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

[ShaKen]

Great that we have some experts on here, so here is a question that has been perplexing me that I’d welcome some advice on.

Is LTA tax only payable at the point where the money you’ve withdrawn has gone over the (at that time) LTA limit?

So for example if I withdraw an income from now that in 20yrs then breaches the then in force LTA limit, then at that point (in 20years time) I then have to start paying LTA tax on the income withdrawn with each drawdown payment from then on?

 

[Garfields]

My understanding is its the amount you can pay in and still make use of the tax benefits

 

[Silver-Fox]

No you can't. You can take part of the 25% at a time over several years but the rest is taxable . There are different rules if its a small pension

If my understanding of your question is correct then, sadly, the answer is no.

You can only take 25% of your TOTAL pension pot once.

However, you can take 25% of 'chunks' of your pension, but the remaining 75% is subject to your marginal tax rate when withdrawn.

Thankyou both

That’s answered the question for me.

 

[Deneb]

If my understanding of your question is correct then, sadly, the answer is no.

You can only take 25% of your TOTAL pension pot once.

However, you can take 25% of 'chunks' of your pension, but the remaining 75% is subject to your marginal tax rate when withdrawn.

Pretty much. It is complicated, and before doing anything if you don't fully understand it, you should take professional advice. I am not a professional financial advisor, so cannot give advice.

You can get free advice from the Pensions Advisory Service.

Pensions and retirement | Help with pensions and retirement | MoneyHelper

MoneyHelper has advice on everything related to pensions and retirement. Explore our guidance on types of pensions, building your pension pot, and more.

www.pensionsadvisoryservice.org.uk

I general though, if you wish to withdraw 25% of your entire pension pot in one lump sum, you only have the ability to do it once, you can't split it over two or more withdrawals (per pension; if you have more than one pension, you may be able to take up to 25% from each of them at different times). Once you have taken that sum, all future withdrawals from your pension will be subject to income tax at your marginal rate.

There are also ways to flexibly access your pension, known as flexi-access drawdown and taking uncrystallised pension fund lump sums. So as an alternative to taking the whole 25% in one go, you may be able to opt to take out smaller sums, each of which will consist of 25% tax free, and 75% taxed at your marginal rate of income tax.

It is important to realise that any withdrawal above the single 25% tax free sum, or using flexible access, may severely restrict your ability to make further contributions to that or any other pension scheme, including any that you might have with an employer.

There are different rules for different types of pension, particularly defined benefit schemes, to which none of the above may apply.

So take advice. Don't rely on anything anyone says on a forum (including me).

 

[Rosemary1]

Pretty much. It is complicated, and before doing anything if you don't fully understand it, you should take professional advice. I am not a professional financial advisor, so cannot give advice.

You can get free advice from the Pensions Advisory Service.

Pensions and retirement | Help with pensions and retirement | MoneyHelper

MoneyHelper has advice on everything related to pensions and retirement. Explore our guidance on types of pensions, building your pension pot, and more.

www.pensionsadvisoryservice.org.uk

I general though, if you wish to withdraw 25% of your entire pension pot in one lump sum, you only have the ability to do it once, you can't split it over two or more withdrawals (per pension; if you have more than one pension, you may be able to take up to 25% from each of them at different times). Once you have taken that sum, all future withdrawals from your pension will be subject to income tax at your marginal rate.

There are also ways to flexibly access your pension, known as flexi-access drawdown and taking uncrystallised pension fund lump sums. So as an alternative to taking the whole 25% in one go, you may be able to opt to take out smaller sums, each of which will consist of 25% tax free, and 75% taxed at your marginal rate of income tax.

It is important to realise that any withdrawal above the single 25% tax free sum, or using flexible access, may severely restrict your ability to make further contributions to that or any other pension scheme, including any that you might have with an employer.

There are different rules for different types of pension, particularly defined benefit schemes, to which none of the above may apply.

So take advice. Don't rely on anything anyone says on a forum (including me).

