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Pension and retirement


Ska Junkie

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What's a reasonable pot to retire early with? Not taking any state pension into account.

Drawdown or annuity etc?

I've got some of both plus an old final salary scheme which guarantees a small lump annuity at 65.

Annuity pensions would give me £7500 pa at 65 and the drawdown one, I can take as much or as little as I want, whenever I want, until the pot is empty although the pot continues to grow post retirement which is handy.

Any thoughts on pensions / retirement as I've just had a projection / review / assessment and its got me thinking about going early, maybe at 60.

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Having had to go through this process myself SJ, I'd look at it from a different angle. 

You need enough money to get you to 65 or 67 (in my case) for the state pension to kick in.  Going from £66pw for me as a full time carer to £165 pw would be akin to winning the pools!

In our case, looking after a disabled wife meant we needed to tap in to my small pensionpot. I have a few years to go until 67.

At 65, you'll be getting £150pw from your annuity plus the extra government pension at 67 bringing it to £300pw approx.....tax free as well (assuming I've understood your thresholds.)

If you can retire now and can pay off mortgages, car loans and become debt free, it helps in becoming stress free as well.

It's what you want out of life.  Retiring early has health benefits and more time to spend with family plus becoming worse at golf...or any other hobby.

No doubt your financial advisor can give you the figures for retiring early. There are also annuity calculators available on providers websites giving you a clue what your pension pot is worth. Taking the lump sum of 25% but deferring your annuity is another way of looking at it. 

Our small pension pot is accessible any time and should you need an urgent withdrawal, the process will take about 3 weeks to get money into your account.

 

A great way to legitimately save tax especially for a large lump sum, and with HMRC's blessing, is to not touch your pension pot until March. I called it Bed and Breakfasting when in the financial business!

Remember, it takes a minimum of 3 weeks of admin to process your withdrawal. Take out the maximum allowable, taxband wise, to come out on 5th April. Then take out the maximum allowable for 6th April as it's a new tax year.  Voila! You'll gain quite a few thousand pounds from not paying higher tax for every 100k. You're simply playing the system and using the end and start of tax years for your benefit. Nothing shady at all. All by waiting 24 hours. 

Then there is the choice of which fund you want to invest your money with your the pension pot. It'll range from minimum risk (most providers have one. The Pru call it the Cautious Fund) to ummmm, maximum risk but maximum potential as well as maximum losses (paper or actual)! The government funded website and phone line Pensionwise, can explain more. The beauty of a pension pot is you are in more control. You can treat it as your own investment and can switch providers as well. 

Shop around for a decent Indie Financial Advisor. I can recommend one in the Bristol area should you need one. There is also BCFC's benefactor/owner who might be able to help...no discount is given though!

Keeping the existing annuity provider is a good guaranteed peace of mind option but you might want to transfer that to a drawdown scheme as well!

Options eh? It's great you can seriously plan with what you have.

For me the no1 question is What Can I Do With My Life If I Retire Now? Look at all the pros and cons. Look at what it will mean to you before retiring just before 5th April 2022. All your financial pension issues will then fall into place.

 

 

 

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14 hours ago, Ska Junkie said:

What's a reasonable pot to retire early with? Not taking any state pension into account.

Drawdown or annuity etc?

I've got some of both plus an old final salary scheme which guarantees a small lump annuity at 65.

Annuity pensions would give me £7500 pa at 65 and the drawdown one, I can take as much or as little as I want, whenever I want, until the pot is empty although the pot continues to grow post retirement which is handy.

Any thoughts on pensions / retirement as I've just had a projection / review / assessment and its got me thinking about going early, maybe at 60.

If it was me I'd take the 25% tax free lump sum and invest it somewhere else (like a stocks/shares ISA or even property) to spread the risk.

Put the rest into drawdown. Annuity rates are terrible.

Retire as soon as you can, plenty of odd jobs going around if you want a few hours casual to top up your weekly cash.

Just imo.

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1 minute ago, cidercity1987 said:

If it was me I'd take the 25% tax free lump sum and invest it somewhere else (like a stocks/shares ISA or even property) to spread the risk.

Put the rest into drawdown. Annuity rates are terrible.

Retire as soon as you can, plenty of odd jobs going around if you want a few hours casual to top up your weekly cash.

Just imo.

Leave the drawdown fund where it is? It's growing at over 8% so it's doing well. Just take the 25% from the annuities.

The part time thing is something I'm seriously looking at TBH.

