Quick pension question, relating to the 25% tax free.
my wife will be 55 in a couple of years so can access her SIPP (she also has a couple of DB pensions, coming out at 60 & 67 currently but park that for now).
let’s say at that point it’s £200k, she can draw £50k tax free leaving £150k invested.
lets fast forward 5 years after that and say her pot is now £200k again, can she take a further £12.5k tax free (ie 25% of the £50k growth?).
No, she can't. If you take the 25% lump sum at the start that's that, the rest is taxable. If your wife had zero subsequent income she could make a taxable withdrawal of £12,570pa which although taxable, no tax would be payable.
If you do take lesser withdrawals plus 25% tax free you can do that ad infinitum. IE I started withdrawing £12,570 + 25% tax free, total £16,000 odd for a few years.
But last year when the risk of losing the 25% tax free lump sum was mooted, I then withdrew 25% tax free of the total sum.
Quick pension question, relating to the 25% tax free.
my wife will be 55 in a couple of years so can access her SIPP (she also has a couple of DB pensions, coming out at 60 & 67 currently but park that for now).
let’s say at that point it’s £200k, she can draw £50k tax free leaving £150k invested.
lets fast forward 5 years after that and say her pot is now £200k again, can she take a further £12.5k tax free (ie 25% of the £50k growth?).
Regrettably, no. The 25% tax free is based on the pot at the time the pension is first accessed - no additional 25% tax free withdrawals if the pot subsequently increases in value.
Quick pension question, relating to the 25% tax free.
my wife will be 55 in a couple of years so can access her SIPP (she also has a couple of DB pensions, coming out at 60 & 67 currently but park that for now).
let’s say at that point it’s £200k, she can draw £50k tax free leaving £150k invested.
lets fast forward 5 years after that and say her pot is now £200k again, can she take a further £12.5k tax free (ie 25% of the £50k growth?).
Regrettably, no. The 25% tax free is based on the pot at the time the pension is first accessed - no additional 25% tax free withdrawals if the pot subsequently increases in value.
Thanks, that’s what I had thought but couldn’t find a definite answer.
Quick pension question, relating to the 25% tax free.
my wife will be 55 in a couple of years so can access her SIPP (she also has a couple of DB pensions, coming out at 60 & 67 currently but park that for now).
let’s say at that point it’s £200k, she can draw £50k tax free leaving £150k invested.
lets fast forward 5 years after that and say her pot is now £200k again, can she take a further £12.5k tax free (ie 25% of the £50k growth?).
No, she can't. If you take the 25% lump sum at the start that's that, the rest is taxable. If your wife had zero subsequent income she could make a taxable withdrawal of £12,570pa which although taxable, no tax would be payable.
If you do take lesser withdrawals plus 25% tax free you can do that ad infinitum. IE I started withdrawing £12,570 + 25% tax free, total £16,000 odd for a few years.
But last year when the risk of losing the 25% tax free lump sum was mooted, I then withdrew 25% tax free of the total sum.
That’s partly my thought, get the full 25% out as soon as you can!!
Quick pension question, relating to the 25% tax free.
my wife will be 55 in a couple of years so can access her SIPP (she also has a couple of DB pensions, coming out at 60 & 67 currently but park that for now).
let’s say at that point it’s £200k, she can draw £50k tax free leaving £150k invested.
lets fast forward 5 years after that and say her pot is now £200k again, can she take a further £12.5k tax free (ie 25% of the £50k growth?).
No, she can't. If you take the 25% lump sum at the start that's that, the rest is taxable. If your wife had zero subsequent income she could make a taxable withdrawal of £12,570pa which although taxable, no tax would be payable.
If you do take lesser withdrawals plus 25% tax free you can do that ad infinitum. IE I started withdrawing £12,570 + 25% tax free, total £16,000 odd for a few years.
But last year when the risk of losing the 25% tax free lump sum was mooted, I then withdrew 25% tax free of the total sum.
That’s partly my thought, get the full 25% out as soon as you can!!
Advisers are hauled over the coals by the FCA for advising this strategy unless there is a good reason for it (paying off a mortgage for example). Worse thing you can do (and I've seen clients do it) is to take the 25% lump sum & then just leave it in a deposit account where the interest is taxable. Even citing "Labour might tax it on future / reduce the amount of TFC allowed" is not good enough......I cant give advice on rumour or hearsay.
If you ARE going to take out TFC at least put it somewhere tax efficient. Problem is the main one (ISA) has a meagre £20k annual limit. Next best thing would be an Investment Bond. You cant really look at pensions as you'd probably fall foul of the recycling rules.
Quick pension question, relating to the 25% tax free.
my wife will be 55 in a couple of years so can access her SIPP (she also has a couple of DB pensions, coming out at 60 & 67 currently but park that for now).
let’s say at that point it’s £200k, she can draw £50k tax free leaving £150k invested.
lets fast forward 5 years after that and say her pot is now £200k again, can she take a further £12.5k tax free (ie 25% of the £50k growth?).
No, she can't. If you take the 25% lump sum at the start that's that, the rest is taxable. If your wife had zero subsequent income she could make a taxable withdrawal of £12,570pa which although taxable, no tax would be payable.
If you do take lesser withdrawals plus 25% tax free you can do that ad infinitum. IE I started withdrawing £12,570 + 25% tax free, total £16,000 odd for a few years.
But last year when the risk of losing the 25% tax free lump sum was mooted, I then withdrew 25% tax free of the total sum.
That’s partly my thought, get the full 25% out as soon as you can!!
Advisers are hauled over the coals by the FCA for advising this strategy unless there is a good reason for it (paying off a mortgage for example). Worse thing you can do (and I've seen clients do it) is to take the 25% lump sum & then just leave it in a deposit account where the interest is taxable. Even citing "Labour might tax it on future / reduce the amount of TFC allowed" is not good enough......I cant give advice on rumour or hearsay.
