CETV - SIPP

[Nimbus1999]

Any pension experts out there?

My ex has £200,000 in a self managed SIPP and has recently liquidated all the investments so there is now just cash, no investments.

He has included the cash value on Form E. Is that right?

I put £200,000 in an investment calculator to invest over 20 years at a low growth rate and it came back with £297,189 after 20 years.

So is it correct to only put £200,000 as the value now?

If there is £200k in the pension fund then yes, that it what he should put.

Yes. And if you got 50% then your share would also go up in value, you can’t have his theoretical rose plus your rise too.

This!

Putting it in cash makes it all simpler to divide he's done you a favour

Ok thanks everyone!

I wouldn’t be getting the pension, it’s more for an offset point of view.

So he keeps X pension and I keep X house.

Couldn’t quite understand if the cash value now is the true value (as obviously it will be invested and worth a lot more at retirement)

It is the true value as of now which is what matters for this purpose. Presumably the house will go up x amount in value too by retirement but you’re using the current value of that?

There will be no house - it is being sold so just cash.

But yes, I get your point.

I just didn’t want to make a mistake agreeing, hence the question to ask an expert!

Was just thinking as I also have a SIPP that I paid £4,000 cash for, but it’s invested so worth £5,000. He is losing out on lots of gains keeping the balance in cash!!

Pension is worth less than cash.

think of this way.

would you rather have 200k tax free cash or £200k in a pension you can’t touch for 20 (?) years and it’s taxable when you withdraw it.

lets say your sipp/pension is valued at £200k. Cash equivalent (to buy someone out) is usually 30-40% less.

it’s a black art and very dependent on lots of things like time to retirement/ tax status etc.

If he has £200k in cash and you have around £300k in a pension I would say you are about even.

Ok just reread that. Are you saying he has £200k “cash” in a sipp?

in that case it’s still locked into a pension. It should not be treated as cash. it’s not like he can go buy a Ferrari tomorrow.

so his £200k and your £300k should be split 50/50. Ie you owe him £50k as pension share or if you give him cash (from the house sale for example) then offer him £30k to leave pensions alone.

Sorry reread again, 😂 not good at this!

I thought you implied you have £300k in pension.

I’ll start again.

if he has £200k in his pension (cash or otherwise) then he will either pension share it. ( you get £100k into your pension) or you agree a figure for cash .
assuming your share is £100k then a fair offer would be £70k cash.

otherwise you could take his £100k cash and put it in your pension and immediately gain tax relief up to 50% ( depending on your tax status). So you would end up with £150k Vs his £100k.

hope that makes sense.

i didn’t realise I got tax relief on it? That’s good news. Just weighing up best options.

Thanks for the advice! And I get what you’re saying about £1 cash not being the same as £1 pension.

Is he old enough to access the Sipp?
If so, I’d be worried that he was planning to take a big wedge due to selling the underlying investments, it doesn’t make sense otherwise.
He will be getting a bit of interest on the cash but not a good ‘savings rate’. Probably somewhere between 1-3%.

If OP got cash and wanted to top up her pension she could only put her earnings in ( gross including tax relief) .
Say she earns £50k, she could put in £40k and it becomes £50k. It’s X amount x 0.8 to work out.

UNLESS she earns over £60k and could use carry over allowances for the excess.

you get £60k pension allowance (used to be £40k) assuming you have not invested any money in last three years you can reclaim that tax allowance i.e. you can put a maximum of £140,000 in this year and claim the tax relief.

This of course will be dependent on your tax status and your earnings over the last three years.

You only get £60k allowance if you earn over £60k, so pension carry over is only for the well off, it’s sickening really.
Everyone should have a pension carry over availability in line with what they earn. They want people to have a pension so they should incentivise it by allowing carry over at whatever level, especially for the self employed.

Will I definitely get tax relief on any divorce amounts transferred into my pension from ex’s? Hasn’t he already received tax relief on the pension payments when he paid in?!

I mean, it would be amazing if I did get tax relief but don’t want to get my hopes up!

Ah right, I think you mean if I use cash to top up my own pension. Thought that sounded too good to be true! There will be a pension sharing order in place.

As a sharing order, It will be transferred into your own pension without relief, that’s what happened with my Sister.

I take it there is no option of you getting the cash by way of getting more of the equity then?

It would give you the added tax relief, even if you had to feed it into your pension over a couple of tax years 😉

I suppose he needs his share of equity just as much as you do though.

We’ve come to an agreement so I’ll take the pension as pension rather than offsetting.

Just stick it in a low cost Global tracker and forget about it for a decade then. Should have at least doubled.