Can we retire please? How much money do you really need need?

[Bluemanc100]

If you don't need it, it may be better left to grow where it is, but think about your future financial position should you subsequently wish to make withdrawals. I will be a higher rate tax payer once I start receiving my state pension. I don't need any of my private pensions to live on, but I am drawing down as much as I can each year without going into the higher rate bracket, and re-investing it in S&S ISAs to limit future tax liability should I want access to the funds at some future time. If I leave it in the pension, the additional tax on withdrawal will largely negate the benefit of having contributed to it in the first place.

I think I will be too.... I need to read up on ISA's etc as I really don't have the necessary knowledge about them

 

[Cheshirecat57]

Anybody on the forum prepared to offer some free advice? I have circa £100k in private pensions that were frozen in March last year when I took statutory redundancy. I am already receiving a forces pension and my wife has an NHS pension. We also receive rental income from a property to supplement the pensions and live on these funds now.

I am unsure whether to take the private pensions as drawdown or as an annuity.. With no protection or index linking, once I've taken the £25k tax free amount I would receive circa £233 per month on the annuity but I am not sure whether to just draw down an annual amount instead and pay the tax on the element that is over my allowance until my state pension pays out in 10 years time (I am 57).

I am also contemplating selling the property in Chester which we receive rental income on some time between now and state pension age but that will depend on Sue's Lymphoma... if we decide to go mad and take a world tour for example we might sell but at present it's vastly out performing what the capital would make in the bank in terms of rental income.

Any thoughts? I really won't hold it against you...

An IFA but I for one would NEVER buy an annuity since the rules changed
You can do better with the £75000 ( or £100k if you leave the Tax Free sum there)
You can also make the decision to start drawdown today, tomorrow or in 5 years
Annuities are nothing more than a RACKET

 

[Bluemanc100]

An IFA but I for one would NEVER buy an annuity since the rules changed
You can do better with the £75000 ( or £100k if you leave the Tax Free sum there)
You can also make the decision to start drawdown today, tomorrow or in 5 years
Annuities are nothing more than a RACKET

To be honest, we were considering taking the £25k because it's tax free and not because we need it so I'll give that some thought too.... Maybe if I do take it I'll put it straight into Tesla shares or something

 

[Cheshirecat57]

To be honest, we were considering taking the £25k because it's tax free and not because we need it so I'll give that some thought too.... Maybe if I do take it I'll put it straight into Tesla shares or something

Premium Bonds?

 

[MichaelT]

An IFA but I for one would NEVER buy an annuity since the rules changed
You can do better with the £75000 ( or £100k if you leave the Tax Free sum there)
You can also make the decision to start drawdown today, tomorrow or in 5 years
Annuities are nothing more than a RACKET

In the old days when you could get 10% they were not, I would happily take 10% on my small pot, but with todays low returns then not a racket as such just maybe not very good value for most but they may still be good for some people.

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[bigtwin]

To be honest, we were considering taking the £25k because it's tax free and not because we need it so I'll give that some thought too.... Maybe if I do take it I'll put it straight into Tesla shares or something

If you don’t need the £25k, withdrawing it would be a poor decision, from a financial perspective. It will continue to work for you in its current home and, furthermore, will fall outside your estate from an IHT perspective, as does the other £75k.

Ian

 

[Bluemanc100]

Premium Bonds?

Already got close to the maximum for one person.. but might be worth getting some more

 

[Cheshirecat57]

In the old days when you could get 10% they were not, I would happily take 10% on my small pot, but with todays low returns then not a racket as such just maybe not very good value for most but they may still be good for some people.

I cannot see at todays rate an annuity is good for "any" people
£75000 annuity giving £240 a month that dies with you ( maybe tomorrow)
versus a cash pot of £75000- zero risk- that gives £240 a month for 26 years
and leaves the balance to your estate !!

 

[Cheshirecat57]

Already got close to the maximum for one person.. but might be worth getting some more

Jelly and Ice Cream ??
( Sorry being flippant now-- well done for last night BTW)

 

[Camdoon]

Sate pension is north of £13k per couple

There is no way on gods earth i "NEED" £38k a year to enjoy life

If you have that, then very well done

£18282 (£9141 times 2) is the state pension for a couple these days.

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[Bluemanc100]

Jelly and Ice Cream ??
( Sorry being flippant now-- well done for last night BTW)

Good game I thought... it made me feel excited about the rest of the season.. Let’s just say we did it for “The King”.. Mike Summerbee in tears during the minutes silence got me all choked up...

