the opportunity to open/withdraw this tax year then?
Thanks for replying ladies. I keep getting distracted today and need to read up later.
Curly,
you are not too late for this year If you are going to keep the account open for future years. See my post above of 4th Feb.
You will get the £720 tax relief anyway even if you don’t withdraw this year. (I’m assuming here that you meet all the necessary criteria).
If your money is currently earning interest, you may as well hold onto it until the beginning of next month (unless you'd rather do it now/aren't bothered about the bit of interest). This is from the HL website:
We request basic-rate tax relief from HM Revenue & Customs (HMRC) on a monthly basis for all personal contributions made between the 6th of the previous month and the 5th of the current month (inclusive). We receive the tax relief from HMRC and apply it to clients' accounts on the 21st of the following month (or the next working day if the 21st is not one), so this is always 6-11 weeks after the date of the initial contribution.
So I've missed the opportunity to open/withdraw this tax year then?
Thanks for replying ladies. I keep getting distracted today and need to read up later.
You haven't missed the chance to open one yet - as long as HL receive your money before the end of the current tax year, it's classed as your contribution for the 2019/20 year, even though the £720 from HMRC won't have been added before 5th April. As sweetnsavvy said above though, you can speak to them and withdraw before the £720 is added if you need the funds. You can always speak to HL on the phone before opening one if you need to withdraw money asap and see what they advise.
I Have a H&L sipp as many of us did a couple or so years ago, 2 years ago I drew money out but had to call them and do it over the phone, as apparently I hadn't got a 'nominated 'bank account, the lady then said after this call I would now have a bank account. Anyway I haven't tried to draw any money out since even though monies have been paid in. I have just looked to see if I can draw out money online but my account says I haven't got a nominated bank. Therefore my actual question is if I do have a nominated bank (I have now printed off the form to send back to H&L)do I still have to call and speak direct or can my withdrawal been done online?
There's different ways to drawdown. If the form is to tell them how you want to take the money out you might be ok but my friend has always spoken to them to get the correct form then filled it in and sent it back.
I've not done any withdrawals, I use it as a long term savings account.