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2 minutes ago, Ska Junkie said:

Leave the drawdown fund where it is? It's growing at over 8% so it's doing well. Just take the 25% from the annuities.

The part time thing is something I'm seriously looking at TBH.

Yes I would have thought so but I am not a financial nor pensions advisor.

Plan around the tax bands as Norn Iron says. If you don't need more than £12,570 per annum you pay no tax. Or otherwise especially don't take so much that some of it is taxed at 40% above £50,270.

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6 hours ago, BS2 Red said:

It's a hard question to answer as only you know how much is enough for you to have a decent quality of life after retirement.

Taking it early will reduce the annuity you get though. If it's £7500pa at 65, it'll be a fair bit less than that at 60.

That's just the annuity side BS2, I've still got the drawdown fund as well, plus a few quid saved up.

 

20 minutes ago, Norn Iron said:

Having had to go through this process myself SJ, I'd look at it from a different angle. 

You need enough money to get you to 65 or 67 (in my case) for the state pension to kick in.  Going from £66pw for me as a full time carer to £165 pw would be akin to winning the pools!

In our case, looking after a disabled wife meant we needed to tap in to my small pensionpot. I have a few years to go until 67.

At 65, you'll be getting £150pw from your annuity plus the extra government pension at 67 bringing it to £300pw approx.....tax free as well (assuming I've understood your thresholds.)

If you can retire now and can pay off mortgages, car loans and become debt free, it helps in becoming stress free as well.

It's what you want out of life.  Retiring early has health benefits and more time to spend with family plus becoming worse at golf...or any other hobby.

No doubt your financial advisor can give you the figures for retiring early. There are also annuity calculators available on providers websites giving you a clue what your pension pot is worth. Taking the lump sum of 25% but deferring your annuity is another way of looking at it. 

Our small pension pot is accessible any time and should you need an urgent withdrawal, the process will take about 3 weeks to get money into your account.

 

A great way to legitimately save tax especially for a large lump sum, and with HMRC's blessing, is to not touch your pension pot until March. I called it Bed and Breakfasting when in the financial business!

Remember, it takes a minimum of 3 weeks of admin to process your withdrawal. Take out the maximum allowable, taxband wise, to come out on 5th April. Then take out the maximum allowable for 6th April as it's a new tax year.  Voila! You'll gain quite a few thousand pounds from not paying higher tax for every 100k. You're simply playing the system and using the end and start of tax years for your benefit. Nothing shady at all. All by waiting 24 hours. 

Then there is the choice of which fund you want to invest your money with your the pension pot. It'll range from minimum risk (most providers have one. The Pru call it the Cautious Fund) to ummmm, maximum risk but maximum potential as well as maximum losses (paper or actual)! The government funded website and phone line Pensionwise, can explain more. The beauty of a pension pot is you are in more control. You can treat it as your own investment and can switch providers as well. 

Shop around for a decent Indie Financial Advisor. I can recommend one in the Bristol area should you need one. There is also BCFC's benefactor/owner who might be able to help...no discount is given though!

Keeping the existing annuity provider is a good guaranteed peace of mind option but you might want to transfer that to a drawdown scheme as well!

Options eh? It's great you can seriously plan with what you have.

For me the no1 question is What Can I Do With My Life If I Retire Now? Look at all the pros and cons. Look at what it will mean to you before retiring just before 5th April 2022. All your financial pension issues will then fall into place.

 

 

 

Great post NI. The annuity pot is by some way, the smaller of the 2, the larger one being the drawdown pot.

I'm leaning towards doing a few extra years and going at 60, possibly incorporating a small part time job id I feel it's necessary. Hopefully, given how the drawdown is performing (in the Aegon fund), I can just pack in althogether.

It's a right minefield to those of us not in finance, hence my query.

 

5 minutes ago, TMWANG50 said:

Have you paid off your mortgage? as that would be most peoples biggest ougoing, I'm retiring as soon as the kids move out and the mortgage is paid off :laugh:

I have mate, thankfully.

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It’s worth getting some proper advice, I did have an overview of mine several years ago and it was interesting, the advice was to take max lump sums, take the final salary schemes and put the others into drawdown.  It was suggested that you aim to spend most of the pot by age 80, as after that most peoples spending greatly reduces and you should enjoy it while you can.