If you ARE going to take out TFC at least put it somewhere tax efficient. Problem is the main one (ISA) has a meagre £20k annual limit. Next best thing would be an Investment Bond. You cant really look at pensions as you'd probably fall foul of the recycling rules.
Taking the 25% doesn’t stop further payments into pension (DC). At least that’s what I read….. not that a lot goes into her SIPP anyway as a low earner. But let me know if I’ve read that incorrectly!
it won’t be a huge sum (£50k max) and believe me it won’t live in any account for long 😂 she has plans 🙈 wants a place in Lanzarote…..
Until the recent rule change my plan was to leave as much as possible in my SIPP and drain other resources first, that’s changed now thanks to the Chancellor so I’ll be drawing and spending it and leaving the kids the gold and her premium bonds instead 😂
Quick pension question, relating to the 25% tax free.
my wife will be 55 in a couple of years so can access her SIPP (she also has a couple of DB pensions, coming out at 60 & 67 currently but park that for now).
let’s say at that point it’s £200k, she can draw £50k tax free leaving £150k invested.
lets fast forward 5 years after that and say her pot is now £200k again, can she take a further £12.5k tax free (ie 25% of the £50k growth?).
Regrettably, no. The 25% tax free is based on the pot at the time the pension is first accessed - no additional 25% tax free withdrawals if the pot subsequently increases in value.
Yes, although I think you ought be clear here. The way I understand it is this as an eaxample. If the pot is £200k and you want to draw down £25k the way it works is that the £25k is 25% of £100k. So although you have £175k left, it counts as £75K crystalised and £100k uncrystalised. If the £175k became £350k (keeping the maths simple), you have £150k crystalised and £200k uncrystalised. You then have 25% of the £200k uncrystalised pot available as tax free ie £50k and not £25k of the original pot. Hopefully Golfie will confirm this.
Quick pension question, relating to the 25% tax free.
my wife will be 55 in a couple of years so can access her SIPP (she also has a couple of DB pensions, coming out at 60 & 67 currently but park that for now).
let’s say at that point it’s £200k, she can draw £50k tax free leaving £150k invested.
lets fast forward 5 years after that and say her pot is now £200k again, can she take a further £12.5k tax free (ie 25% of the £50k growth?).
Regrettably, no. The 25% tax free is based on the pot at the time the pension is first accessed - no additional 25% tax free withdrawals if the pot subsequently increases in value.
Yes, although I think you ought be clear here. The way I understand it is this as an eaxample. If the pot is £200k and you want to draw down £25k the way it works is that the £25k is 25% of £100k. So although you have £175k left, it counts as £75K crystalised and £100k uncrystalised. If the £175k became £350k (keeping the maths simple), you have £150k crystalised and £200k uncrystalised. You then have 25% of the £200k uncrystalised pot available as tax free ie £50k and not £25k of the original pot. Hopefully Golfie will confirm this.
You are no doubt correct - I was responding to R7L's question where he mentions taking the full 25% of the pot.
Quick pension question, relating to the 25% tax free.
my wife will be 55 in a couple of years so can access her SIPP (she also has a couple of DB pensions, coming out at 60 & 67 currently but park that for now).
let’s say at that point it’s £200k, she can draw £50k tax free leaving £150k invested.
lets fast forward 5 years after that and say her pot is now £200k again, can she take a further £12.5k tax free (ie 25% of the £50k growth?).
Regrettably, no. The 25% tax free is based on the pot at the time the pension is first accessed - no additional 25% tax free withdrawals if the pot subsequently increases in value.
Yes, although I think you ought be clear here. The way I understand it is this as an eaxample. If the pot is £200k and you want to draw down £25k the way it works is that the £25k is 25% of £100k. So although you have £175k left, it counts as £75K crystalised and £100k uncrystalised. If the £175k became £350k (keeping the maths simple), you have £150k crystalised and £200k uncrystalised. You then have 25% of the £200k uncrystalised pot available as tax free ie £50k and not £25k of the original pot. Hopefully Golfie will confirm this.
That’s how it’s worked for me so yes you are correct.
Quick pension question, relating to the 25% tax free.
my wife will be 55 in a couple of years so can access her SIPP (she also has a couple of DB pensions, coming out at 60 & 67 currently but park that for now).
let’s say at that point it’s £200k, she can draw £50k tax free leaving £150k invested.
lets fast forward 5 years after that and say her pot is now £200k again, can she take a further £12.5k tax free (ie 25% of the £50k growth?).
Regrettably, no. The 25% tax free is based on the pot at the time the pension is first accessed - no additional 25% tax free withdrawals if the pot subsequently increases in value.
Yes, although I think you ought be clear here. The way I understand it is this as an eaxample. If the pot is £200k and you want to draw down £25k the way it works is that the £25k is 25% of £100k. So although you have £175k left, it counts as £75K crystalised and £100k uncrystalised. If the £175k became £350k (keeping the maths simple), you have £150k crystalised and £200k uncrystalised. You then have 25% of the £200k uncrystalised pot available as tax free ie £50k and not £25k of the original pot. Hopefully Golfie will confirm this.
Quick pension question, relating to the 25% tax free.
my wife will be 55 in a couple of years so can access her SIPP (she also has a couple of DB pensions, coming out at 60 & 67 currently but park that for now).
let’s say at that point it’s £200k, she can draw £50k tax free leaving £150k invested.
lets fast forward 5 years after that and say her pot is now £200k again, can she take a further £12.5k tax free (ie 25% of the £50k growth?).
No, she can't. If you take the 25% lump sum at the start that's that, the rest is taxable. If your wife had zero subsequent income she could make a taxable withdrawal of £12,570pa which although taxable, no tax would be payable.
