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

Hi Minxy

I am over 55, and the pension pot is only £3k which is what should have been my contracted out pension pot.
However, I know I can cashbout the whole pot, if its under £12k.

I have used my ISA allowance this year.
I have another £3.5k available to save.
So, I am wondering if i can add to the existing pot, get the 20% uplift. No employer contributions available on this amount, and then transfer the lot into the ISA in April.

Then it won't impact on the 25% tax free limit, or have to be taxed, when I withdraw it, at retirement.

Or do I just hold it in a general account until April. as i am unlikely to be able to save the full 20k this year from earnings.

It is do complicated.
 
The Wino said:
But you could draw 25% of your pot put it in an isa and if it acheives the the same rate of growth take it tax free whenever you want unless you're already at the isa limit you can also take part of your 25% and the rest later.
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But there’s no net benefit of doing that, is there?

The 25% from the pension is, effectively, the same as using tax paid funds saved elsewhere. Yes, you’d be able to take any ISA growth on those funds tax free.

However, had you left those funds in the pension they’d grow at the same rate as in the ISA (assuming you made the same investment choices) and would still be availabe for tax free withdrawal.

Ian

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bigtwin said:
But there’s no net benefit of doing that, is there?

The 25% from the pension is, effectively, the same as using tax paid funds saved elsewhere. Yes, you’d be able to take any ISA growth on those funds tax free.

However, had you left those funds in the pension they’d grow at the same rate as in the ISA (assuming you made the same investment choices) and would still be availabe for tax free withdrawal.

Ian
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Theres no tax advantage but it might be easier to access especially if you want it in bits. The advantage if you're well enough off of leaving it in the pension is inheritance tax.
 
I am sorry there is so many posts I can't read them all but the best thoughts I have on this and it applies to most trying to do as many travels as possible in their vans you are living in a different place not on holiday and your money will go a lot further. Live as if holidays and you will soon run out of money.
 
Boris7 said:
I find the whole thing a minefield, I’m entitled to a full state pension at some point, and a private pension which I can take now or wait for, but better still I can sell a property every 18-24 months that will see me through.

What worries me is people who have not been as lucky as me, there’s been a general increase in the division of wealth over the last 30 years, and those who have been earning less will have little or no money behind them when they come to retirement and still face increasing costs of living.

Ive got a new tenants moving in next week, he earns £55k and she earns £25k but properties in this area are out of their reach, it’s all a bit grim for younger people.
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Incredible, he earns 55k and she earns 25k and properties in that area out of their reach, on 80k combined.

I move in circles where people are on 15k to 20k a year. I really need to get into this century.

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MaidinDevon said:
Hi Minxy

I am over 55, and the pension pot is only £3k which is what should have been my contracted out pension pot.
However, I know I can cashbout the whole pot, if its under £12k.

I have used my ISA allowance this year.
I have another £3.5k available to save.
So, I am wondering if i can add to the existing pot, get the 20% uplift. No employer contributions available on this amount, and then transfer the lot into the ISA in April.

Then it won't impact on the 25% tax free limit, or have to be taxed, when I withdraw it, at retirement.

Or do I just hold it in a general account until April. as i am unlikely to be able to save the full 20k this year from earnings.

It is do complicated.
Click to expand...
It would depend on who it is with, many personal pensions specifically set up for contracting out, because it is was set up so long ago probably in the late 80,s early 90,s will not accept new contribution. You probably wouldn’t want to pay into it because the charging structure is expensive.
take a look at at AJ bell or Standard Life Elevate or Nokia platforms which will allow you to invest both Pension contributions (to get the 20% tax uplift ) and ISA contribution. You can use a common investment portfolio for both to keep things simple.
 
The Wino said:
Theres no tax advantage but it might be easier to access especially if you want it in bits. The advantage if you're well enough off of leaving it in the pension is inheritance tax.
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Agreed.

Ian
 
Most people in the UK who retire are on £134.25/wk or less. Anything more than that is a luxury.
 
The Wino said:
But this thread is about retiring early I bet the average for early retirees is a fair bit higher.
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State pension age for both men and women is set to rise to 68, so I guess early retirement would mean £0/wk for most.

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The Lobster said:
State pension age for both men and women is set to rise to 68, so I guess early retirement would mean £0/wk for most.
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Only if they only had the state pension I doubt if many early retirees are relying just on that!. All the people I know who are early retired have a lifestyle that suggests way higher income than a basic state pension.
I was 60 last year at new year we had a zoom meet for my uni friends I think there were roughly half still working and I suspect most of the others looking at getting out soon. I think anyone who has paid into a pension for a significant part of their working life and been in a fairly well paid job will be looking at their options once were all allowed out again. I think health scares make a lot decide to retire and the pandemic will have made a lot feel less invincible.
 
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You're a long time dead. One of my friends said something which really struck a chord. If you wait until you're 65/67/68, will you still be fit enough to enjoy the retirement that you have saved all of your life for.
I'm 55 in April and will 'semi-retire'.
 