Trouble is I like having money to spend, so still toiling away……

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I have a couple of Final salary pensions, and a few people i know have been offered very high CETV's - someone was offered 33 x their final salary as a lump sum (A rule of thumb is 20x) He put that into a drawdown. You can request CETV's annually. 

With pensions its good to have a mixed portfolio and take advice from multiple sources. The "issue" i have is i want to stop when im 58/59. My pension should be decent enough at retirement age, its that 8/9 year gap between i now need to focus on.

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Advising people on this was my job for a good few years, and I’ve been ‘living’ this question since I retired five years ago.

A few thoughts.

To feel fairly confident that an invested fund like drawdown will generate a given level of income for the rest of your life (with increases to offset inflation) I’d suggest looking to draw no more than about 4% a year from the pot. It might not sound a lot, but a combination of taking more and a couple of bad years of investment returns can quickly put a big hole in a fund’s buying power.

Even at that level, there's no guarantee the fund will perform well enough to maintain your income (although it could do better, of course). Having some guaranteed income (annuity, State Pension) massively reduces the risks of you ending up with insufficient income in future.

Make sure you’ve got a decent amount in cash (either in the bank or within your drawdown fund) so that you’re never forced to sell investments. Having to sell investments when prices are down is one of the surest ways of demolishing your long-term savings. As well as enough for emergencies and any lump sums you can anticipate (next car, house maintenance/improvement) it’s worth having a year or two’s income in reserve. I try to keep myself in a position where if I had to I could fund between two and three years' income without having to sell investments. That doesn't mean a whole 2-3 years income is in cash, as the investments in my drawdown and ISAs pay dividends of between 3 and 4%, so I only have to keep the shortfall as cash.  I actively top up the cash in my drawdown by selling units whenever markets are high, so that I can sit tight during the inevitable bad times. Obviously not everyone wants to be that ‘hands on’.

As others have mentioned, you can take account of other income that will kick in, so that you don’t need a fund  big enough to support your total income forever. So, let’s say you need £24,000 a year, but you’ll get £7,500 from your annuity at 65 and £8,500 a year from the State at 67: at 60 you need a fund big enough to pay you £24,000 a year until 65, then £16,500 for two years then £8,000 a year indefinitely after that. The calculations can get a bit involved (particularly when you take account of any tax on the withdrawals), but hopefully that makes sense.

Don’t underestimate the effects of inflation over the medium term (you could easily be retired for 20 years plus; even 2% a year inflation can put a big hole in your real income over that timescale). This is often particularly relevant for annuities, where most people choose an annuity that will never increase. In your case, if you opt for drawdown the annuity will be a fairly small proportion of the total once your State pension kicks in, so it may be less of a factor for you.

It’s often worth taking the 25% lump sum. Even if you think of it as part of your retirement pot, you can invest it back into similar funds in things like ISAs, where you’ll then be able to take money out tax-free, whereas you’d have to pay Income Tax to take it out of your drawdown. And if you don’t take the lump sum when you move a pension fund into drawdown, you can’t do so later.

Have you worked out how much money you’ll actually need in retirement? Perhaps surprisingly, people often struggle to answer this question - but obviously it’s crucial, and, if you haven’t already, it’s worth  sitting down with a bit of paper or a spreadsheet and working out what you’ll have to spend and what you'd like to spend once you’re  not earning.

With my work history I would say this, but…this really is one of the times when it might be worth paying a fee to get a bit of advice. Making the most of your investments, pensions, tax allowances etc for what you specifically need to achieve can be quite complex. I really think advice can pay for itself at times like this, even if it’s just a one-off to make sure you set off on the right track.

Finally, on a non-financial point, have you thought about what you will do with your time once you retire? In my experience some people don’t think beyond “I won’t have to work any more - hurrah” and can then struggle to enjoy retirement because they don’t have any firm plans of how to use all their spare time. Doesn’t matter what they are, but it’s great to have an idea of what things you will do to fill your time enjoyably.

Hope this rather lengthy response is helpful. Good luck with the decision making - and I hope that if you do decide to retire early you enjoy it as much as I have so far!

 

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And finally Esther (for the oldies), if you have any child tax credits etc...this amount will be included as taxable income. Many a person thinks that they can retire early, forgetting that HMRC will ask/demand all of the credits back for that tax year! Some benefits are also classed as Taxable Income. Carer's allowance for instance. Bah humbug. My £66pw would eat into the 0 tax rate of the first £12,570 Cider City mentioned.