If you do take lesser withdrawals plus 25% tax free you can do that ad infinitum. IE I started withdrawing £12,570 + 25% tax free, total £16,000 odd for a few years.
But last year when the risk of losing the 25% tax free lump sum was mooted, I then withdrew 25% tax free of the total sum.
That’s partly my thought, get the full 25% out as soon as you can!!
Advisers are hauled over the coals by the FCA for advising this strategy unless there is a good reason for it (paying off a mortgage for example). Worse thing you can do (and I've seen clients do it) is to take the 25% lump sum & then just leave it in a deposit account where the interest is taxable. Even citing "Labour might tax it on future / reduce the amount of TFC allowed" is not good enough......I cant give advice on rumour or hearsay.
If you ARE going to take out TFC at least put it somewhere tax efficient. Problem is the main one (ISA) has a meagre £20k annual limit. Next best thing would be an Investment Bond. You cant really look at pensions as you'd probably fall foul of the recycling rules.
Taking the 25% doesn’t stop further payments into pension (DC). At least that’s what I read….. not that a lot goes into her SIPP anyway as a low earner. But let me know if I’ve read that incorrectly!
it won’t be a huge sum (£50k max) and believe me it won’t live in any account for long 😂 she has plans 🙈 wants a place in Lanzarote…..
Until the recent rule change my plan was to leave as much as possible in my SIPP and drain other resources first, that’s changed now thanks to the Chancellor so I’ll be drawing and spending it and leaving the kids the gold and her premium bonds instead 😂
1st world problems I know……
There is a difference between funding a pension via regular premiums and funding it by a lump sum recently acquired by way of the 25% TFC.
The recycling rules are down to HMRC interpretation as (and my memory might let me down here) it all depends on how you have previously funded your pension. If you can show that you have previously contributed lump sums into your pension you may get away with it. If all you've done is paid £300pm for the past 10 years you'll probably not get away with sticking in £20k now as a one off payment.
On a different note (and maybe what you were alluding to) you are not affected by the MPAA (max £10k) if you are only taking TFC. Once you start taking "taxable" income then you are limited to how much you can pay into a pension.
Quick pension question, relating to the 25% tax free.
my wife will be 55 in a couple of years so can access her SIPP (she also has a couple of DB pensions, coming out at 60 & 67 currently but park that for now).
let’s say at that point it’s £200k, she can draw £50k tax free leaving £150k invested.
lets fast forward 5 years after that and say her pot is now £200k again, can she take a further £12.5k tax free (ie 25% of the £50k growth?).
Regrettably, no. The 25% tax free is based on the pot at the time the pension is first accessed - no additional 25% tax free withdrawals if the pot subsequently increases in value.
Yes, although I think you ought be clear here. The way I understand it is this as an eaxample. If the pot is £200k and you want to draw down £25k the way it works is that the £25k is 25% of £100k. So although you have £175k left, it counts as £75K crystalised and £100k uncrystalised. If the £175k became £350k (keeping the maths simple), you have £150k crystalised and £200k uncrystalised. You then have 25% of the £200k uncrystalised pot available as tax free ie £50k and not £25k of the original pot. Hopefully Golfie will confirm this.
Quick pension question, relating to the 25% tax free.
my wife will be 55 in a couple of years so can access her SIPP (she also has a couple of DB pensions, coming out at 60 & 67 currently but park that for now).
let’s say at that point it’s £200k, she can draw £50k tax free leaving £150k invested.
lets fast forward 5 years after that and say her pot is now £200k again, can she take a further £12.5k tax free (ie 25% of the £50k growth?).
No, she can't. If you take the 25% lump sum at the start that's that, the rest is taxable. If your wife had zero subsequent income she could make a taxable withdrawal of £12,570pa which although taxable, no tax would be payable.
If you do take lesser withdrawals plus 25% tax free you can do that ad infinitum. IE I started withdrawing £12,570 + 25% tax free, total £16,000 odd for a few years.
But last year when the risk of losing the 25% tax free lump sum was mooted, I then withdrew 25% tax free of the total sum.
That’s partly my thought, get the full 25% out as soon as you can!!
Advisers are hauled over the coals by the FCA for advising this strategy unless there is a good reason for it (paying off a mortgage for example). Worse thing you can do (and I've seen clients do it) is to take the 25% lump sum & then just leave it in a deposit account where the interest is taxable. Even citing "Labour might tax it on future / reduce the amount of TFC allowed" is not good enough......I cant give advice on rumour or hearsay.
If you ARE going to take out TFC at least put it somewhere tax efficient. Problem is the main one (ISA) has a meagre £20k annual limit. Next best thing would be an Investment Bond. You cant really look at pensions as you'd probably fall foul of the recycling rules.
Taking the 25% doesn’t stop further payments into pension (DC). At least that’s what I read….. not that a lot goes into her SIPP anyway as a low earner. But let me know if I’ve read that incorrectly!
it won’t be a huge sum (£50k max) and believe me it won’t live in any account for long 😂 she has plans 🙈 wants a place in Lanzarote…..
Until the recent rule change my plan was to leave as much as possible in my SIPP and drain other resources first, that’s changed now thanks to the Chancellor so I’ll be drawing and spending it and leaving the kids the gold and her premium bonds instead 😂
1st world problems I know……
There is a difference between funding a pension via regular premiums and funding it by a lump sum recently acquired by way of the 25% TFC.
The recycling rules are down to HMRC interpretation as (and my memory might let me down here) it all depends on how you have previously funded your pension. If you can show that you have previously contributed lump sums into your pension you may get away with it. If all you've done is paid £300pm for the past 10 years you'll probably not get away with sticking in £20k now as a one off payment.