I’m 57 in a couple of weeks time, I have decided to stop working now after losing my job last Spring. I got a job in the Summer helping with the harvest and loved it. God knows how I found the time to do the 60+ hours a week I use too! 😳

With a friend who died at 28, a wife at 35 and a relative with a terminal illness at 50, why wait? Providing you have one, you can always downscale your house, reduce your extravagant outgoings, or get a part time job if needed, but one thing is for sure, you won’t regret retiring early!
Life is far too short for so many, live for today because tomorrow isn’t guaranteed.
 
Sillious Sodus said:
Remember to include inflation into your calculations and have you access to more funds in say 5 years because nothing comes down in price.
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We retired early and, like you, did the big "money sum".

20 years later the two things which we got very wrong were savings interest rates and inflation.

Inflation has worked in our favour but savings interest returns are practically nil.

So the things to check are inflation-linked pensions and a contingency fund - for health related issues.

£15K is (but depending on your life-style) a bit low £20 sounds more realistic.

But we would say "go for it".

10 years ago I was hit by a 40 ton waggon, head on, and was very lucky to be largely unscathed, so we've never regretted our decision.

Good Luck with your project.
 
PEM said:
We were in a similar situation 2 years ago both 60 fed up of work could we fund retirement until 66 when old age pension kicks in having done the sums we take £12500 ea so we dont have to pay tax and have managed ok on this. We have taken 4 3 month trips paid all Bill's on house and have found money left at end of year. If you think you could afford it go for it life is to short to worry.
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Morning folks, 12500 each out of your pension pot, you say no tax but do you not have to pay tax when you take it out of your fund ❓

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PEM said:
We were in a similar situation 2 years ago both 60 fed up of work could we fund retirement until 66 when old age pension kicks in having done the sums we take £12500 ea so we dont have to pay tax and have managed ok on this. We have taken 4 3 month trips paid all Bill's on house and have found money left at end of year. If you think you could afford it go for it life is to short to worry.
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Morning, you say 12500 out your fund and no tax to pay........do you not have to pay tax when you withdraw from your fund ❓
 
The Ex-Gasman said:
Neither of us had a company pension and I started a pension after my employer arranged an interview with a financial advisor. It all stayed in my name even when we added to it, mainly because we gave it little thought. That mistake will now cost us paying £750 per year tax on a £10,000 drawdown, which we could have avoided.
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I believe you can cut that tax bill in two ways, assuming your wife has no income?
She transfers part of he tax allowance to you, I think it is just over £1000. You save £200 on that!
You withdraw £3600 from your pension in one lump, paying £720 tax. Pay the remainder about £2880 into your wife’s SIPP and she gets the tax back so She has £3600, taking it out in one lump or monthly not paying any tax!
Worth doing?
The setting up of the sipp is easy if she doesn’t have one already!
 
Rosco said:
Morning, you say 12500 out your fund and no tax to pay........do you not have to pay tax when you withdraw from your fund ❓
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No, withdraw money from fund (I’m assuming pension fund of some sort) and pay your marginal tax rate (if no other income then 1st £12,500 is tax free).
 
Rosco said:
Morning folks, 12500 each out of your pension pot, you say no tax but do you not have to pay tax when you take it out of your fund ❓
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If they haven't got any other income then they can use up the whole of the tax allowance of £12,500 against the withdrawal so no tax to pay - if the pension pot initially charges it (which they may well do) you just claim it back.

In addition to the PA there's also the savings allowance of £1000 earned interest on which there is no tax.

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CazPaul said:
Incredible, he earns 55k and she earns 25k and properties in that area out of their reach, on 80k combined.

I move in circles where people are on 15k to 20k a year. I really need to get into this century.
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It is easy to lose track of wages & payments elsewhere.When we moved to Devon years ago I was self employed for the next 18 years. Not long afterwards I was looking at the same job I had been doing that paid £67,500/year for 37 hours week + company van, work mobile phone, on call payment every 8th week @ hourly rate of 1,5 x & 2x if called out . I realised then that I had been working far to long in a low paid area where every where else had sky rocketed & I had been doing twice as many hours for 20% less money,supplying everthing including vehicle & no job security.
 
I was looking at someone else's defined benefit pension recently. A public sector one. Always worth reading the fine print.

Under this DB scheme rules, the annual inflation uprating of deferred benefits is based on CPI. Whereas at least for the next few years the annual uprating for a pension in payment is based on RPI (which is normally 1% better than CPI).

Unless you really like working longer on the same salary for the same employer, taking early retirement under this scheme would be a no-brainer. Other pension scheme rules may be different.
 
Chris said:
it might be all I have left if this shit storm carries on.
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No doubt your offshore funds & S. Pembs property portfolio / empire will see you through . . . if not you could always consider ''soliciting'' for business . . . . :LOL:
 
MH 55 FUN said:
No doubt your offshore funds & S. Pembs property portfolio / empire will see you through . . . if not you could always consider ''soliciting'' for business . . . . :LOL:
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I wish :(
 
Oh yes forgot to mention.. make sure you've paid your 'full stamp' to ensure you get the full 'state pension' at 68.
At 54 I've already paid my 'full stamp'. I won't get any more from the state than the £175.20 a week (+ inflation) and yet, I'm still paying in the same amounts of National Insurance. I could carry on, for the next 14 years, paying NI for no personal gain.

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