keitha
Member of DD Central
2024, hopefully the year I get out of P2P
Posts: 3,889
Likes: 2,321
|
Post by keitha on Nov 8, 2022 20:00:20 GMT
I have a friend who has just hit 66 so has retired.
He is investing his state pension and a chunk more into a SIPP.
he says because this is a "family SIPP" his investment is free of CGT and inheritance tax.
|
|
|
|
Post by mostlywrong on Nov 8, 2022 21:25:32 GMT
I have a friend who has just hit 66 so has retired. He is investing his state pension and a chunk more into a SIPP. he says because this is a "family SIPP" his investment is free of CGT and inheritance tax. My understanding is that there are 2 types of SIPPs. One is for shares/bonds/cash etc usually offered by HL., AJ Bell, II, Halifax etc.
T'other is a more complex fund that allows other investments such as property. This type might also be for more than one person (as in for a business).
The rules for cash in are, at least in theory, relatively straightforward:
1. £40k pa max averaged over 3 years. 2. The amount you pay in cannot exceed your taxable earnings (note the use of the word) in that year. 3. If you do not have any taxable earnings (investment/pension incomes etc do not count) then the maximum is £2880.
The rules for cash out are complex and I do not think that I understand them either...
The growth in investments in a SIPP are tax efficient - no dividend/interest tax and no CGT.
The dosh in your SIPP can fall outside your estate if you have nominated a recipient.
If you croak before you are 75yo, then your nominee can take the dosh tax-free.
If you croak after 75yo, the nominee pays tax at his/her marginal rate.
The value of your SIPP will be tested at 75yo (or at the point of death) for the LTA and adjustments made as necessary.
Although retired, I run a SIPP with £2880 going in per annum. The taxman tops that up with £720. If I don't need it, the dosh will go to my son.
Lots of caveats and I may be completely wrong but your man may be speaking a form of the truth!!!
MW
|
|
|
|
Post by bernythedolt on Nov 9, 2022 10:44:35 GMT
I have a friend who has just hit 66 so has retired. He is investing his state pension and a chunk more into a SIPP. he says because this is a "family SIPP" his investment is free of CGT and inheritance tax. Although retired, I run a SIPP with £2880 going in per annum. The taxman tops that up with £720.
I'm retired and do exactly this. Our maximum annual contribution is £3600, made up as you've laid out here. If keitha 's friend has just retired, I imagine the same rules are about to apply to him too. What appealed to me is if I croak first, before 75, my small SIPP pot will pass to my missus tax free. She has a tiny occupational pension, plus half of my modest one to look forward to, so every little extra is going to help. I have no intention of ever drawing it and treat it as a tax efficient savings scheme for my wife's benefit.
|
|
|
|
Post by mostlywrong on Nov 9, 2022 11:05:39 GMT
Although retired, I run a SIPP with £2880 going in per annum. The taxman tops that up with £720.
I'm retired and do exactly this. Our maximum annual contribution is £3600, made up as you've laid out here. If keitha 's friend has just retired, I imagine the same rules are about to apply to him too. What appealed to me is if I croak first, before 75, my small SIPP pot will pass to my missus tax free. She has a tiny occupational pension, plus half of my modest one to look forward to, so every little extra is going to help. I have no intention of ever drawing it and treat it as a tax efficient savings scheme for my wife's benefit. My assumption was that Keitha's friend had sufficient taxable earnings from this tax year, 06 Apr to date, to justify funding a SIPP. But that was my assumption!
I started the SIPP because I was a marginal 40% taxpayer and it made sense to force my taxable earnings below the 40% tax limit. I have continued funding it because it is performing better than the bldg soc and because it is an insurance policy. If I need the dosh, then I can cash it in. Annuity rates are rising in line with interest rates. And The Boy need never know that I have robbed his future... 
MW
|
|
|
|
Post by Penny Pincher on Nov 9, 2022 11:16:00 GMT
I have a friend who has just hit 66 so has retired. He is investing his state pension and a chunk more into a SIPP. he says because this is a "family SIPP" his investment is free of CGT and inheritance tax. As I understand it, a family SIPP is an unofficial concept created by pension providers which brings two or more individuals' SIPPs together for a common investment. Typically allowing a group of individuals to invest in a single asset (often a property).
|
|
|
|
Post by mostlywrong on Nov 9, 2022 11:19:15 GMT
It was late last night so I didn't get everything right!
Cash out:
1. Not generally available until 55yo (57yo in the near future). There are exceptions.
2. 25% cash is tax free. 3. Income is then taxed at your highest marginal rate. 4. Your SIPP will be tested against the Lifetime Allowance (LTA) either when you draw it down, you reach 75 or you croak. 5. You should nominate a beneficiary. If you don't, the dosh stays in your estate and might be taxed at 40%.
I have never heard of a "family SIPP" but that does not mean that they do not exist.
I have heard of "company SIPPs" where the owners/directors of a company all contribute to a SIPP which allows them to hold, collectively, the assets (buildings/land/plant) of the company. The company then pays rent to the SIPP for the use of those assets.
I can see why one might do that but the thought of having my pension tied to the assets of the same company that employs me would give me sleepless nights.
But, maybe, that is why I am not a company director...
MW
|
|
