Options for SIPP after age 75

[sharpener]

Background - my 75th birthday was before 5th April so my SIPP was subject to a mandatory Benefit Crystallisation Event. Because of the imputed value of my occupational pensions I was deemed to have exceeded the LTA and a big chunk of tax was forcibly extracted. A pity the abolition of the LTA was not retrospective.

Having also taken the maximum 25% tax free withdrawals I now face the problem of getting at the remaining funds (which are not needed to live off) to eventually pass on in a way which will avoid income tax and inheritance tax. The best plan I can think of has the following components:

1. Without incurring the personal allowance reduction trap, take as much income as I can from the SIPP, which will then attract tax at 40%
2. Offset the tax due by investing the income in VCTs, which will earn income tax relief at 30%
3. Invest 1/3 times as much again into VCTs to offet the remaining tax
4. Sell enough VCTs that I have already held for more than 5 years to fund Step 3.
5. Sell the remainder and re-invest the proceeds in my AIM portfolio so getting BPR after 2 years
6. Repeat in future years.

Are there any rules about re-cycling VCTs?
Will the above plan achieve what I want?
Is there a better way of doing it?

TIA

[strawn]

"to eventually pass on in a way which will avoid income tax and inheritance tax."

Under current laws your SIPP will pass to whomever you have nominated, free of IHT.


Once he/she/it/they starts drawing income it will be subject to income tax.

[sharpener]

Yes, thanks. But both nominees are higher-rate tax payers. And it is probably more useful as a capital sum (e.g. for buying a larger house) than as a source of income. Hence my plan.

Would like to know if there is anything wrong with it before comitting.

[billypiper]

Rolling into VCTs will not cause a tax problem.

However these are risky investments

Dennis

Taxesclear Ltd

07802704840

[sharpener]

Rolling into VCTs will not cause a tax problem.

However these are risky investments

Dennis

Taxesclear Ltd

07802704840

Yes, but they are part of a diversified pfo, the SiPP is mostly in mainstream investment trusts at present. Selling old VCTs and reinvesting to get another 30% tax rebate won't change the risk profile. Re-investing in AiM shares might (though it's not clear whether for the worse or not), however the IHT savings will cover quite a lot of downside so I am thinking it is still probably a worthwhile thing to do.