 

[MC 55 FUN]

Sate pension is north of £13k per couple

There is no way on gods earth i "NEED" £38k a year to enjoy life

If you have that, then very well done

Everyone's needs / wants / desires are different.

The current full new state pension is £9,110.40 p.a., over a 20 year retirement, that sum alone represents a '' pot '' worth £182,208.

Not everyone receives the new state pension in full & of course not everyone receives the new state pension, some are in receipt of the basic state pension which I believe is circa £6,981.00 per annum.

A full, new state pension + other pension(s) equating to a gross figure of £25k p.a. are of course taxed @ 20% minimum after the personal allowance is deducted.

So, £25k p/pension + £9k full state pension = £34k annual pre-tax pension income.

- £12.5k personal tax free allowance
=£21.5k taxed income @ 20%
Tax = £4,300 p.a.

Gross pension income £34k - £4.3k tax =£29.7k net income, which is less than the median salary & only circa £11k p.a. more than the minimum wage calculated @ 40 hrs per week . . .

 

[The Wino]

Everyone's needs / wants / desires are different.

The current full new state pension is £9,110.40 p.a., over a 20 year retirement, that sum alone represents a '' pot '' worth £182,208.

Not everyone receives the new state pension in full & of course not everyone receives the new state pension, some are in receipt of the basic state pension which I believe is circa £6,981.00 per annum.

A full, new state pension + other pension(s) equating to a gross figure of £25k p.a. are of course taxed @ 20% minimum after the personal allowance is deducted.

So, £25k p/pension + £9k full state pension = £34k annual pre-tax pension income.

- £12.5k personal tax free allowance
=£21.5k taxed income @ 20%
Tax = £4,300 p.a.

Net income £34k - £4.3k tax =£29.7k which is less than the median salary & only circa £11k p.a. more than the minimum wage calculated @ 40 hrs per week . . .

But disposable income could be quite different for a worker on Min wage with work related expenses a rent or mortgage to pay and a pensioner on slightly more income but none of those expenses.
When we visited our adviser the first question was what do you need to live the lifestyle you want which is a really difficult question. In the end we asked a different question what would our circumstances make reasonable to draw without risking running out. A thing we haven't looked at is do we need the same level amount (adjusted for inflation) as we get older or not..... who knows

 

[Otter Spotter]

If you don't need it, it may be better left to grow where it is, but think about your future financial position should you subsequently wish to make withdrawals. I will be a higher rate tax payer once I start receiving my state pension. I don't need any of my private pensions to live on, but I am drawing down as much as I can each year without going into the higher rate bracket, and re-investing it in S&S ISAs to limit future tax liability should I want access to the funds at some future time. If I leave it in the pension, the additional tax on withdrawal will largely negate the benefit of having contributed to it in the first place.

Are you taking the tax free cash and some from your PP? Do you realise that if you allowed the pension fund to remain in place and grow ( hopefully) then your tax free cash amount will be larger ?
in addition, on death before age 75 your pension fund can be past on free of tax and is not considered as part of your estate for IHT. ISA’s will ultimately increase your taxable estate.

 

[The Wino]

Are you taking the tax free cash and some from your PP? Do you realise that if you allowed the pension fund to remain in place and grow ( hopefully) then your tax free cash amount will be larger ?
in addition, on death before age 75 your pension fund can be past on free of tax and is not considered as part of your estate for IHT. ISA’s will ultimately increase your taxable estate.

Also if you take up some paid work if you start to draw on your pension other than the tax free 25% it will limit pension contributions.
I'm going to contribute an amount equal to all the earnings from my part time job into my pension. It will get topped up so effectively I get a 20%bonus on my tax free income ( I think) and it can then grow in case I need it later. Meanwhile if I die its free from IHT.

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[MC 55 FUN]

But disposable income could be quite different for a worker on Min wage with work related expenses a rent or mortgage to pay and a pensioner on slightly more income but none of those expenses.
When we visited our adviser the first question was what do you need to live the lifestyle you want which is a really difficult question. In the end we asked a different question what would our circumstances make reasonable to draw without risking running out. A thing we haven't looked at is do we need the same level amount (adjusted for inflation) as we get older or not..... who knows

One size does not fit all as previous posts testify, everyone has differing expectations & that's fair enough - each to their own.

