Drawdown question.

[sweepster70]

I'm hoping to put my 60 pension into a SIPP each month until I get to 65. I hope to combine my AVC's, I'm paying into the new pension and private SIPP to a drawdown pension at 65. Is this possible? Thanks.

[RobertT]

I'm hoping to put my 60 pension into a SIPP each month until I get to 65.

You should be ok, but you might want to read up on pension recycling rules to make sure you don't fall foul of them.

I hope to combine my AVC's, I'm paying into the new pension and private SIPP to a drawdown pension at 65. Is this possible? Thanks.

From the RMCPP AVC Handbook:
"If you leave the Collective Plan before you get your income for life, lump sum and AVC savings, then you could choose to transfer out the AVC savings you’ve built up."

[sweepster70]

Thanks Robert. Always very helpful.

[sweepster70]

I've just checked out the recycling rules.
I will be putting my NRA60 that I receive monthly into a SIPP from 60-65 when I am hoping to retire. It will be around £10,000 a month. The tax free lump sum will be spent on house improvements at 60, before I fully retire at 65, so should be OK.
The AVC I'm investing into Scottish Widows is on top of the guaranteed lump sum and 1% booster, so none of that should be part of the tax free lump sum, so that should be safe?
I also have a little extra money in my NRA65, that will be uncristalised. Would it be worth putting that into the drawdown?
I've just found out, because of my wages and SIPP contributions, I can claim an extra 20% tax relief myself, as it puts me in the higher tax band.

[RobertT]

I've just checked out the recycling rules.
I will be putting my NRA60 that I receive monthly into a SIPP from 60-65 when I am hoping to retire. It will be around £10,000 a month. The tax free lump sum will be spent on house improvements at 60, before I fully retire at 65, so should be OK.

£10k a month?
That's one good pension!

The AVC I'm investing into Scottish Widows is on top of the guaranteed lump sum and 1% booster, so none of that should be part of the tax free lump sum, so that should be safe?

Safe from what?
The lump sum(inc booster) is there to fund the tax free lump sum with your RMCPP pension.
The AVC can also fund the tax free cash.
Or you could also transfer out one or even all three elements if you want to.

I also have a little extra money in my NRA65, that will be uncristalised. Would it be worth putting that into the drawdown?

It's not possible to transfer out the RMSPS element(2010-2012) of your Age65 benefits, unless it's to another DB scheme.
The RMPP part(2012-2018) could be transferred, but is subject to the £30k advice rule and finding a provider willing to accept it.
The Cash Balance(2018-2024) is no longer dependent on the same rules, so can be transferred out without advice(even if over £30k).
I believe there's also a clause which says if you took any Cash Balance with your Age60, the remainder can't then be transferred out.
Whether moving that to a SIPP is a good thing to do, will be down to your own tax liability, personal circumstances and choices.

I've just found out, because of my wages and SIPP contributions, I can claim an extra 20% tax relief myself, as it puts me in the higher tax band.

My understanding is you can claim an extra 20% tax relief on any wages income you've paid 40% tax on, which is normally anything over £50,270.

*The rules in Scotland are different.

https://www.gov.uk/tax-on-your-private- ... tax-relief

[Hitcher]

I will be putting my NRA60 that I receive monthly into a SIPP from 60-65 when I am hoping to retire. It will be around £10,000 a month.

Why are you still working?

[sweepster70]

Should have been £10,000 a year, not month.
Thanks again.

[heapsy]

I'm hoping to put my 60 pension into a SIPP each month until I get to 65. I hope to combine my AVC's, I'm paying into the new pension and private SIPP to a drawdown pension at 65. Is this possible? Thanks.

Forgive me for asking, but why do you want to put your NRA60 pension through your SIPP? Why not just take the pension at 60? Defering a pension means you've got less time to draw it. And could get less than you would have done.

[RobertT]

I'm hoping to put my 60 pension into a SIPP each month until I get to 65. I hope to combine my AVC's, I'm paying into the new pension and private SIPP to a drawdown pension at 65. Is this possible? Thanks.

Forgive me for asking, but why do you want to put your NRA60 pension through your SIPP? Why not just take the pension at 60? Defering a pension means you've got less time to draw it. And could get less than you would have done.

He's not deferring it!
He wants to take his Age60 and save it into a SIPP until he retires at 65.

[mr hil.]

By paying your NRA60 monthly payments into a SIPP whilst still working means you get the income tax back that would be deducted, presuming you are earning more than £12570 pa from your main job. This will allow you to then either drawdown at a later time or purchase an annuity when you finally retire.

At retirement you will still be getting the original NRA60 + any increases, your state pension, your NRA65 and the new NRA67. When you add in the extra SIPP (25% of which you could take as a lump sum tax free) you should have a relatively decent income for your retirement. Factoring in the lump sums that come with the NRA65 and NRA67 that should be mainly tax free and the DBCBS will have a tidy amount in too you should also have a nice nest egg to do with as you please.

If you don't need the extra money from the monthly NRA60 whilst still working this is a sensible way to "invest it". Alternatively you could put it in an ISA but would not get the tax back initially but it would be tax free to access later. Swings and roundabouts really the tax man will always want his share. The advantage of paying into a SIPP over an ISA is that the 20% tax added to your payments will be invested for 5 to 7 years and the growth will be yours (but taxable)

e.g. if you pay in £240 per month into a sipp you get £60 tax rebate added making a gross monthly investment of £300. The compound effect of any growth/interest could realise an extra £400 (using current base rate as a rough guide) after 5 years

[heapsy]

I'm hoping to put my 60 pension into a SIPP each month until I get to 65. I hope to combine my AVC's, I'm paying into the new pension and private SIPP to a drawdown pension at 65. Is this possible? Thanks.

Forgive me for asking, but why do you want to put your NRA60 pension through your SIPP? Why not just take the pension at 60? Defering a pension means you've got less time to draw it. And could get less than you would have done.

He's not deferring it!
He wants to take his Age60 and save it into a SIPP until he retires at 65.

Maybe that was the wrong term to use. But my point is, why not just take the pension, and carry on working? It doesn't make sense not to.

[RobertT]

Maybe that was the wrong term to use. But my point is, why not just take the pension, and carry on working? It doesn't make sense not to.

He is going to take the pension!
But instead of spending it, he wants to save it so he's got a pot to draw on when he retires.
He's obviously realised that putting it in a SIPP is better than any other savings vehicle.