I consulted an advisor and he has set my pension up so that in the future I could each year or month pulldown the amount up to my tax allowance (so tax free) and then take a percentage of my 25% of my pension which is tax free. I would be able to take a fair amount as a “salary” each month without paying any tax.

Thats the theory anyway!

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[Deneb]

I consulted an advisor and he has set my pension up so that in the future I could each year or month pulldown the amount up to my tax allowance (so tax free) and then take a percentage of my 25% of my pension which is tax free. I would be able to take a fair amount as a “salary” each month without paying any tax.

Thats the theory anyway!

So the amount above the 25% is subject to tax at your marginal rate, which in your case is 0% because your entire withdrawal is within your personal tax allowance. Very similar to what I am doing, except that as my income is already above the personal tax allowance I can't avoid being taxed at 20%, but I restrict my withdrawals to avoid being taxed at 40%.

 

[Nasher]

So take advice. Don't rely on anything anyone says on a forum (including me).

Well said - couldn't agree more

 

[Nasher]

I've skimmed this thread with interest, having retired at 54 (I believe you have to wait until you're 55 these days)

When planning for my retirement I was in a final salary scheme (getting very rare these days) I had been in it for 10 years
I did a calculation on the difference between taking a reduced pension early compared to waiting until 65 (it would be 67 these days)

In the case of my pension scheme (others will differ) the age I would reach before I started to lose money is when I'm 83 years old

The fact that I didn't have to pay tax on that pension until my state pension kicked in 12 years later, meant that the real age I will start to lose money on the deal is probably nearer 85 (assuming I live that long - fingers crossed)

But in reality, you can't put a price on the amazing times I've had in retirement.....long may it continue

As advised (correctly & many times) on this thread, get advice from someone who knows what's what

 

[Fragle]

If you don’t achieve your £12500 limit per year then you won’t pay tax on a pension withdrawal. Is that correct?

 

[Catpirate]

Here is a guide,

What is the average UK retirement income? | unbiased.co.uk

Find out the average current UK income from state pension plus private pensions, and how this compares to current average wages.

www.unbiased.co.uk

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[dabhand]

If you don’t achieve your £12500 limit per year then you won’t pay tax on a pension withdrawal. Is that correct?

Excepting lump sums as part of your 25% tax free, if you are going into drawdown you most probably will if you haven’t notified the Pension Provider of your tax code

 

[Al n Val]

You my friend are probably the boat Im in but you are probably businesswise and experience wise 10 year farther down the line than me (Im 53) .
ive got a few houses paid for, my business has gotten to quite a size and Im taking the maximum before silly silly tax kicks in but Im already thinking of planning how to get out, but I like you cant stop working .

At what point did you think hey thats it? and did you just leave your managers too it or do you run it remotley.

I feel Ive only just managed to get this beast(the business) to a secure foot that its almost self generating & still growing even through the pandemic (60 good staff) and I want to go motorhoming all the time now. feels like Im cheating on my wife .
worked damn hard on it for 20 years and just dont know if Im doing it too soon, Ive only took a very good wage the past 8 years, prior to that It was what was available and when.
I dont have the amount in the bank you have but take home 90 a year so is building nicely.

I spose it a question of stay and earn, or jib it and dont is my dilema...do I want my cake and eat it??
what swayed the decision for you two ?

hi
I don’t have managers as I don’t trust anyone else, i’m a one man band and always have been tbh.

The main thing that swayed it was infact I was talking to my accountant in 2018 saying that i’d be getting my OAP and that the money would just go into a bank account and i’d never see it but my kids would.

That same week our son purchased a new motorhome after tugging for years and we went for a look at it, within a week or 2 of looking around, ours was ordered and paid for cash and the government is paying me back albeit on a monthly basis . After 30 months they’ve paid me nearly 20 grand so eventually they’ll have paid me back in full.

Thats how i’m looking at it tbh, so that and the sheer enjoyment of owning it and the great life it’s brought/bringing us is perfect for us and we love it.

