When to stop adding to a SIPP

[sludgesurfer]

Looking at the history of the lifetime allowance since it was introduced in 2006 - it isn't obvious that it must keep increasing. Who knows what UK or world politics will look like in another 20 years? It might be an easy way for the woke generation to generate tax revenue.

Quite possibly. I'd argue that the LTA of £1.8m (when, from memory the annual allowance was in excess of £200k) was very generous and a goose ripe for plucking. I think the LTA will start to benefit from inflationary increases again post-freeze although I can see higher rate tax relief being reduced/eliminated. Personally, the attraction of reducing/stopping pension contributions at this point for me is limited. I see it as definitely exposing myself to a large income tax hit now rather than a potential large hit later. Sequence of returns risk is very real even after reducing risk as retirement approaches. Although everyone's circumstances are different.

I still consider exceeding the LTA as a nice problem to have.

[sludgesurfer]

There is an article on the LTA in the FT today. The comments are pretty useful too.

https://www.ft.com/content/48ae7709-...f-3c006805b699

To view it behind the paywall, google "FT the million pound pension problem" hit news and click the top link

[Smartie]

There's an excellent article in The Times money section today with some very detailed analysis on this subject. Paywall though.

https://www.thetimes.co.uk/article/w...-can-gb3mfds2j

[_V_]

Another thing to consider is that ideally you want a balance of money in the SIPP and money in stocks and shares ISA.

Two reasons, SIPP rules mean you don't know what min retirement age will be in 20 years (possibly 60 to 65), and income from a SIPP is taxable once you access it at retirement.

Income and capital gains from the ISA is not taxable.

Therefore, the perfect setup (assuming a couple) is:

SIPP generates up to the personal tax allowance of income, currently about £25K pa, assuming you and your partner have a SIPP each.

25% tax free lump sum from SIPP is used to boost the ISA and/or pay off any remaining mortgages.

ISA generates income above that level taxable level, from dividends and bonds and sale of shares.


This is how I have played it anyway.

[sludgesurfer]

Yes. A balance between ISAs and SIPPs is important. Especially if you want to pull the trigger on "retirement" before 55.

Monevator did a decent series on this:

https://monevator.com/how-to-maximis...-independence/

[sludgesurfer]

Another article from the FT on the LTA which talks about the tax charge being the least worst option with updated tables on when the allowance is likely to be breached under various growth scenarios.

It does however talk of "whispered threats" of a further reduction in LTA to £800k or £900k.

https://www.ft.com/content/a59e5427-...4-44b3b4c33bbf