On a different note (and maybe what you were alluding to) you are not affected by the MPAA (max £10k) if you are only taking TFC. Once you start taking "taxable" income then you are limited to how much you can pay into a pension.
Agreed,
I was thinking more of every month for about the last 8 years my wife has paid £300 into her SIPP (plus the odd extra £1 or £2k every so often). If in a couple of years she is still working but takes her 25% she could continue putting in the £300 a month (or probably even if she wasn't working).
The 25% is a tricky decision but we decided to take our pensions as early as possible, use the 25% to buy property and have guarenteed annuity income before some super rich smart arse in government changes the rules. For example, upping the age for the OAP / changing allowances etc. Wanted our finances in our hands not at the whim of some muppet, get it wrong and it's down to us, so be it.
Quick pension question, relating to the 25% tax free.
my wife will be 55 in a couple of years so can access her SIPP (she also has a couple of DB pensions, coming out at 60 & 67 currently but park that for now).
let’s say at that point it’s £200k, she can draw £50k tax free leaving £150k invested.
lets fast forward 5 years after that and say her pot is now £200k again, can she take a further £12.5k tax free (ie 25% of the £50k growth?).
Regrettably, no. The 25% tax free is based on the pot at the time the pension is first accessed - no additional 25% tax free withdrawals if the pot subsequently increases in value.
Yes, although I think you ought be clear here. The way I understand it is this as an eaxample. If the pot is £200k and you want to draw down £25k the way it works is that the £25k is 25% of £100k. So although you have £175k left, it counts as £75K crystalised and £100k uncrystalised. If the £175k became £350k (keeping the maths simple), you have £150k crystalised and £200k uncrystalised. You then have 25% of the £200k uncrystalised pot available as tax free ie £50k and not £25k of the original pot. Hopefully Golfie will confirm this.
Thanks, between here and a few other places I've pieced it together as thus (I probably also didn't ask quite the right question!):
SIPP Pot (let's use the example of £200k) Take 25% (50k) and the remaining £150k (75%) moves into a crystallised 'section' and no further 25% (even if growth) is claimable - basically what others have said here.
HOWEVER...... were my wife continue to pay into her pension, then that still accrues in an uncrystalised 'pot', contributions and any growth on those - at any point 25% of said pot can be taken tax free (and so the cycle continues). Of course subject to the overall limit of the just over £268k.
This is interesting for me, being able to withdraw 25% and then continue to contribute and take a further 25% on those new contributions and their growth (noted Golfie's comments on recycling). That'll probably suit my wife's pension arrangements (no where near enough to max out the £268k).
The more I think about it, especially with the new IHT rules coming in, I'm getting my 25% out as soon as I hit the age barrier.
Interest rates reduced today from 4.5% to 4.25%. Commentators say that there should be 2 more reductions this year & up to 4 next year. I doubt there will be that many next year but BOE rate should be 3.5% or less by xmas 2026.
And the trade deal announced earlier today between the US & UK has led to US markets tuning around small declines to being almost 1.5% up.
Interest rates reduced today from 4.5% to 4.25%. Commentators say that there should be 2 more reductions this year & up to 4 next year. I doubt there will be that many next year but BOE rate should be 3.5% or less by xmas 2026.
And the trade deal announced earlier today between the US & UK has led to US markets tuning around small declines to being almost 1.5% up.
Good news for my remortgage in December 2026 ;-) if there are 6 between now and end of next year will be sub 3%.
My SIPP is now a fair few % points above where it was before it all came tumbling down with Trump, happy days, although could do with the dollar coming back down a bit. Did quite well on a few shares during the dip, especially Tesco, Greggs and Barclays (my order for Greggs actually sold this morning). Just kicking myself I didn't buy more Alpha group when they were tipped a month ago.
Interest rates reduced today from 4.5% to 4.25%. Commentators say that there should be 2 more reductions this year & up to 4 next year. I doubt there will be that many next year but BOE rate should be 3.5% or less by xmas 2026.
And the trade deal announced earlier today between the US & UK has led to US markets tuning around small declines to being almost 1.5% up.
Good news for my remortgage in December 2026 ;-) if there are 6 between now and end of next year will be sub 3%.
My SIPP is now a fair few % points above where it was before it all came tumbling down with Trump, happy days, although could do with the dollar coming back down a bit. Did quite well on a few shares during the dip, especially Tesco, Greggs and Barclays (my order for Greggs actually sold this morning). Just kicking myself I didn't buy more Alpha group when they were tipped a month ago.
Do you mean that? $ vs £? I want the bloody thing to strengthen back to where it was so i can get rid of more US trash funds. The S&P 500 has recovered nicely but my US funds haven't because they are denominated in £s.
Interest rates reduced today from 4.5% to 4.25%. Commentators say that there should be 2 more reductions this year & up to 4 next year. I doubt there will be that many next year but BOE rate should be 3.5% or less by xmas 2026.
And the trade deal announced earlier today between the US & UK has led to US markets tuning around small declines to being almost 1.5% up.
Good news for my remortgage in December 2026 ;-) if there are 6 between now and end of next year will be sub 3%.
My SIPP is now a fair few % points above where it was before it all came tumbling down with Trump, happy days, although could do with the dollar coming back down a bit. Did quite well on a few shares during the dip, especially Tesco, Greggs and Barclays (my order for Greggs actually sold this morning). Just kicking myself I didn't buy more Alpha group when they were tipped a month ago.
Do you mean that? $ vs £? I want the bloody thing to strengthen back to where it was so i can get rid of more US trash funds. The S&P 500 has recovered nicely but my US funds haven't because they are denominated in £s.
By 'could do with the dollar coming back down a bit' yes the dollar being worth less against the pound. About $1.2-$1.25 would be nice
Interest rates reduced today from 4.5% to 4.25%. Commentators say that there should be 2 more reductions this year & up to 4 next year. I doubt there will be that many next year but BOE rate should be 3.5% or less by xmas 2026.
