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  1. #1

    Paying £2880 into pension when retired

    Jamesd wrote in another thread the following:
    "She can make 720 a year tax free by paying 2880 net into a pension, having it grossed up to 3600 then withdrawing it. Can only do the withdrawing part from age 55. Can only pay in for this until age 75."

    I have just retired at 60 and have transferred my DC pension to a new SIPP. I plan to live off savings till state pension kicks in.

    I am correct that the above approach should be part of my strategy of being tax efficient?
    Last edited by nxdmsandkaskdjaqd; 03-01-2017 at 10:14 AM.

  2. #2
    I think the gain of 720 is "over egging" it a bit.
    Bear in mind you're moving money from a taxed paid to tax due environment.
    Assuming you're drawing the 3600 out as a 20% taxpayer, you'll pay 15% tax with consideration to the 25% TFLS.
    Therefore 3600 x 0.85 = 3060.
    This gives a gain of 180 which is still worth doing.
    Better than a slap with a wet fish as they say!!!

  3. #3
    Apologies just noticed you're living off savings so yes could withdraw all the 3600 tax free as it is within you PA.

  4. #4
    Yes - tho take care not to close the account with the SIPP provider in the first year or you will incur hefty charges.

    Basically pay in your 2880 - HMRC adds 720 within about two months. Withdraw 3000. It may be taxed and you will need to claim the tax back via form, which itself is quite straight forward and quick, considering it is HMRC!!

    Effectively 720 for zilch. Grab it while it is going.

  5. #5
    You can pay monthly DD but its easier if you have the cash to pay in one lump sum of 2880. You pay in before 6th April for this year and after 6th April for next year. So pay in 2880 on 7th April. Get the HMRC 720 added by about June. Withdraw 99% and put it somewhere else to gain interest.

    PS You need to leave it in Cash in the SIPP platform rather than investing it into anything.


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