 

[Fragle]

Anybody on the forum prepared to offer some free advice? I have circa £100k in private pensions that were frozen in March last year when I took statutory redundancy. I am already receiving a forces pension and my wife has an NHS pension. We also receive rental income from a property to supplement the pensions and live on these funds now.

I am unsure whether to take the private pensions as drawdown or as an annuity.. With no protection or index linking, once I've taken the £25k tax free amount I would receive circa £233 per month on the annuity but I am not sure whether to just draw down an annual amount instead and pay the tax on the element that is over my allowance until my state pension pays out in 10 years time (I am 57).

I am also contemplating selling the property in Chester which we receive rental income on some time between now and state pension age but that will depend on Sue's Lymphoma... if we decide to go mad and take a world tour for example we might sell but at present it's vastly out performing what the capital would make in the bank in terms of rental income.

Any thoughts? I really won't hold it against you...

Excellent to see the thread still going.

Hi Bluemanc.
I'm still looking in to when I retire but what I have discovered through pensionwise etc is that I will definitely go for draw down.
annuity figures do not add up I would need to live past 100 to benefit and as my father and grandfather didn't get past 66 for me its a no.

 

[MC 55 FUN]

Excellent to see the thread still going.

Hi Bluemanc.
I'm still looking in to when I retire but what I have discovered through pensionwise etc is that I will definitely go for draw down.
annuity figures do not add up I would need to live past 100 to benefit and as my father and grandfather didn't get past 66 for me its a no.

Your post is the perfect example of why one size doesn't fit all.

At the time ( February 2014 ) my annuity was 5%, extremely good by todays standards apparently, my 25% tax free lump sum far exceeded all the premiums I'd ever paid into my pension plan, so in effect, I got all my money back aged 55 & every month since then I receive a modest bonus.

This was a p/pension taken out in circa 1980, when pensions were worth paying into.

 

[Kannon Fodda]

It may depend on how your pension was set up, but there is a lot more flexibility than policies 10 or 20 years ago. It can be worth speaking to an IFA simply to move your current pot from an older scheme into a newer one that can create greater versatility.

Generally up to 25% of your pension pot can be taken as a "tax free" lump sum. In modern pensions you don't have to take that all at once, you can do it in portions. So you have a total pot of say £200,000. You now take out £20,000 at 25%, then then remaining 75% or £60,000 becomes ringfenced for future taxable drawdown, annuity, or however. But that still leaves £120,000 for you to come back to in later years and take a further 25% tax free.

You should of course watch that if withdrawing, there is enough remaining in the pot to cover future policy management fees so the remainder can still have some growth. But overall, a good pension fund should be a better investment than you can achieve in many other areas. Despite coronavirus, decimating the economy, somehow I can see one of my plans setup with moderately cautious risk accumulated by 10% over the last year. At that sort of rate I'm leaving the funds in the pension rather than take the lump sum to pay off the mortgage remains.

 

[Deneb]

Are you taking the tax free cash and some from your PP? Do you realise that if you allowed the pension fund to remain in place and grow ( hopefully) then your tax free cash amount will be larger ?
in addition, on death before age 75 your pension fund can be past on free of tax and is not considered as part of your estate for IHT. ISA’s will ultimately increase your taxable estate.

I have already taken the PCLS from the private pension in question, and invested it into the same funds, but within an ISA. I am now taking annual drawdown of amounts that keep me just below my HRT liability, and reinvesting them in the ISA as well.

I have another PP which is staying in place due to the considerations you mention. I also have two defined benefit pensions that I did not commute to take a lump sum, as being relatively young at the time the largest of them commenced, I calculated that it was more beneficial to lock in the inflation linking on a larger annual pension. Also, whilst being in receipt of the first and working a further six years before taking the second, I paid my entire salary into a PP to take advantage of the uplift from tax relief on contributions and mitigate my HRT liability.

Consequently, although being in a fairly happy place of my own making, I ended up relatively heavily invested in pensions, and much less so in other wrappers, but of course our personal pensions are not as large as might be expected for someone with a defined contribution pension who is deriving a similar income. As the IHT allowances currently stand, we can stay within the combined allowance for the surviving partner, and it makes sense to me to take advantage of the uplift that I received on a proportion of my contributions, by withdrawing them whilst they are liable to 20% tax and reinvesting them in a different wrapper, instead of waiting until I would have to pay 40%, wiping out much of the original gain.

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[Otter Spotter]

I have already taken the PCLS from the private pension in question, and invested it into the same funds, but within an ISA. I am now taking annual drawdown of amounts that keep me just below my HRT liability, and reinvesting them in the ISA as well.