And the trade deal announced earlier today between the US & UK has led to US markets tuning around small declines to being almost 1.5% up.
Good news for my remortgage in December 2026 ;-) if there are 6 between now and end of next year will be sub 3%.
My SIPP is now a fair few % points above where it was before it all came tumbling down with Trump, happy days, although could do with the dollar coming back down a bit. Did quite well on a few shares during the dip, especially Tesco, Greggs and Barclays (my order for Greggs actually sold this morning). Just kicking myself I didn't buy more Alpha group when they were tipped a month ago.
Do you mean that? $ vs £? I want the bloody thing to strengthen back to where it was so i can get rid of more US trash funds. The S&P 500 has recovered nicely but my US funds haven't because they are denominated in £s.
By 'could do with the dollar coming back down a bit' yes the dollar being worth less against the pound. About $1.2-$1.25 would be nice
But if you hold a fund that holds US stocks, but the fund is priced and dealt in GBP on a UK platform such as H-L, the value of your fund holding in £s is lower if the dollar itself has decreased since you bought the fund, isn't it? I could be wrong, or you want the dollar to decrease for a different reason...
Interest rates reduced today from 4.5% to 4.25%. Commentators say that there should be 2 more reductions this year & up to 4 next year. I doubt there will be that many next year but BOE rate should be 3.5% or less by xmas 2026.
And the trade deal announced earlier today between the US & UK has led to US markets tuning around small declines to being almost 1.5% up.
Good news for my remortgage in December 2026 ;-) if there are 6 between now and end of next year will be sub 3%.
My SIPP is now a fair few % points above where it was before it all came tumbling down with Trump, happy days, although could do with the dollar coming back down a bit. Did quite well on a few shares during the dip, especially Tesco, Greggs and Barclays (my order for Greggs actually sold this morning). Just kicking myself I didn't buy more Alpha group when they were tipped a month ago.
Do you mean that? $ vs £? I want the bloody thing to strengthen back to where it was so i can get rid of more US trash funds. The S&P 500 has recovered nicely but my US funds haven't because they are denominated in £s.
By 'could do with the dollar coming back down a bit' yes the dollar being worth less against the pound. About $1.2-$1.25 would be nice
But if you hold a fund that holds US stocks, but the fund is priced and dealt in GBP on a UK platform such as H-L, the value of your fund holding in £s is lower if the dollar itself has decreased since you bought the fund, isn't it? I could be wrong, or you want the dollar to decrease for a different reason...
The underlying assets in say the Vanguard S&P500 ETF are all dollar shares.
Today lets say those shares are worth $1.32, my pound buys one share (current FX is $1.32 = £1). If in time the share prices remains $1.32 but now the FX is £ = $1.20 my 1 share @$1.32 is now worth more than £1 when I sell it.
If you flipped that the other way and the FX became £1 = $2.64 then my $1.32 share is going to be worth now half, ie £50p.
That's how I've always worked anyway but could be wrong!
Interest rates reduced today from 4.5% to 4.25%. Commentators say that there should be 2 more reductions this year & up to 4 next year. I doubt there will be that many next year but BOE rate should be 3.5% or less by xmas 2026.
And the trade deal announced earlier today between the US & UK has led to US markets tuning around small declines to being almost 1.5% up.
Good news for my remortgage in December 2026 ;-) if there are 6 between now and end of next year will be sub 3%.
My SIPP is now a fair few % points above where it was before it all came tumbling down with Trump, happy days, although could do with the dollar coming back down a bit. Did quite well on a few shares during the dip, especially Tesco, Greggs and Barclays (my order for Greggs actually sold this morning). Just kicking myself I didn't buy more Alpha group when they were tipped a month ago.
Do you mean that? $ vs £? I want the bloody thing to strengthen back to where it was so i can get rid of more US trash funds. The S&P 500 has recovered nicely but my US funds haven't because they are denominated in £s.
By 'could do with the dollar coming back down a bit' yes the dollar being worth less against the pound. About $1.2-$1.25 would be nice
But if you hold a fund that holds US stocks, but the fund is priced and dealt in GBP on a UK platform such as H-L, the value of your fund holding in £s is lower if the dollar itself has decreased since you bought the fund, isn't it? I could be wrong, or you want the dollar to decrease for a different reason...
The underlying assets in say the Vanguard S&P500 ETF are all dollar shares.
Today lets say those shares are worth $1.32, my pound buys one share (current FX is $1.32 = £1). If in time the share prices remains $1.32 but now the FX is £ = $1.20 my 1 share @$1.32 is now worth more than £1 when I sell it.
If you flipped that the other way and the FX became £1 = $2.64 then my $1.32 share is going to be worth now half, ie £50p.
That's how I've always worked anyway but could be wrong!
This is the right answer when it comes to numbers.
The same reason the FTSE surges when the pound weakens against the dollar, they're denominated in pounds but earnings are usually in dollars.
Well my new best friend Claude makes me right ( I’m talking about an S&P500 ETF I bought on Feb 19, on the H-L platform, which is traded jn GBP.) Claude says:
I'll search for the S&P 500 performance and GBP/USD exchange rate movements since February 19, 2025.
Based on my search, I can now provide a more detailed explanation of the factors contributing to your -12% loss on your S&P 500 ETF since February 19, 2025:
**Stock Market Performance Factor (-9%)**
The S&P 500 entered bear territory on an intraday basis, falling as much as 21.35% from its February 19, 2025 high of 6,147.43 to a low of 4,835.04 on April 7, 2025. By the end of April, the S&P 500 had posted three consecutive monthly declines: -1.42% in February, -5.75% in March, and -0.76% in April, resulting in a year-to-date decline of -5.31% through April. Since your purchase date coincides exactly with the market peak on February 19, you would have experienced the full impact of this decline, which accounts for most of your loss.
