A little financial tip for carers nearing retirement age

[Duggies-girl]

This may or may not interest you all but I found myself out of work four years ago at the age of 57. Long story cut short but I was given a new boss who turned out to be an absolute ******* and I had to leave my job that I had worked at for over 25 years. Never mind that because I got over it and soon found myself a new job as a barmaid (yes there is hope for us oldies if we are not to picky about what we do)

Anyway I decided that with nine years to go before collecting state pension that I needed a financial plan and I was also lucky enough to have a husband who although retired was able to keep us both. So I did a bit of googling for investments etc and found that the best way of investing any money that I managed to earn was to stick it into a pension and this I did. If I earned five thousand in a year I was able to put four thousand in to a pension and the government would add a thousand more, meaning that I got a thousand pounds for free.

I also found that once we are over 55 we are allowed to draw any private pensions that we have accrued over the years that we have worked tax free as long as we do not go over our personal tax limit. So whatever I earned over the last few years before stopping work to look after dad has been invested into a pension. I am now allowed to draw down this pension each year with 25 % being tax free. I haven't done this yet but probably will take some before next April.

It is a trick that anyone can do year after year even if not earning. Everyone is entitled to put either their total earnings into a pension or if they are not earning they can put in two thousand eight hundred and eighty pounds and the government will top it up by seven hundred and twenty pounds.

You can do this every year and get the top up and then withdraw it within weeks.

This is something that we should all be taking advantage if at all possible when we find ourselves in this in between period of being too young for a pension but unable to work due to caring.

 

[RedLou]

You have to be careful about withdrawing it within weeks; see this from The Telegraph:

According to Martin Tilley, technical director at Dentons, a specialist pension firm, you could fall foul of HMRC rules if you “recycled” more than 1pc of the lifetime pensions limit (which is currently £1.25m but is reducing to £1m next year). This suggests you could put in and immediately withdraw a gross £12,500 this year, and up to £10,000 next year and still be within the rules.

David Smith, head of financial planning at Tilney Bestinvest said: “The recycling rules were introduced to stop open scale abuse by wealthy individuals with large pensions. You could therefore argue that HMRC would not be interested in small scale recycling, as even your top-end example of £10,000 would only cost HMRC £500, assuming we’re talking about a basic-rate taxpayer.”

Won’t it all go wrong and land me with a huge tax bill?
Potentially, yes. If you are seen to be breaking the rules by “recycling” your pension and you are caught by HMRC, you’ll be fined for an unauthorised tax payment.

This means 40pc of the lump sum that you take out will be taken by the taxman – and this increases to 55pc if the tax-free amount taken is worth 25pc or more of the pension plan from which the money is withdrawn.

On top of this, what’s called a “scheme sanction charge” could also be levied, taking a further 15pc to 40pc of your fund. This fine is also designed to punish the pension provider for letting you recycle, and could also mean other people’s Sipps could be at risk of tax charges, although this has never happened before.

 

[RedLou]

The Savvywoman site has just explained the rules very clearly. See this link.
https://www.savvywoman.co.uk/2018/08/the-money-purchase-annual-allowance-explained/

 

[try again]

it depends on personal circumstances. i have kept my final salary pensions and luckily they still kick in at 60 as i left ages ago so i am expecting some payments very shortly! I also had a small pension pot which would have been worth very little as an annunity so a couple of years ago i took the 25% and arranged a drawdown of £500 per month - it runs out in just over a years time but as my other small pensions kick in soon it will be OK. I decided that i preferred to have this and use it now than gamble on the future but i guess if i live to be mid 80's i will be loosing out. I truely believe that NOW is the best years of the rest of my life so am happy to take the gamble and enjoy having the spending money today.
As for anything else, may have to buy 3 more years for the maximum new pension or may apply for the carers NI thing once we have a proper diagnosis in place.
I certainly won't be rich, probably not even comfortable by todays standards but am grateful for a warm house, food and a little bit left for other things.