I have another PP which is staying in place due to the considerations you mention. I also have two defined benefit pensions that I did not commute to take a lump sum, as being relatively young at the time the largest of them commenced, I calculated that it was more beneficial to lock in the inflation linking on a larger annual pension. Also, whilst being in receipt of the first and working a further six years before taking the second, I paid my entire salary into a PP to take advantage of the uplift from tax relief on contributions and mitigate my HRT liability.

Consequently, although being in a fairly happy place of my own making, I ended up relatively heavily invested in pensions, and much less so in other wrappers, but of course our personal pensions are not as large as might be expected for someone with a defined contribution pension who is deriving a similar income. As the IHT allowances currently stand, we can stay within the combined allowance for the surviving partner, and it makes sense to me to take advantage of the uplift that I received on a proportion of my contributions, by withdrawing them whilst they are liable to 20% tax and reinvesting them in a different wrapper, instead of waiting until I would have to pay 40%, wiping out much of the original gain.

Your on the ball, I was not sure if you had drawn the PCLS, I take it you have thought about reinvesting the £3600 to £4000 gross into PP to build up another PCLS entitlement from any ‘earned’ income if you have any

 

[Deneb]

Your on the ball, I was not sure if you had drawn the PCLS, I take it you have thought about reinvesting the £3600 to £4000 gross into PP to build up another PCLS entitlement from any ‘earned’ income if you have any

Neither of us now have any earned income, and don't regret that for a moment, but I did that whilst I could and made sure that Mrs D did the same. If I have any regrets at all, they are that I fell into the "just one more year" trap despite cautioning myself against it from the outset, and now wish I had retired even sooner; and I'm still having trouble spending rather than saving, but lifelong habits are difficult to change

Edit: Sorry, misread your post. We both contribute £2880 into our PPs each year (£3600 gross) which is allowed independent of earned income. Is that what you mean, or are you referring to the MPAA?

 

[OllyHughes]

Help. We are looking for some real world advice on if we are near or have already reached the point of retirement.
I have 8 years to pension age the better half has 2 years and both of us have had enough of being beholden to work. The better half has a few issues we feel its time to enjoy life.

Ineresting question. The only reference point I have is my own experience. I took early retirement at 60 in 2000, because my body couldn't take any more punishment ( a very Physical job) We had a small amount of saving, my wife had a part time job. We had few fianacial commitments HP, morgage ect. It was a difficult decision at the time, we had always had a steady income to depend on, and I alway enjoyed my work, how would i cope without it? Long story short. We decided to go for it, and as fortune would have it twas a good decision, it gave us 6 years of quality time together, My wife died in 2006 of cancer. You never know whats around the corner, so if you get that kind of oppotunity go for it, enjoy the time you have together, Money helps but it not every thing by a long chalk. Regards. Olly

 

[Deneb]

Sorry for the loss of your wife OllyHughes - the "like" was for your recommendation.

 

[OllyHughes]

Sorry for the loss of your wife @OllyHughes - the "like" was for your recommendation.

No need to be sorry my friend, but thank you. We had a good life together, the best. I wouldn't change a second of it. No one said life would be easy, its just learning whats important and grabbing happiness, its a rare commodity

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[Tony50]

But if you have a sudden drop like we did when the pandemic hit your pot could drop by 30% or more!!

Yes you are right, that's why have stopped drawing on it , but the stock market is getting back up , when the drawdown capital is back up then I will start drawing again , another thing with drawdown you can move your risk up or down I lowered mine as soon as this virus appeared , it's easy as it's all in the Financial Advisors fees , do mo extra charges whether you move risk up or down

 

[Lenny HB]

it's easy as it's all in the Financial Advisors fees , do mo extra charges whether you move risk up or down

We take the risk ourselves win some loose some nice to see Next at £76 we paid 22p for them.

 

[Figaro]

I told my employer this week that I`ll be retiring 31st March when I`ll be 63, woopie.
I still got three years to state pension age but did some figures and we`ll be ok, but not flush.
My thinking was if I worked another three years, we`d just have another few £k`s in the bank, everything else stays the same.
I`d rather have those years doing the things I want to do
Roll on March and by then I hope we can all continue with out travel dreams.

 

[Cheshirecat57]

We take the risk ourselves win some loose some nice to see Next at £76 we paid 22p for them.

Good job you didnt pick Laura Ashley Lenny,

 

[Figaro]

..... or Arcadia

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