**Currency Exchange Factor (-3%)**
The GBP/USD exchange rate has strengthened significantly since mid-February, rising from around 1.26-1.27 to as high as 1.3435 USD per GBP by April 28, 2025. Specifically, the exchange rate moved from approximately 1.26 in mid-February to over 1.34 by late April 2025, representing about a 6-7% strengthening of the pound against the dollar.
When the pound strengthens against the dollar, your dollar-denominated assets (S&P 500 stocks) lose value when converted back to pounds. This currency effect would have contributed approximately 3% to your overall loss.
**Combined Effect**
The combined effect of the market decline (-9%) and the currency movement (-3%) explains your total loss of approximately 12%.
This is a classic example of how currency fluctuations can either amplify or mitigate investment returns for international investors. In this case, the strengthening pound magnified your losses from the market decline.
Well my new best friend Claude makes me right ( I’m talking about an S&P500 ETF I bought on Feb 19, on the H-L platform, which is traded jn GBP.) Claude says:
I'll search for the S&P 500 performance and GBP/USD exchange rate movements since February 19, 2025.
Based on my search, I can now provide a more detailed explanation of the factors contributing to your -12% loss on your S&P 500 ETF since February 19, 2025:
**Stock Market Performance Factor (-9%)**
The S&P 500 entered bear territory on an intraday basis, falling as much as 21.35% from its February 19, 2025 high of 6,147.43 to a low of 4,835.04 on April 7, 2025. By the end of April, the S&P 500 had posted three consecutive monthly declines: -1.42% in February, -5.75% in March, and -0.76% in April, resulting in a year-to-date decline of -5.31% through April. Since your purchase date coincides exactly with the market peak on February 19, you would have experienced the full impact of this decline, which accounts for most of your loss.
**Currency Exchange Factor (-3%)**
The GBP/USD exchange rate has strengthened significantly since mid-February, rising from around 1.26-1.27 to as high as 1.3435 USD per GBP by April 28, 2025. Specifically, the exchange rate moved from approximately 1.26 in mid-February to over 1.34 by late April 2025, representing about a 6-7% strengthening of the pound against the dollar.
When the pound strengthens against the dollar, your dollar-denominated assets (S&P 500 stocks) lose value when converted back to pounds. This currency effect would have contributed approximately 3% to your overall loss.
**Combined Effect**
The combined effect of the market decline (-9%) and the currency movement (-3%) explains your total loss of approximately 12%.
This is a classic example of how currency fluctuations can either amplify or mitigate investment returns for international investors. In this case, the strengthening pound magnified your losses from the market decline.
That's exactly what Rob is saying isn't it? That the pound strengthening is bad. The dollar strengthening is good. Having reread your post, I think we are actually all saying the same thing!
Quick pension question, relating to the 25% tax free.
my wife will be 55 in a couple of years so can access her SIPP (she also has a couple of DB pensions, coming out at 60 & 67 currently but park that for now).
let’s say at that point it’s £200k, she can draw £50k tax free leaving £150k invested.
lets fast forward 5 years after that and say her pot is now £200k again, can she take a further £12.5k tax free (ie 25% of the £50k growth?).
Regrettably, no. The 25% tax free is based on the pot at the time the pension is first accessed - no additional 25% tax free withdrawals if the pot subsequently increases in value.
Yes, although I think you ought be clear here. The way I understand it is this as an eaxample. If the pot is £200k and you want to draw down £25k the way it works is that the £25k is 25% of £100k. So although you have £175k left, it counts as £75K crystalised and £100k uncrystalised. If the £175k became £350k (keeping the maths simple), you have £150k crystalised and £200k uncrystalised. You then have 25% of the £200k uncrystalised pot available as tax free ie £50k and not £25k of the original pot. Hopefully Golfie will confirm this.
The more I think about it, especially with the new IHT rules coming in, I'm getting my 25% out as soon as I hit the age barrier.
RE IHT though. It can depend on your health and amount of your wealth of course. If you and your wife have enough and will want to pass some onto your dependants, it may be better to leave in your pot. You can change your "expression of wish" so that an element goes to your children. If you then die before you are 75, as is likely in my case, this element passes tax free to your children. Totally tax free, ie no IHT and no IT. Not suggesting you plan to die before 75 of course!
Quick pension question, relating to the 25% tax free.
my wife will be 55 in a couple of years so can access her SIPP (she also has a couple of DB pensions, coming out at 60 & 67 currently but park that for now).
let’s say at that point it’s £200k, she can draw £50k tax free leaving £150k invested.
lets fast forward 5 years after that and say her pot is now £200k again, can she take a further £12.5k tax free (ie 25% of the £50k growth?).
Regrettably, no. The 25% tax free is based on the pot at the time the pension is first accessed - no additional 25% tax free withdrawals if the pot subsequently increases in value.
Yes, although I think you ought be clear here. The way I understand it is this as an eaxample. If the pot is £200k and you want to draw down £25k the way it works is that the £25k is 25% of £100k. So although you have £175k left, it counts as £75K crystalised and £100k uncrystalised. If the £175k became £350k (keeping the maths simple), you have £150k crystalised and £200k uncrystalised. You then have 25% of the £200k uncrystalised pot available as tax free ie £50k and not £25k of the original pot. Hopefully Golfie will confirm this.
The more I think about it, especially with the new IHT rules coming in, I'm getting my 25% out as soon as I hit the age barrier.
RE IHT though. It can depend on your health and amount of your wealth of course. If you and your wife have enough and will want to pass some onto your dependants, it may be better to leave in your pot. You can change your "expression of wish" so that an element goes to your children. If you then die before you are 75, as is likely in my case, this element passes tax free to your children. Totally tax free, ie no IHT and no IT. Not suggesting you plan to die before 75 of course!