Not all doom and gloom though.... with 6 weeks to go before your 60th birthday, you can apply for your free travel card on the  train and bus here in Norn Iron. We also get free water rates because we have a lot of it. If it doesn't rain after 3 days, drought conditions apply. Therefore, moving here becomes an option as well! Oh yes, house prices are the cheapest in the UK. A standard Totterdown dwelling could buy you a detached house with garage! Mind you despite Easyjet flying to Bristol, they don't fly back Saturday nights anymore. You would need accommodation! Maybe not moving is not an option after all.

BTW, It's great to see such positive responses from City fans to your initial post. 

 

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1 hour ago, lager loud said:

Finally, on a non-financial point, have you thought about what you will do with your time once you retire? In my experience some people don’t think beyond “I won’t have to work any more - hurrah” and can then struggle to enjoy retirement because they don’t have any firm plans of how to use all their spare time. Doesn’t matter what they are, but it’s great to have an idea of what things you will do to fill your time enjoyably.

Hope this rather lengthy response is helpful. Good luck with the decision making - and I hope that if you do decide to retire early you enjoy it as much as I have so far!

 

This is a really good point.

I always planned to retire as early as possible, but when the reality of the situation hit home - i started to realise that a slow descent into retirement would be a better route.

So working a 4 day week for a while, then 3, then look to give it up. (I will add i run my own company, so have the luxury of that choice) that period of 'ramp down' would let me settle into a different routine and get used to having more time.

Getting my head around what retirment actually meant put me out of kilter for a good year or so, i've always worked for myself, so always had that background worry about keeping going, but ironically when faced with that chance to stop, i re evaluated just what my work meant in terms of keeping me going.

 

(and definately pay for some advice - it seems painful to have to cough up, but it makes your decision making much clearer. a good advisor will map out excatly what your options are and how they change over a projected retirment timeline.)

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Anyone can ask their current employer if they can go part time. Instead of retiring and then looking for a part time job, just do less with your current job.

Ive just done it to see how it goes, I’m 10 years from getting my pension but mortgage and debt free so working 3 days a week feels like a good work- leisure ballance. 
So far so good but already I’m thinking in the winter I’ll be pleased to have those 3 days at work, not just financially but to keep busy when the golf course is closed and it’s too cold, wet and rough for kayaking or fishing

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On 19/08/2021 at 18:57, Midred said:

What you've got to be aware of as well is that your state pension is pushed to the front as far as HMRC are concerned leaving the majority of your "works pension" and any other investments in line as taxable income.

Well yes, the state pension is treated as part of your tax-free allowance, but that’s just an administrative convenience.  I’ve found HMRC to be very efficient since I took early retirement a couple of years ago.  

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@Ska Junkie thanks for starting this. I am in a similar position (and I suspect age) and had been thinking of starting a thread but like many things never got around to it!

Thanks to others also for the good advice. I'm thinking of reducing days next year to see what I do with the spare time (particularly in winter) with the aim of finishing the year after. If I find I am at a loose end too much I will consider carrying on at reduced days for a few more years. 

One query on the following comment:

On 19/08/2021 at 14:57, lager loud said:

It’s often worth taking the 25% lump sum. Even if you think of it as part of your retirement pot, you can invest it back into similar funds in things like ISAs, where you’ll then be able to take money out tax-free, whereas you’d have to pay Income Tax to take it out of your drawdown. And if you don’t take the lump sum when you move a pension fund into drawdown, you can’t do so later.

I thought that if you did not take the 25% as an initial lump sum then you instead got 25% tax free allowance on the subsequent annual amounts taken from a drawdown ?

 

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15 minutes ago, Reigate Red said:

@Ska Junkie thanks for starting this. I am in a similar position (and I suspect age) and had been thinking of starting a thread but like many things never got around to it!

Thanks to others also for the good advice. I'm thinking of reducing days next year to see what I do with the spare time (particularly in winter) with the aim of finishing the year after. If I find I am at a loose end too much I will consider carrying on at reduced days for a few more years. 

One query on the following comment:

I thought that if you did not take the 25% as an initial lump sum then you instead got 25% tax free allowance on the subsequent annual amounts taken from a drawdown ?

 

Not quite as I understand it RR. If you take the 25% tax free, any return on that 25% when invested is also tax free. I stand to be corrected though.

I'm an engineer not a financial wizard so others' opinions, apart from my advisor is always welcome. The way I see it, my advisor would like to protect my fund and keep that as high as possible as they make their money from a % of that fund so is his advice in my interests or his employers? 

