Important information - the value of investments and the income from them can go down as well as up, so you may get back less than you invest.

We naturally think of pensions primarily as the place to save during our working lives but they can have a significant role to play even after that point as well.

The benefits of SIPPs, if used correctly, can add valuable extra flexibility to your retirement plans. The tax relief they offer can still be of use even if you’re no longer receiving an income from paid work - subject to certain limits.

Here’s some ways to make the most of SIPPs at older ages.

Paying in and getting tax relief

The tax relief on offer from SIPPs does not end when you stop work. UK residents can continue to pay into a pension until age 75 and potentially benefit from tax relief. 

For those eligible, money paid into a SIPP has basic rate tax relief added automatically, meaning an £80 contribution becomes £100 inside the SIPP. If your earnings mean you are a higher or additional rate taxpayer extra relief is available which can be claimed back through your tax return.

Then, up to 25% of the money you have in a SIPP can usually be paid to you tax free (up to a maximum of £268,275), and the rest is taxed as income.

You can usually access a SIPP from age 55 - this will rise to 57 from April 2028.

Know your limits!

Importantly, there are limits on what can be paid in which will affect those at older ages - it all depends on your earnings and whether or not you have already accessed taxable money from a pension.

Normally, what you pay into a pension is limited first and foremost by the amount you earn - you can’t pay in more than that. There is then an ‘Annual Allowance’ of £60,000 limiting the total that can be paid in.

If you have not yet accessed taxable money from your pension (more on that below) you might be able to use ‘Carry Forward’ rules to pay in a larger amount by using any unused Annual Allowance you have from the preceding three years.

But what if you have retired completely and are no longer earning? The rules still allow a total of £3,600 to be contributed to a pension, even if you have no income. That would require a payment of £2,880 contribution from you and the rest coming from tax relief.

If you’ve already accessed taxable money from a pension

The limits on what you can pay into a SIPP with tax relief change once you’ve accessed taxable money from a pension. This means anything outside of the 25% tax-free cash that is normally available. It might be taxable income via drawdown or a lump-sum withdrawal where a portion was tax-free but the rest subject to income tax.

In these cases a limit called the ‘Money Purchase Annual Allowance’ applies. This is currently £10,000 a year, meaning contributions above that amount will be liable for tax.

Additionally, carry forward is no longer available once taxable pension money has been taken.

If you’ve only taken tax-free cash

Taking tax-free cash alone will not trigger the Money Purchase Annual Allowance but bear in mind that contributions are still limited by your earnings above £3,600. What’s more, there are rules which prevent money taken as tax-free cash being ‘recycled’ into a pension, designed to ensure money that has already benefited from tax relief cannot benefit again.

These can be complicated, so if you intend to make significant extra pension contributions before or after you’ve taken tax-free cash, it is important to be across the rules.

The Government’s Pension Wise service offers free, impartial guidance to help you understand your options at retirement. You can access the guidance online at or over the telephone on 0800 138 3944.

Fidelity’s Retirement Service also has a team of specialists who can provide you with free guidance to help you with your decisions. They can also provide advice and help you select products though this will have a charge.

Inheritance protections

One of the big advantages to holding money within a pension is the extra protection it receives from Inheritance Tax (IHT). That’s because money held in a pension falls outside of your estate for IHT purposes.

If one of your aims in planning your retirement is to leave money to loved ones, and you think there will be an IHT bill to pay, it can make sense to hold money in a pension where it can be passed on with no tax to pay if you die before age 75. If you die after age 75 then the beneficiary will pay tax on the money at their marginal rate of income tax.

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Eligibility to invest in a SIPP and tax treatment depends on personal circumstances and all tax rules may change in the future. Withdrawals from a SIPP will not normally be possible until you reach age 55 (57 from 2028). This information is not a personal recommendation for any particular investment.  If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.

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