Whilst that is correct today the rules are changing in April 2027 though. From that point unused pension pots will form part of your estate from an IHT perspective.
Edit:
Should probably add, my house alone will exceed my wife and I’s IHT allowances so anything else (and some of the house!) will attract 40% IHT assuming we make another 2 years!
Well my new best friend Claude makes me right ( I’m talking about an S&P500 ETF I bought on Feb 19, on the H-L platform, which is traded jn GBP.) Claude says:
I'll search for the S&P 500 performance and GBP/USD exchange rate movements since February 19, 2025.
Based on my search, I can now provide a more detailed explanation of the factors contributing to your -12% loss on your S&P 500 ETF since February 19, 2025:
**Stock Market Performance Factor (-9%)**
The S&P 500 entered bear territory on an intraday basis, falling as much as 21.35% from its February 19, 2025 high of 6,147.43 to a low of 4,835.04 on April 7, 2025. By the end of April, the S&P 500 had posted three consecutive monthly declines: -1.42% in February, -5.75% in March, and -0.76% in April, resulting in a year-to-date decline of -5.31% through April. Since your purchase date coincides exactly with the market peak on February 19, you would have experienced the full impact of this decline, which accounts for most of your loss.
**Currency Exchange Factor (-3%)**
The GBP/USD exchange rate has strengthened significantly since mid-February, rising from around 1.26-1.27 to as high as 1.3435 USD per GBP by April 28, 2025. Specifically, the exchange rate moved from approximately 1.26 in mid-February to over 1.34 by late April 2025, representing about a 6-7% strengthening of the pound against the dollar.
When the pound strengthens against the dollar, your dollar-denominated assets (S&P 500 stocks) lose value when converted back to pounds. This currency effect would have contributed approximately 3% to your overall loss.
**Combined Effect**
The combined effect of the market decline (-9%) and the currency movement (-3%) explains your total loss of approximately 12%.
This is a classic example of how currency fluctuations can either amplify or mitigate investment returns for international investors. In this case, the strengthening pound magnified your losses from the market decline.
That's exactly what Rob is saying isn't it? That the pound strengthening is bad. The dollar strengthening is good. Having reread your post, I think we are actually all saying the same thing!
Well my new best friend Claude makes me right ( I’m talking about an S&P500 ETF I bought on Feb 19, on the H-L platform, which is traded jn GBP.) Claude says:
I'll search for the S&P 500 performance and GBP/USD exchange rate movements since February 19, 2025.
Based on my search, I can now provide a more detailed explanation of the factors contributing to your -12% loss on your S&P 500 ETF since February 19, 2025:
**Stock Market Performance Factor (-9%)**
The S&P 500 entered bear territory on an intraday basis, falling as much as 21.35% from its February 19, 2025 high of 6,147.43 to a low of 4,835.04 on April 7, 2025. By the end of April, the S&P 500 had posted three consecutive monthly declines: -1.42% in February, -5.75% in March, and -0.76% in April, resulting in a year-to-date decline of -5.31% through April. Since your purchase date coincides exactly with the market peak on February 19, you would have experienced the full impact of this decline, which accounts for most of your loss.
**Currency Exchange Factor (-3%)**
The GBP/USD exchange rate has strengthened significantly since mid-February, rising from around 1.26-1.27 to as high as 1.3435 USD per GBP by April 28, 2025. Specifically, the exchange rate moved from approximately 1.26 in mid-February to over 1.34 by late April 2025, representing about a 6-7% strengthening of the pound against the dollar.
When the pound strengthens against the dollar, your dollar-denominated assets (S&P 500 stocks) lose value when converted back to pounds. This currency effect would have contributed approximately 3% to your overall loss.
**Combined Effect**
The combined effect of the market decline (-9%) and the currency movement (-3%) explains your total loss of approximately 12%.
This is a classic example of how currency fluctuations can either amplify or mitigate investment returns for international investors. In this case, the strengthening pound magnified your losses from the market decline.
That's exactly what Rob is saying isn't it? That the pound strengthening is bad. The dollar strengthening is good. Having reread your post, I think we are actually all saying the same thing!
Yes all saying the same thing!!
I don't think we are. What you wrote was "....although could do with the dollar coming back down a bit." I'm talking about my mistake in buying even a small amount of a US focused but £ denominated ETF in February. My ETF now is about 12% down from then, of which 3% is the result of dollar devaluation since I bought it; and if the dollar goes down more, as you want, it will further devalue my holding there. No?
Well my new best friend Claude makes me right ( I’m talking about an S&P500 ETF I bought on Feb 19, on the H-L platform, which is traded jn GBP.) Claude says:
I'll search for the S&P 500 performance and GBP/USD exchange rate movements since February 19, 2025.
Based on my search, I can now provide a more detailed explanation of the factors contributing to your -12% loss on your S&P 500 ETF since February 19, 2025:
**Stock Market Performance Factor (-9%)**
The S&P 500 entered bear territory on an intraday basis, falling as much as 21.35% from its February 19, 2025 high of 6,147.43 to a low of 4,835.04 on April 7, 2025. By the end of April, the S&P 500 had posted three consecutive monthly declines: -1.42% in February, -5.75% in March, and -0.76% in April, resulting in a year-to-date decline of -5.31% through April. Since your purchase date coincides exactly with the market peak on February 19, you would have experienced the full impact of this decline, which accounts for most of your loss.
**Currency Exchange Factor (-3%)**
The GBP/USD exchange rate has strengthened significantly since mid-February, rising from around 1.26-1.27 to as high as 1.3435 USD per GBP by April 28, 2025. Specifically, the exchange rate moved from approximately 1.26 in mid-February to over 1.34 by late April 2025, representing about a 6-7% strengthening of the pound against the dollar.
