cunning plan or recipe for disaster?

[bucklb]

Hi. Searching the site has failed to find an answer, so apologies if this has been broached.

I'm hoping to retire somewhat early, so looking to make the best of what I have already. I'm wondering about pushing some amount of saved cash/ISA into a SIPP, keeping it in the SIPP as cash and then drawing it (shortly) thereafter. Is it straightforward or am I missing something I really should know?

Assuming I earn £40-50k pa, my understanding is that I can put £8k cash (from savings or earnings) in to a SIPP and that gets me £10k (automatically) in the account. If I keep that entirely in cash, I can then retrieve £8.5k cash (give or take platform charges, losses vs inflation, current legislation etc on the basis that 25% will be tax free). There are obviously limits on what can be added to a SIPP annually but I can't exceed them in my wildest dreams.

Can I really push money in to a SIPP, shortly before retirement, and then, after retirement, pull money back out at a 6.25% uplift (less charges, obv) as long as I stay within the 40% tax threshold?

Cheers
Bob

[ursaminortaur]

Hi. Searching the site has failed to find an answer, so apologies if this has been broached.

I'm hoping to retire somewhat early, so looking to make the best of what I have already. I'm wondering about pushing some amount of saved cash/ISA into a SIPP, keeping it in the SIPP as cash and then drawing it (shortly) thereafter. Is it straightforward or am I missing something I really should know?

Assuming I earn £40-50k pa, my understanding is that I can put £8k cash (from savings or earnings) in to a SIPP and that gets me £10k (automatically) in the account. If I keep that entirely in cash, I can then retrieve £8.5k cash (give or take platform charges, losses vs inflation, current legislation etc on the basis that 25% will be tax free). There are obviously limits on what can be added to a SIPP annually but I can't exceed them in my wildest dreams.

Can I really push money in to a SIPP, shortly before retirement, and then, after retirement, pull money back out at a 6.25% uplift (less charges, obv) as long as I stay within the 40% tax threshold?

Cheers
Bob

The money you put into a pension has to come from relevant earnings but if your earnings are £40-50k then that is covered in that the taxman will accept that it came from those earnings even if you contributed the money early in the financial year from a savings account before the money had actually been earned. As to the uplift you will get that is an incentive to contribute to a pension and tie up your money. However If you are over 55 and start drawing taxable money from the DC pension a new annual allowance limit (MPAA) kicks in and restricts future DC pension contributions to just £4000 gross per year.

https://www.moneyadviceservice.org.uk/en/articles/money-purchase-annual-allowance