It's a right minefield isn't it.

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3 minutes ago, Reigate Red said:

@Ska Junkie thanks for starting this. I am in a similar position (and I suspect age) and had been thinking of starting a thread but like many things never got around to it!

Thanks to others also for the good advice. I'm thinking of reducing days next year to see what I do with the spare time (particularly in winter) with the aim of finishing the year after. If I find I am at a loose end too much I will consider carrying on at reduced days for a few more years. 

One query on the following comment:

I thought that if you did not take the 25% as an initial lump sum then you instead got 25% tax free allowance on the subsequent annual amounts taken from a drawdown ?

 

You’re right: there is a way to use your pension fund like that. Essentially you are entitled to take a 25% lump sum whenever you move money from the “pre-retirement” to the “in retirement” state (“crystallising” funds, to use the jargon). 

You don’t have to crystallise all your fund at once. The option you are describing generally involves crystallising just enough each year to cover that year’s income - with the 25% lump sum being released at that time (and often treated as a bit of tax-free income). The rest of the fund remains “uncrystallised”, in its pre-retirement state, so the 25% entitlement will still be there whenever you decide to access that part of the fund.

But if you were to crystallise some (or all) of your fund without taking the lump sum - creating a drawdown pot from which you could withdraw income whenever you wanted - then you wouldn’t be able to take the 25% lump sum from that bit later. 


https://thepeoplespension.co.uk/compare-retirement-options/a-bit-at-a-time/

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On 19/08/2021 at 13:22, Norn Iron said:

Having had to go through this process myself SJ, I'd look at it from a different angle. 

You need enough money to get you to 65 or 67 (in my case) for the state pension to kick in.  Going from £66pw for me as a full time carer to £165 pw would be akin to winning the pools!

In our case, looking after a disabled wife meant we needed to tap in to my small pensionpot. I have a few years to go until 67.

At 65, you'll be getting £150pw from your annuity plus the extra government pension at 67 bringing it to £300pw approx.....tax free as well (assuming I've understood your thresholds.)

If you can retire now and can pay off mortgages, car loans and become debt free, it helps in becoming stress free as well.

It's what you want out of life.  Retiring early has health benefits and more time to spend with family plus becoming worse at golf...or any other hobby.

No doubt your financial advisor can give you the figures for retiring early. There are also annuity calculators available on providers websites giving you a clue what your pension pot is worth. Taking the lump sum of 25% but deferring your annuity is another way of looking at it. 

Our small pension pot is accessible any time and should you need an urgent withdrawal, the process will take about 3 weeks to get money into your account.

 

A great way to legitimately save tax especially for a large lump sum, and with HMRC's blessing, is to not touch your pension pot until March. I called it Bed and Breakfasting when in the financial business!

Remember, it takes a minimum of 3 weeks of admin to process your withdrawal. Take out the maximum allowable, taxband wise, to come out on 5th April. Then take out the maximum allowable for 6th April as it's a new tax year.  Voila! You'll gain quite a few thousand pounds from not paying higher tax for every 100k. You're simply playing the system and using the end and start of tax years for your benefit. Nothing shady at all. All by waiting 24 hours. 

Then there is the choice of which fund you want to invest your money with your the pension pot. It'll range from minimum risk (most providers have one. The Pru call it the Cautious Fund) to ummmm, maximum risk but maximum potential as well as maximum losses (paper or actual)! The government funded website and phone line Pensionwise, can explain more. The beauty of a pension pot is you are in more control. You can treat it as your own investment and can switch providers as well. 

Shop around for a decent Indie Financial Advisor. I can recommend one in the Bristol area should you need one. There is also BCFC's benefactor/owner who might be able to help...no discount is given though!

Keeping the existing annuity provider is a good guaranteed peace of mind option but you might want to transfer that to a drawdown scheme as well!

Options eh? It's great you can seriously plan with what you have.

For me the no1 question is What Can I Do With My Life If I Retire Now? Look at all the pros and cons. Look at what it will mean to you before retiring just before 5th April 2022. All your financial pension issues will then fall into place.

 

 

 

Just catching up on this NI.

Saying to just take the return on any drawdown pot confuses me a bit as isn't that pot supposed to fund you for your retirement? Given the fund still grows (or shrinks) post retirement, would taking a fixed amount each year, slightly above the 4% average, therefore taking some of the pot annually, not be sensible? I've done a projection in excel for this and it would leave me with a pot of approx £100K at 90 but giving my wife and myself a very comfortable retirement.

