How can money be taken out of my SIPP tax-free?
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I have taken the PCLS in full, but have not crystallised any of the remainder.
I have a DB pension that is above the lower limit for income tax, so whatever I take from the SIPP will be taxed.
I don't think there is any way that I (and I emphasise I) can get the money out of my pension without paying income tax. However I think that my beneficiaries can. Is this correct?
If so, what are the restrictions that Cobens put on my SIPP after my death?
I've heard from someone who works in pensions that there is a two year limit to draw out the pension after you have been informed. Is this true?
Can my beneficiaries draw the pension tax free before they are 55 (soon to be 57)?
Are they allowed to draw the money out of my pension and put it into their pension, assuming they have the same amount as personal income through work?...
Whilst I am alive, if I draw £1000 out, I would only receive £800 net. If I give that to my son and he puts the £800 in his pension, HMRC would add 25% and make it up to £1000.
When I am dead, could my son could draw £1000 out of my pension tax free, and put that into his pension? Would HMRC make that upto £1250?
Thanks.
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I have taken the PCLS in full, but have not crystallised any of the remainder.
I have a DB pension that is above the lower limit for income tax, so whatever I take from the SIPP will be taxed.
I don't think there is any way that I (and I emphasise I) can get the money out of my pension without paying income tax. However I think that my beneficiaries can. Is this correct?
If so, what are the restrictions that Cobens put on my SIPP after my death?
I've heard from someone who works in pensions that there is a two year limit to draw out the pension after you have been informed. Is this true?
Can my beneficiaries draw the pension tax free before they are 55 (soon to be 57)?
Are they allowed to draw the money out of my pension and put it into their pension, assuming they have the same amount as personal income through work?...
Whilst I am alive, if I draw £1000 out, I would only receive £800 net. If I give that to my son and he puts the £800 in his pension, HMRC would add 25% and make it up to £1000.
When I am dead, could my son could draw £1000 out of my pension tax free, and put that into his pension? Would HMRC make that upto £1250?
Thanks.
Under current rules the beneficiaries have 2 years to claim the pension benefits, after this any lump sum paid may be taxed.
If you die before the age of 75 the beneficiaries have the option to take the pension value as a tax free lump sum or transfer it into a "beneficiary pension" They can then access this pot tax free at any time.
After age 75 the benefits are taxed as income in the hands of the beneficiary.
Your son can use the income from the pension to fund his own pension contributions but the tax relief on these contributions would be dependent on him having taxable earned income to qualify for tax relief.
Cheers
Nik
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Excellent.
The last paragraph sounds like he can get £1250 from £1000 - happy days!
I assume that if they transfer to a "beneficiary pension" they can access at anytime, but don't get the 25% HMRC increase that a deposit into their own pension would give them.
Are they able to put some into a beneficiary and take some as cash, or is it all or nothing in their choice?
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Excellent.
The last paragraph sounds like he can get £1250 from £1000 - happy days!
I assume that if they transfer to a "beneficiary pension" they can access at anytime, but don't get the 25% HMRC increase that a deposit into their own pension would give them.
Are they able to put some into a beneficiary and take some as cash, or is it all or nothing in their choice?
A beneficiary pension is just a tax efficient place for the beneficiary to hold the value of a pension they inherit. In allows the funds to grow free of tax and be accessed at a future point free of tax. They can access the fund as they wish i.e. all in one go off take chunks if cash when it is needed.
It is not treated as a pension contribution so doesn't impact on the allowances of the beneficiary and doesn't attract any tax relief on the way in.
If the pension benefit is taken as a lump sum, unless it is spent or placed in an ISA it will start to attract tax in one format or another.
Tax relief on contributions to a pension/SIPP are dependent on the net relevant earnings (NRE) of the individual contributing. NRE is mainly taxable earned income, so while a beneficiary could use the proceeds of a beneficiary pension to fund their own pension contributions they would need to have NRE from other sources to gain tax relief.
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Thanks for the confirmation. It works just as I thought. Better to ask to confirm than just assume I'm correct. A small mistake can make a big difference.