When the pound strengthens against the dollar, your dollar-denominated assets (S&P 500 stocks) lose value when converted back to pounds. This currency effect would have contributed approximately 3% to your overall loss.
**Combined Effect**
The combined effect of the market decline (-9%) and the currency movement (-3%) explains your total loss of approximately 12%.
This is a classic example of how currency fluctuations can either amplify or mitigate investment returns for international investors. In this case, the strengthening pound magnified your losses from the market decline.
That's exactly what Rob is saying isn't it? That the pound strengthening is bad. The dollar strengthening is good. Having reread your post, I think we are actually all saying the same thing!
Yes all saying the same thing!!
I don't think we are. What you wrote was "....although could do with the dollar coming back down a bit." I'm talking about my mistake in buying even a small amount of a US focused but £ denominated ETF in February. My ETF now is about 12% down from then, of which 3% is the result of dollar devaluation since I bought it; and if the dollar goes down more, as you want, it will further devalue my holding there. No?
As I said earlier, by ‘coming BACK down a bit’ for me means at the moment it’s $1.32 to the £ I’d rather it was back near $1.20, ie coming back down. I think your ‘goes down more’ you mean the opposite which yes of course if the dollar went to $1.5 to the £ your holding would worsen in £ value..
Conventionally, the dollar going down would be from say $1.20 to $1.32 = £1. 'Weakening' is probably a better term for clarity. You're both agreeing with each other though, which is lovely
Comments
If you take the 25% lump sum at the start that's that, the rest is taxable.
If your wife had zero subsequent income she could make a taxable withdrawal of £12,570pa which although taxable, no tax would be payable.
If you do take lesser withdrawals plus 25% tax free you can do that ad infinitum.
IE I started withdrawing £12,570 + 25% tax free, total £16,000 odd for a few years.
But last year when the risk of losing the 25% tax free lump sum was mooted, I then withdrew 25% tax free of the total sum.
Regrettably, no. The 25% tax free is based on the pot at the time the pension is first accessed - no additional 25% tax free withdrawals if the pot subsequently increases in value.
If you ARE going to take out TFC at least put it somewhere tax efficient. Problem is the main one (ISA) has a meagre £20k annual limit. Next best thing would be an Investment Bond. You cant really look at pensions as you'd probably fall foul of the recycling rules.
it won’t be a huge sum (£50k max) and believe me it won’t live in any account for long 😂 she has plans 🙈 wants a place in Lanzarote…..
Until the recent rule change my plan was to leave as much as possible in my SIPP and drain other resources first, that’s changed now thanks to the Chancellor so I’ll be drawing and spending it and leaving the kids the gold and her premium bonds instead 😂
1st world problems I know……
Hopefully Golfie will confirm this.
You are no doubt correct - I was responding to R7L's question where he mentions taking the full 25% of the pot.
The recycling rules are down to HMRC interpretation as (and my memory might let me down here) it all depends on how you have previously funded your pension. If you can show that you have previously contributed lump sums into your pension you may get away with it. If all you've done is paid £300pm for the past 10 years you'll probably not get away with sticking in £20k now as a one off payment.
On a different note (and maybe what you were alluding to) you are not affected by the MPAA (max £10k) if you are only taking TFC. Once you start taking "taxable" income then you are limited to how much you can pay into a pension.
I was thinking more of every month for about the last 8 years my wife has paid £300 into her SIPP (plus the odd extra £1 or £2k every so often). If in a couple of years she is still working but takes her 25% she could continue putting in the £300 a month (or probably even if she wasn't working).
SIPP Pot (let's use the example of £200k)
Take 25% (50k) and the remaining £150k (75%) moves into a crystallised 'section' and no further 25% (even if growth) is claimable - basically what others have said here.
HOWEVER...... were my wife continue to pay into her pension, then that still accrues in an uncrystalised 'pot', contributions and any growth on those - at any point 25% of said pot can be taken tax free (and so the cycle continues). Of course subject to the overall limit of the just over £268k.
This is interesting for me, being able to withdraw 25% and then continue to contribute and take a further 25% on those new contributions and their growth (noted Golfie's comments on recycling). That'll probably suit my wife's pension arrangements (no where near enough to max out the £268k).
The more I think about it, especially with the new IHT rules coming in, I'm getting my 25% out as soon as I hit the age barrier.
Interest rates reduced today from 4.5% to 4.25%. Commentators say that there should be 2 more reductions this year & up to 4 next year. I doubt there will be that many next year but BOE rate should be 3.5% or less by xmas 2026.
And the trade deal announced earlier today between the US & UK has led to US markets tuning around small declines to being almost 1.5% up.
My SIPP is now a fair few % points above where it was before it all came tumbling down with Trump, happy days, although could do with the dollar coming back down a bit. Did quite well on a few shares during the dip, especially Tesco, Greggs and Barclays (my order for Greggs actually sold this morning). Just kicking myself I didn't buy more Alpha group when they were tipped a month ago.
Today lets say those shares are worth $1.32, my pound buys one share (current FX is $1.32 = £1).
If in time the share prices remains $1.32 but now the FX is £ = $1.20 my 1 share @$1.32 is now worth more than £1 when I sell it.
If you flipped that the other way and the FX became £1 = $2.64 then my $1.32 share is going to be worth now half, ie £50p.
That's how I've always worked anyway but could be wrong!
The same reason the FTSE surges when the pound weakens against the dollar, they're denominated in pounds but earnings are usually in dollars.
Edit:
Should probably add, my house alone will exceed my wife and I’s IHT allowances so anything else (and some of the house!) will attract 40% IHT assuming we make another 2 years!