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Thread: SIPP Problem

  1. #1

    SIPP Problem

    In March 2015 my SIPP was worth 1.2M. I crystallised 100% and took my 25% tax free allowance i.e. 300K leaving 900K in drawdown. This represented 96% of my LTA which was then 1,250K. I have lifetime protection at this level.

    I am now 63, work full time and do not intent to retire for at least another 5 years. I have not touched the 900K as I have no need of it.

    My problem (some would say a nice problem) is that the 900K has grown to 1.3M. If it stays like this or keeps growing I will end up with a big tax payment on the next review at age 75.

    Has anyone any ideas please - I don't particularly want to contribute even more to the social welfare and foreign aid budgets as I already contribute at 40%.

  2. #2
    Hmmm! Yes, I pretty much have the same issue. I have resolved to stimulate the economy in the short term - focusing on wine and travel in particular. Giving to children is another option. There is a technical option of having a joint SIPP with a partner and allocating future growth to them. Needs some specialist help though.

  3. #3
    I am 49 and am within 20K of 1.5M (my LTA). I am invested in what might be regarded as medium-high risk, the way I see it is there will be at some point a lot of tax to pay but in the meantime it is growing very efficiently taxwise. Perhaps one day the rules will change again and the LTA will be much higher or hopefully abandoned.

  4. #4
    Rather than getting free advice (if that's quite the word) which is worth precisely what you paid for it, when you're playing with serious money and HMRC rules you need - as quesera says rightly - specialist advice. Find a serious calibre specialist adviser, agree a flat fee for the advice, and pay with a smile on your face. At least you can sue him / her if it's a total cluster-****.

    I just saw Max P's comment before posting this and he too is spot on. His problem is different, having donkey's years to run and enjoying many future years of tax-free growth, hopefully.

    Here's a reasonable summary (no, not recommending these people, just saying it's a reasonably readable summary they've written): http://adviser.royallond...etime-allowance-charge/ . I've known a good many people misunderstand the tax charge completely; considering that most of the growth that led to it being due was tax-free or subsidised at highest marginal rate by others less fortunate, the charge is not altogether unreasonable. A little like adjusting State pension benefits for those in Contracted Out schemes.

    I don't like tax any more than the next man and will avoid it any time I legally can. In fact I'm on the "tax is legalised theft with menaces" side of the spectrum. All the more important, then, to avoid a possible scragging by the Revenue by getting quality advice.

  5. #5
    My understanding is that at 75, you have two options if you have exceeded your LTA. Either take the excess out and pay 55% or leave the excess within the SIPP and pay tax of 25% on that excess.

    Whilst I am hoping LTA may be abolished before I make 75, if I can not get the SIPP below the LTA by then I will take option 2 and pay the 25% tax. At least that way I can still leave a large pot Inheritance Tax free to my children.


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