All Depends how much of your tax free allowance used and general earnings for that tax year. Almost certainly best to take in fresh tax year. Be careful of going on BR tax code, I think I read best to take a couple smaller withdrawals to get right tax code then take your lumper to prevent having to claim back.
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Retirement
- Thread starter Shieldsman
- Start date
DaveH
Striker
Personally I would look at taking professional advice.
For me, I can access my pension 10 years before normal retirement age, which is from 57. For every year I draw on it early I get a 3% penalty, so 10 years I lose 30%. But I do end up drawing it for longer so the amount I get out is actually more if I draw early, up until about the age of 85.
Matt Hopkins
Winger
1) if that is your only income then yes no tax is payable
2) Once in drawdown it's classed as a different pot and you'd have to pick another fund for it to go in. You could of course pick the same fund as the uncrystallised, if it was me for 2 or 3 years then I'd just hold it as cash won't go up but won't go down. You'd have to check with L&G tho as to what exactly you can do different platforms have different ways of treating crystallised and uncrystallised pots
I'd think long and hard about doing that mind depending what's in it
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You wouldn’t ride her into battle - I shall spare the SMB the horror.Pics
Only 60 000 in,if I withdrew the lot I think I would get 42000 after tax,I just want to leave the present job I’m in coz I hate it and the 42000 would give me a safety net whilst I look for anotherI'm not sure really - as I'm still finding the options a bit confusing ..(..and the assistance from the pension pot holder ( L&G) is pretty minimal )
.... but what I was thinking was ' crystallising ' a lump ( let's say £40k) - taking the 25% tax free in one go ( £10k) .....and having the remaining £30k draw down over 3 years paid out monthly .
This would still leave me with around £160k in the uncrystallised Fund (hopefully) growing at around 10% per annum .
Questions I have are :-
1. Would I pay any income tax on the 75% crystallised ( £30k) ( assuming no other income). I presume not as the drawdown would only pay it out to me at around £10k per annum and I'd be taxed on receipt ?
2. Once the £40 k drawdown has been allocated - does the taxable portion ( the £30k) still sit in the fund as Investment and hence still grow ?
I guess if you're still working (?) and paying income tax ( and intend to Continue That way for a while ) ?
In which case it wouldn't really matter whether you did it in March or April.
If you're stopping work soon then you may want to push into April to minimise income tax for this year .
When you say " gonna take the whole lot out " ... there may be tax penalties for you that way - you may want to spread it out over a few years ( depending on how much it is )
Then again I might just take 25 per cent tax fee and drawdown on the rest ,haven’t made me mind up yet tbh
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D
Deleted member 55162
Guest
Get into the mindset that it’s already in a safety net - called a pension.
What you need to look at is where and how the money is invested and typically a de-risking auto enrolment plan fails to meet the needs or goals of clients.
Looking at this for example professional advice is going to save you about £16.5k to £17.5k.
AndrewP
Striker
Bills cost a fortune these days.
moanjam
Midfield
Got a question if anyone can help, does the amount of tax relief you get paying into a private pension only apply to the amount of what you pay in income tax or do you get 20% topped up onto whatever you pay in upto the contribution ceiling?
The wife is 52 works in her own business which is LTD and doesn't pay a great deal in income tax and has no pension, we will be coming into a bit money in the next year or so when we downsize and instead of having it in the bank was thinking of putting some into a pension for her. We want to retire at 60.
Cheers in advance.
The wife is 52 works in her own business which is LTD and doesn't pay a great deal in income tax and has no pension, we will be coming into a bit money in the next year or so when we downsize and instead of having it in the bank was thinking of putting some into a pension for her. We want to retire at 60.
Cheers in advance.
Ned Land
Winger
Your situation is similar to my own.
I’m planning to retire at 60 and to supplement income until 67 I have an ISA and a SIPP.
I’ll probably want/need about £5k a year for 7 years so I’d hopefully have some options to consider.
Currently I plan to withdraw from the SIPP first between 60 and 67, then afterwards from the ISA.
But rules might have changed by then.
Will e
Midfield
As I understand it (please check) Ltd co any pension contributions are classed as a business expense so would reduce your (her) tax liability, not sure about paying from another source like your personal savings, will be someone along soon who knows a lot more than me regarding this though.
D
Deleted member 55162
Guest
It depends how she makes the contribution.
If it’s from the limited company then there is no tax relief at source however the business will benefit from corporation tax relief on the contribution.