This is where I get confused TBH.

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3 minutes ago, lager loud said:

You’re right: there is a way to use your pension fund like that. Essentially you are entitled to take a 25% lump sum whenever you move money from the “pre-retirement” to the “in retirement” state (“crystallising” funds, to use the jargon). 

You don’t have to crystallise all your fund at once. The option you are describing generally involves crystallising just enough each year to cover that year’s income - with the 25% lump sum being released at that time (and often treated as a bit of tax-free income). The rest of the fund remains “uncrystallised”, in its pre-retirement state, so the 25% entitlement will still be there whenever you decide to access that part of the fund.

But if you were to crystallise some (or all) of your fund without taking the lump sum - creating a drawdown pot from which you could withdraw income whenever you wanted - then you wouldn’t be able to take the 25% lump sum from that bit later. 


https://thepeoplespension.co.uk/compare-retirement-options/a-bit-at-a-time/

I'm not sure what 'crytalise' means ll but ae you saying I couldn't take 25% tax free if I don't take up the option at 55?

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6 minutes ago, Ska Junkie said:

Not quite as I understand it RR. If you take the 25% tax free, any return on that 25% when invested is also tax free. I stand to be corrected though.

Not necessarily or as of right. So it depends what you do with it. But with the right planning you can avoid tax on a lot of invested money, and if you’re not using your various investment tax allowances already (ISA, Capital Gains Tax, dividend allowance, for example) then you may well be able to avoid paying tax when you invest your lump sum.

It's a right minefield isn't it. It can be.

 

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1 minute ago, lager loud said:

 

Another thing I was hoping to utilise is the shared tax burden where any unused tax allowance from my wife's' income could be used by me but I've been advised this is stopping. Is that correct? I was hoping to have a joint income with £25K tax free?

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4 minutes ago, Ska Junkie said:

I'm not sure what 'crytalise' means ll but ae you saying I couldn't take 25% tax free if I don't take up the option at 55?

No, not saying that.

You can leave the fund untouched for as long as you like and the lump sum option will be there for you when you do ‘break into’ your pot. (Actually there are some rule changes at age 75 but you don’t need to worry about those ATM. And of course, the rules could always be changed, although taking away the tax-free lump sum would not be a vote-winner!)

As things stand, you’ll need to make a decision about whether to take the lump sum whenever you decide to access your fund (or part of it). If, at that time, you decided not to take the lump sum you couldn’t have it later on that part of your fund. But if you didn’t use all your fund at once, for whatever reason, the lump sum option would still be there for the rest of the pot.

Hope that makes sense. I’m not sure ‘keeping things simple’ was ever my strong suit as an adviser!

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1 minute ago, lager loud said:

No, not saying that.

You can leave the fund untouched for as long as you like and the lump sum option will be there for you when you do ‘break into’ your pot. (Actually there are some rule changes at age 75 but you don’t need to worry about those ATM. And of course, the rules could always be changed, although taking away the tax-free lump sum would not be a vote-winner!)

As things stand, you’ll need to make a decision about whether to take the lump sum whenever you decide to access your fund (or part of it). If, at that time, you decided not to take the lump sum you couldn’t have it later on that part of your fund. But if you didn’t use all your fund at once, for whatever reason, the lump sum option would still be there for the rest of the pot.

Hope that makes sense. I’m not sure ‘keeping things simple’ was ever my strong suit as an adviser!

Thanks ll, I get it now. 

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13 minutes ago, Ska Junkie said:

Another thing I was hoping to utilise is the shared tax burden where any unused tax allowance from my wife's' income could be used by me but I've been advised this is stopping. Is that correct? I was hoping to have a joint income with £25K tax free?

I’m not a tax expert but I’m not aware it’s ever been possible to claim the whole of a spouse’s Personal Allowance - at least not in the last 30 years or so.

In the right circumstances your wife could transfer 10% of her Income Tax Allowance to you, giving you an extra £1,250 or so before you start paying tax. I’ve not heard that this is being removed, and will be disappointed if it is, as my wife and I take advantage of it!

Of course you can always try to make sure your wife uses her own tax allowances by investing more of your joint money (including your lump sum) in her name, as long as your circumstances allow (doesn’t always work in ‘blended’ families).

 

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2 minutes ago, Ska Junkie said:

Thanks ll, I get it now. 

Great SJ!