Reading other replies to this thread has made me realise I could stop running my business now and live quite well until i’m about 140 years old but I love what I do and made made/met some lovely people along the way so why stop.

As I said i’m tailoring it down so it suits my new/our lifestyle quite a bit, I can work from the motorhome quite easy, I take the laptop and printer so I can keep up with paperwork if needed, answer emails and phone enquires and all in the sunshine. It’s great tbh and I can’t wait to get back at it once this C is behind us.

The only thing I can’t do are personal Home Cinema demonstrations, (now this I really like), whilst we’re away so that’s a price to pay whilst sunning ourselves when abroad, it’s not affected business too much as most will wait until we are back home, those who won’t, well I wish them well and still advise them the best I can, advice is free in my book.

So in essence i’m well sorted I suppose and I should stop worrying about what might happen and get on with enjoying the time I/we have left before I can’t.

Not wanting to preach but if you can do the same then I would no question, we can meet up somewhere and have a bottle or 2 under the awning trying to shade ourselves from the sun, it’s great

Al

 

[Al n Val]

I 'retired' from full time employment 4 years ago (now work 2 days per week). My wife still works full time. We bought our first MH last August. 3 adult children at home . Still looking forward to the adventures.

I hope we get there and get to meet you somewhere along the way.

that’s a plan I’ll hold you to, it’s a fantastic way of life and one i’m certain you’ll take to.

see you soon

Al

 

[bigtwin]

I did a calculation on the difference between taking a reduced pension early compared to waiting until 65 (it would be 67 these days)

I presume that when you are referring to the ages (65 and 67) tgat you are referring to the State Pension ages. The age at which you can draw a works pension is set by the pension scheme and is independent of the State Pension age. Some pension scheme may choose to align the age at which penalty free withdrawals can be taken but I suspect that these would be in a tiny minority.

If you don’t achieve your £12500 limit per year then you won’t pay tax on a pension withdrawal. Is that correct?

You wont pay tax on the amount of a pension withdrawal that makes up the difference between your income (from other sources) and the £12500 personal allowance. Amounts above that value would attract tax at your marginal rate (withdrawals that form part of your 25% tax free amount excepted).

Ian

 

[Fragle]

Has anybody used the unbiased.co.uk website for independent financial advice?

To be perfectly honest I have a bit of a problem with financial advisers and trusting them. Poor advice when I was made redundant at Jaguar cars has put me off them and I now tend to use research and my own judgment. at least if its wrong its my fault. I have used free pensionwise advice and found them helpful

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[Otter Spotter]

You my friend are probably the boat Im in but you are probably businesswise and experience wise 10 year farther down the line than me (Im 53) .
ive got a few houses paid for, my business has gotten to quite a size and Im taking the maximum before silly silly tax kicks in but Im already thinking of planning how to get out, but I like you cant stop working .

At what point did you think hey thats it? and did you just leave your managers too it or do you run it remotley.

I feel Ive only just managed to get this beast(the business) to a secure foot that its almost self generating & still growing even through the pandemic (60 good staff) and I want to go motorhoming all the time now. feels like Im cheating on my wife .
worked damn hard on it for 20 years and just dont know if Im doing it too soon, Ive only took a very good wage the past 8 years, prior to that It was what was available and when.
I dont have the amount in the bank you have but take home 90 a year so is building nicely.

I spose it a question of stay and earn, or jib it and dont is my dilema...do I want my cake and eat it??
what swayed the decision for you two ?

Hope your maxing out on pension contributions to save further tax

 

[Tombola]

hi
I don’t have managers as I don’t trust anyone else, i’m a one man band and always have been tbh.

The main thing that swayed it was infact I was talking to my accountant in 2018 saying that i’d be getting my OAP and that the money would just go into a bank account and i’d never see it but my kids would.

That same week our son purchased a new motorhome after tugging for years and we went for a look at it, within a week or 2 of looking around, ours was ordered and paid for cash and the government is paying me back albeit on a monthly basis . After 30 months they’ve paid me nearly 20 grand so eventually they’ll have paid me back in full.

