Swindon On Tour
Striker
Ok - misread that.
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Retirement
- Thread starter Shieldsman
- Start date
Ok - misread that.
Fletch
Striker
Isn’t what you drawdown each year , 25% of that is tax free ?
So say if you have £100k pot , if you tell your pension provider in April say that want to drawdown £10k, then £2.5k is tax free and the other £7.5k gets taxed at whatever rate you paying ?
Or not ? I’m not certain on this
And the £90k left just stays in your pension pot invested
So say if you have £100k pot , if you tell your pension provider in April say that want to drawdown £10k, then £2.5k is tax free and the other £7.5k gets taxed at whatever rate you paying ?
Or not ? I’m not certain on this
And the £90k left just stays in your pension pot invested
3.142
Striker
My money is all in property or pension. To be able to retire relatively early I'd really need to sell and downsize / move to a less expensive area to live. Don't want to do that, so need to clear the mortgage and then build up some more savings to work part time through 50s. And inflation to stay lower so my DB doesn't keep losing value as it is capped for inflation.
I work for a pension provider and you have the choice to either take £10k tax free (in which case £30k - or the remaining 75% - moves to another pension pot, where you can only then take taxable income.
Alternatively you can do as you’ve said, take the £10k as a combination of tax free cash and taxable income.
Just remember that taking a large taxable lump sum early in the tax year will likely mean some of it is taxed at higher rate. There’s a pretty good tool at HMRC to calculate how much tax you could pay
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Whatever you choose, the remainder remains invested. (This relates to a SIPP)
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a1970man
Striker
That's about it, but for most people your tax free annual allowance is £12500.
Example:
So lets say your want £1500 a month, so £18000 a year, but only £12500 will be tax free and you don't want to pay tax.
You need another £5,500.
So you work out that £5,500 times 4 is £ £22,000.
You "Crystallise" (withdraw) £22,000 from your pension.
Then tell them that you want £5,500 of tax free lump some paid into your current account and the remainder goes to a drawdown account, £16500
Take £12500 from your drawdown account which is your annual allowance and you pay no tax.
Add the £5,500 to it from your tax free lump sum and you have and you get £18000 in your hand for the year.
The remaining £4,000 sits in your drawn down account still with the pension provider but remains untaxed as you haven't taken it out of the system.
This then gains interest as your not touching it, just not at the same as the remaining amount in your pension at the tax free investment rate.
Obviously this means you're slowly moving money from your tax free main pension to a savings account, but at least your not paying tax.
Don't trust me on the maths and I'm happy to be put right by people who know about this stuff better than I do.
Matt Hopkins
Winger
Don't worry I won't
OldNewtown
Winger
Pfft bloody amateur.6 months in since hanging boots up and it’s been brutal,
I got a great routine with gym , hobbies and family, pension & investments are going fine if only
I probably could of done it at 50 but suppose no regrets 55 is the new 21
Don’t hesitate is my advice
I've clocked up 6 years and my young lady has been retired just over a year.
Whilst it would be great to have a little more money you would only get used to that level of lifestyle and then wish you had a little bit more,
In my experience we have sufficient to meet our expenses with the occasional holiday and are no worse off than when we were working. However we now have time. Time to do what we want to do. Sometimes it's the simplest things that give the greatest pleasure. A walk through Castle Eden dene and suddenly spotting a deer at close quarters. Pottering about in the garden and seeing a plant that you have nurtured suddenly coming into flower. Listening to birdsong.
There's still the hassle of everyday life but the ability to do things that you want to do and, more importantly, when you want to do them is priceless.
I would thoroughly recommend retirement, however it is what you make it, I wish I could have afforded it a couple of years earlier.
for those taking the 25% tax free, i was listening to starmer being interviewed on the subject last week on radio 5 on the wireless. the way i understood it was he was saying the scheme is due to run out and they'd be making a decision whether or not to continue with it when it's due to expire.
it's mentioned here as well.
they appear to be saying it won't change it but imo both sides will say anything to either stay or get into the hotseat.
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there are other news sites with conflicting reports like the telegraph but that's behind a paywall.it's mentioned here as well.
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they appear to be saying it won't change it but imo both sides will say anything to either stay or get into the hotseat.
Swindon On Tour
Striker
6 months in since hanging boots up and it’s been brutal
I got a great routine with gym , hobbies and family, pension & investments are going fine if only
I probably could of done it at 50 but suppose no regrets 55 is the new 21
Don’t hesitate is my advice
I just wish my kids were self reliant
42
Striker
I can't see it being removed, however when the current government removed the life time allowance, it remained in place for the purposes of the tax free lumper. So what could happen is the amount you can take tax free is reduced (which would only really affect those with massive pensions anyway)
tbh, i'm not clued up with pensions. i just posted it in case it might be useful.
i do know that when a politician dodges a question with a load of waffle on another subject that's irrelevant to the question asked it's because they know if they answered that question truthfully they'd lose votes/favour.
a good mate of mine had a million in his pot, he retired then went back for a few months for whatever reason, retired again and died a year later.
Select coaches
Striker
If you take away the tax free lump sum it renders pensions pointless. You may as well save into an isa and get greater flexibility
like i said, i'm not clued up with pensions. i have a main db pension and a couple of others. as long as i have enough to do the footy and ride the bikes that'll do me.
42
Striker
You'd still get the 1st £12.5k a year tax free, and would still benefit the higher rate tax payers. It wouldn't be as attractive, but wouldn't be pointless
Select coaches
Striker
42
Striker
True, and because of the tax situation, would only encourage early retirement. Which is the exact opposite of what governments want.
Any changes like this would lead to a huge outflow of funds from pension schemes, crashing the investment markets as a result. Not going to happen except over a very long gradual period.
Great post, although I’d add that if your pension is invested in funds rather than just sitting in cash, the growth will be the same in both the uncrystallised and crystallised pots. The difference is you can still take tax-free money from your uncrystallised pot whereas any income you take from your crystallised pot is taxable..