Would you like me to respond to your response of 17 mins ago?

I think Lager has explained it really well. What I am also trying to say is that when you take into account what can be coming to you at 67 means less money to take out of your pension pot. This means your Pension Pot should still grow far better than having it in a building society account!  You can dip into the Pension pot at any time so you're not handcuffed.

If it was me....I would take my TFLS (tax free lump sum) of 25% from your Pension Pot which plus max allowable of your annual tax free allowance ( the £12570 before you then pay tax on all incomes etc) and I would do this on the 5th April (remember it takes at least 3 weeks admin so start process 1st March. Your provider will advise). I would then take out the maximum annual tax free allowance for new tax year starting 6th April (see what I call Bed and Breakfasting in original post). 

If you think that your total amount of TFLS plus 2 lots of tax free allowances within that 24 hours is enough for pleasure and bills plus a one off treat...brilliant.

I would use the annuity as my back stop to pay normal utility bills, maintenance etc for future years. Remember, if you defer the annuity for even a year before you take it, you will get an increase in that payment to you.

It boils down to what you really want to do with your life.

What are your needs? Will they be covered (bills, more bills, food, insurances, keeping car on the road etc)

What are your wants? (Decent food and wine on your table, plus beer, holidays, season ticket and away trips with BCFC, going out for decent meals, buying Ska albums)

What are your ambitions and dreams? (To go to Jamaica. Travel around Europe. Buy out Steve Lansdown and become the new City owner)?

When you have finalised how you see Mrs SJ and your good self in retirement, then you can plan how to fund it. 

I think you're in a great position to do some of the above now or at 60.  It's a question of cutting your cloth accordingly and maybe going without some of the wants and dreams but to retire far exceeds those you can't do.....in my opinion. 

Your indie financial advisor will ask all the above questions and then submit it in writing ie to show how you plan for the future. It would be a thorough investigation as well.  

I think you'll be pleasantly surprised that you can retire ASAP....should you wish.

 

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26 minutes ago, Norn Iron said:

Great SJ!

Would you like me to respond to your response of 17 mins ago?

I think Lager has explained it really well. What I am also trying to say is that when you take into account what can be coming to you at 67 means less money to take out of your pension pot. This means your Pension Pot should still grow far better than having it in a building society account!  You can dip into the Pension pot at any time so you're not handcuffed.

If it was me....I would take my TFLS (tax free lump sum) of 25% from your Pension Pot which plus max allowable of your annual tax free allowance ( the £12570 before you then pay tax on all incomes etc) and I would do this on the 5th April (remember it takes at least 3 weeks admin so start process 1st March. Your provider will advise). I would then take out the maximum annual tax free allowance for new tax year starting 6th April (see what I call Bed and Breakfasting in original post). 

If you think that your total amount of TFLS plus 2 lots of tax free allowances within that 24 hours is enough for pleasure and bills plus a one off treat...brilliant.

I would use the annuity as my back stop to pay normal utility bills, maintenance etc for future years. Remember, if you defer the annuity for even a year before you take it, you will get an increase in that payment to you.

It boils down to what you really want to do with your life.

What are your needs? Will they be covered (bills, more bills, food, insurances, keeping car on the road etc)

What are your wants? (Decent food and wine on your table, plus beer, holidays, season ticket and away trips with BCFC, going out for decent meals, buying Ska albums)

What are your ambitions and dreams? (To go to Jamaica. Travel around Europe. Buy out Steve Lansdown and become the new City owner)?

When you have finalised how you see Mrs SJ and your good self in retirement, then you can plan how to fund it. 

I think you're in a great position to do some of the above now or at 60.  It's a question of cutting your cloth accordingly and maybe going without some of the wants and dreams but to retire far exceeds those you can't do.....in my opinion. 

Your indie financial advisor will ask all the above questions and then submit it in writing ie to show how you plan for the future. It would be a thorough investigation as well.  

I think you'll be pleasantly surprised that you can retire ASAP....should you wish.

 

Quite ironic, we're going to Jamaica in June. :)

Thanks NI, I really appreciate your input.

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I was told that I needed a pension pot of £250,000 in order to retire at 62 and live in the manner to which I have become accustomed.

I was then told (by the same advisor at a later date) that I needed to take the maximum lump sum out when the time was right (e.g. 62) from my work superannuation scheme which would leave me short of the £24,000 a year that I would need to be taking out prior to my 67th birthday.  I'm confused...

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