If she doesn’t pay much income tax then the above is probably the best route however income tax relief is applied on personal contributions (made from her own bank account rather than the companies). How much tax relief she gets depends on what she earns. Again I’m assuming if she doesn’t pay much tax she won’t be entitled to use things like carry forward.
Will e
Midfield
As I understand it (please check) Ltd co any pension contributions are classed as a business expense so would reduce your (her) tax liability, not sure about paying from another source like your personal savings, will be someone along soon who knows a lot more than me regarding this though.
D
Deleted member 55162
Guest
Usually the best advice is to do it the other way around as it’s more tax efficient.
moanjam
Midfield
Is carry forward when contributions automatically get topped up ?
Edit just googled it
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Jasper
Striker
I'm in no way judging or criticising anybody, I'm sure I'd make the same decision too if I was in a position to retire in my 50s, but a read through this thread is evidence enough that the Government have to get a grip on the labour market.
Nearly 20% of our population is now over 65.
62.9% of our population are of working age but only 75.5% of that are economically active.
Which means just 42% of our population are economically active.
There is no slack in the labour market, productivity continues to be sluggish at best since 2008 whilst growth similarly continues to be anaemic.
That situation will only be worsened by working age people being able to retire early. Add to that declining birth rates and the hot potato of immigration, we are essentially now on the same path as Japan. Low to no growth, increasing debts and consequent chronic underfunding of services and infrastructure.
Nearly 20% of our population is now over 65.
62.9% of our population are of working age but only 75.5% of that are economically active.
Which means just 42% of our population are economically active.
There is no slack in the labour market, productivity continues to be sluggish at best since 2008 whilst growth similarly continues to be anaemic.
That situation will only be worsened by working age people being able to retire early. Add to that declining birth rates and the hot potato of immigration, we are essentially now on the same path as Japan. Low to no growth, increasing debts and consequent chronic underfunding of services and infrastructure.
Matt Hopkins
Winger
Is it? How's that? Unless I've misread the post. If @Ned Land withdraws from SIPP from 60-67 he can take £12570 /year and not pay tax if he waits until 67 to draw from SIPP and his state pension is being paid then virtually everything will be taxed?
Ned Land
Winger
That’s my thinking.
When I receive DB pension at 60 then I would pay tax on part of SIPP.
When I receive DB pension + state pension at 67 then I’ll pay tax, but can access ISA without paying any tax.
DaveH
Striker
You have a point, though this is down to the long term model that we have built for society. The labour market is at an all time low, with a few areas struggling. The low skilled work gets the attention, bar work and picking fruit, but it goes across the board. Cyber security is rated as one of the biggest threats to the country and it is estimated we are 350,000 people short in that field. That is a well paid career and people in well paid fields can realistically look at retiring on private pensions in their 50s. It creates a chicken and egg situation, high skilled and high demand jobs pay well, people get good pensions and retire early adding to the shortage, and boosting the demand for the next generation.
But what can you do about it? You can't suddenly change all these pension packages to prevent early retirement. If you did, because they will pay out less, people will pay in less. In which case they will just make private investments and live off those until retirement age. You can't force people into work unless you go full on Communist State. Even then you are strong arming people who started their pension payments when there was an abundance of labour and now there is a shortage, you can't just move the goal posts.
Though on the other hand, is it really a problem? The UK average salary is £27k per year and the average mortgage payment is £8k per year (reported £665 per month). So after mortgage your average person has £19k. A lot of private pensions for people who have had reasonably paid jobs will be equal or more than that, and retirees are not likely to have the mortgage. So financially you have someone not working, or they could go out and do an average job for equal to doing nothing, or a low paid job for less. Either way, a retiree is just as economically active as a minimum wage worker.
From the economics point of view I don't think it is an issue. The labour market gap is more of a concern and there are ways to address that, but that conversation fork is best taken onto the politics board.
D
Deleted member 55162
Guest
You’re forgetting about inheritance tax benefits and legacy planning.
Ultimately it depends on the value of his estate.
You can access the ISA any time without paying tax whereas a pension is potentially taxable on the way out. That’s the point really. A pension is also exempt from IHT whereas an ISA isn’t.
I mean you can’t say for sure what the best route is without knowing far more information.
We don’t know if you’ve got a massive house, loads of savings or an inheritance coming for example.
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Matt Hopkins
Winger
Fair points I'm not above the IHT threshold but I suppose a lot of people will be