Thats how i’m looking at it tbh, so that and the sheer enjoyment of owning it and the great life it’s brought/bringing us is perfect for us and we love it.

Reading other replies to this thread has made me realise I could stop running my business now and live quite well until i’m about 140 years old but I love what I do and made made/met some lovely people along the way so why stop.

As I said i’m tailoring it down so it suits my new/our lifestyle quite a bit, I can work from the motorhome quite easy, I take the laptop and printer so I can keep up with paperwork if needed, answer emails and phone enquires and all in the sunshine. It’s great tbh and I can’t wait to get back at it once this C is behind us.

The only thing I can’t do are personal Home Cinema demonstrations, (now this I really like), whilst we’re away so that’s a price to pay whilst sunning ourselves when abroad, it’s not affected business too much as most will wait until we are back home, those who won’t, well I wish them well and still advise them the best I can, advice is free in my book.

So in essence i’m well sorted I suppose and I should stop worrying about what might happen and get on with enjoying the time I/we have left before I can’t.

Not wanting to preach but if you can do the same then I would no question, we can meet up somewhere and have a bottle or 2 under the awning trying to shade ourselves from the sun, it’s great

Al

Well, that sounds like you have certainly done the right thing and you deserve it.
Crack on enjoying yourself and as they say, if you enjoy what you do then you never work a day in your life.

Thanks for the advice.
have fun

 

[Otter Spotter]

Has anybody used the unbiased.co.uk website for independent financial advice?

To be perfectly honest I have a bit of a problem with financial advisers and trusting them. Poor advice when I was made redundant at Jaguar cars has put me off them and I now tend to use research and my own judgment. at least if its wrong its my fault. I have used free pensionwise advice and found them helpful

Be careful, unbiase.co.uk only offer IFA,s that pay them to be on the website.
Can I suggest you search on Google for IFA,s in your area then read their reviews. Then get you information together and see at least 2 IFA,s.
Be aware do not go anywhere near St. James Place advisers they are not independent though they pretend they are and they are expensive and once you take their advice (sic) you cannot get away from them for 5 years.

 

[Otter Spotter]

Pretty much. It is complicated, and before doing anything if you don't fully understand it, you should take professional advice. I am not a professional financial advisor, so cannot give advice.

You can get free advice from the Pensions Advisory Service.

Pensions and retirement | Help with pensions and retirement | MoneyHelper

MoneyHelper has advice on everything related to pensions and retirement. Explore our guidance on types of pensions, building your pension pot, and more.

www.pensionsadvisoryservice.org.uk

I general though, if you wish to withdraw 25% of your entire pension pot in one lump sum, you only have the ability to do it once, you can't split it over two or more withdrawals (per pension; if you have more than one pension, you may be able to take up to 25% from each of them at different times). Once you have taken that sum, all future withdrawals from your pension will be subject to income tax at your marginal rate.

There are also ways to flexibly access your pension, known as flexi-access drawdown and taking uncrystallised pension fund lump sums. So as an alternative to taking the whole 25% in one go, you may be able to opt to take out smaller sums, each of which will consist of 25% tax free, and 75% taxed at your marginal rate of income tax.

It is important to realise that any withdrawal above the single 25% tax free sum, or using flexible access, may severely restrict your ability to make further contributions to that or any other pension scheme, including any that you might have with an employer.

There are different rules for different types of pension, particularly defined benefit schemes, to which none of the above may apply.

So take advice. Don't rely on anything anyone says on a forum (including me).

Pensions AdvidoryService do not provide advice, it’s guidance, they cannot arrange anything or handle the paperwork. Good to talk to them though to get ideas of what you can and cannot do. Stupid name but that’s the Government for you, never call a spade a spade when it could be called a fork

 

[The Wino]

I would ask friends for recommendations for an IFA in just the same way you would for a doctor dentist or builder. I'm sceptical of large websites and large companies I'm sure they list some very good ones but also some not so good.

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[Otter Spotter]

I would ask friends for recommendations for an IFA in just the same way you would for a doctor dentist or builder. I'm sceptical of large websites and large companies I'm sure they list some very good ones but also some not so good.

There

I would ask friends for recommendations for an IFA in just the same way you would for a doctor dentist or builder. I'm sceptical of large websites and large companies I'm sure they list some very good ones but also some not so good.

good idea, Unbiased and Vouchedfor are subscription sites so there will be good advisers and poor ones. The goid ones don’t really need to be on these sites, they have potential clients chasing them. Not pragging but I passed at least 6 new clients a month on to my colleagues as I haven’t needed new clients for 5 years prior to finishing. The major problem for people needing ( maybe not wanting it though) advice is that there are many advisers like me who are retiring early or within the next 5 years, and there are not enough new advisers coming through So those that are left can pick and choose who they work for, so clients with smaller investment/pension pots will struggle to find an adviser worth his salt to work with.

 

[Scotch mist]

I have made up a spreadsheet for rough costs , keeping a house & running vehicles , £30,000 a year clear should be enough for me

I’ve met a British couple (PVC) full timing in France on £8,000 a year

a German family (2+2) living in a ancient MH in France surviving on €150 a month
inc food banks

 

[TheMachMan]

Interesting I think we calculated about £27k doing a similar exercise.
I’m 55 this month and had that number in my head years back as the age I planned to retire. Now it’s crunch time, but with everything locked down I might as well carry on.

 

[Scotch mist]

My spreadsheet needs a tweak as it was done 3 years ago (things have changed)
it shows £21,000 would be enough , £6,000 to keep a house & £15,000 for MH travel , BUT I think £30,000 feels better

 

[mikebeaches]

My spreadsheet needs a tweak as it was done 3 years ago (things have changed)
it shows £21,000 would be enough , £6,000 to keep a house & £15,000 for MH travel , BUT I think £30,000 feels better

You are probably right, because there are always unexpected costs. Some might fall within the contingencies you've included provision for, but others can come right out of the blue and knock your finances off course.

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[Fragle]

I have made up a spreadsheet for rough costs , keeping a house & running vehicles , £30,000 a year clear should be enough for me

I’ve met a British couple (PVC) full timing in France on £8,000 a year

a German family (2+2) living in a ancient MH in France surviving on €150 a month
inc food banks


View attachment 455860

£5196 for sites Wow

 

[Al n Val]

in real world terms i think things will be different from what the figures are telling you, fact is (well in my case lol) when your enjoying yourself that much things quite ofter go a bit haywire and all thoughts of spending and keeping costs down go out the window

 

[AnnK]

Hi, pension wizards, opinions please, my husband and I "retired" in 2019 he is 55, I am 51. He receives his private pension which covers all our expenses, he is going back to work on a temporary contract (this may follow onto a permanent job) probably Feb. My question is, is it worth/allowed to pay into the pension scheme? Many thanks

Ann-Marie
ps I know advice given on a forum is general, however I know there is a vast knowledge base out there

 

[Otter Spotter]

Hi, pension wizards, opinions please, my husband and I "retired" in 2019 he is 55, I am 51. He receives his private pension which covers all our expenses, he is going back to work on a temporary contract (this may follow onto a permanent job) probably Feb. My question is, is it worth/allowed to pay into the pension scheme? Many thanks

Ann-Marie
ps I know advice given on a forum is general, however I know there is a vast knowledge base out there

Yes he can make contributions to a pension scheme, the employer should have a scheme in place to which he will contribute to so daft not to join and have employer payment. The employer may delay for up to 3 months but go for it if he can.
is it worth it, well yes, as even if he only works for a couple of years whatever has accumulated he can take 25% tax free when he wants to and manage the balance of the fund for income later.

 

[Langtoftlad]

Basically when planning for retirement, you'll never anticipate having enough money.

It's a bit of a culture shock once retired to realise that whatever you've got has to last.

It's also a truism that you live up to the level of your income.

And a sad fact of life that as you get older, the less you'll spend on enjoying yourself.

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