Retirement

[JAZZMANB]

I'm in exactly the same boat bridging gap between 60 (possibly earlier) and 67. We are living off half our wages to see how much we need and started a vanguard sipp for the rest. The 25% tax goes literally straight on there but unsure about higher rate tax as unfortunately it doesn't apply to me .

If you have funds to start and load ££ a sipp up in those last years of work it's always nice as you have a decent ceiling on how much you can put in based on your income ,you can also back date previous years allowance and the 25% gets added
That's a massive boost to a pot you will be using in a relatively short space of time from starting .

 

[Jesse The Body Ventura]

So lets's say for example I have cash ISAs worth 6 figures and i can put in up to £60,000 per annum into a sipp and back date to a previous allowance. I'm assuming with the 25% boost by the government it should beat the best cash ISA rate? I guess the problem would be if stocks/ shares took a nose dive based on their high valuations at the moment?

 

[Matt Hopkins]

So lets's say for example I have cash ISAs worth 6 figures and i can put in up to £60,000 per annum into a sipp and back date to a previous allowance. I'm assuming with the 25% boost by the government it should beat the best cash ISA rate? I guess the problem would be if stocks/ shares took a nose dive based on their high valuations at the moment?

No it doesn't work like that for the carried forward bit go back to #3890 and read a bit from there for an explanation

 

[42]

So lets's say for example I have cash ISAs worth 6 figures and i can put in up to £60,000 per annum into a sipp and back date to a previous allowance. I'm assuming with the 25% boost by the government it should beat the best cash ISA rate? I guess the problem would be if stocks/ shares took a nose dive based on their high valuations at the moment?

Its not really a 25% boost. Pensions are basically deferred pay, so the money you have in normal savings / ISAs etc is out of taxed income. So when you put into pension, youre just getting your tax back (25% going in, is same as 20% going out). Then when you draw it, it becomes taxable. And remember, state pension now takes up all of the personal allowance. It doesn't grow more, as proportionally youll just pay more tax on it.

 

[Dark Traveller]

My line manager is retiring in the Summer after 37 years in public service. When she starts her retirement, she’s been approached by travel company to be a mystery shopper type thing four times a year. Basically they pay her flights and accommodation and she does report on the reps, hotel, meals etc.

She’s looking forward to it, when she was in her twenties she was a Thompson rep on the Spanish islands. So according to her feels like gone full circle.

 

[NGS]

How much if you don't mind saying?

£131k

Always paid a large chunk into it, even in my early twenties

 

[JAZZMANB]

Its not really a 25% boost. Pensions are basically deferred pay, so the money you have in normal savings / ISAs etc is out of taxed income. So when you put into pension, youre just getting your tax back (25% going in, is same as 20% going out). Then when you draw it, it becomes taxable. And remember, state pension now takes up all of the personal allowance. It doesn't grow more, as proportionally youll just pay more tax on it.

The people i know who loaded sipps did it in their mid to late 50s so the 25% free went on and it's in quite adventurous investments with little intention of drawing out for a good while .So that free moneys doing quite well but like you say once we hit the state pension any withdrawals will be taxed .

 

[macks1966]

A £25k cetv, for a pension worth £350 per year? They must be expecting you to reach a ripe old age!

Personally i would open a SIPP with AJ Bell or someone then i would request transfer transfer the 2 pensions into the new SIPP. Just pick an off the shelf fund then self manage it and draw it down as and when u need it. Maybe spend all this first before you start taking other pensions.

 

[42]

The people i know who loaded sipps did it in their mid to late 50s so the 25% free went on and it's in quite adventurous investments with little intention of drawing out for a good while .So that free moneys doing quite well but like you say once we hit the state pension any withdrawals will be taxed .

Its not free money, its your own money going from taxed to untaxed.
If you put £80 into a pension, youre actually putting £100 of your own money in, with the government just giving you back the tax you originally paid on it.

 

[Darlo1973]

Its not free money, its your own money going from taxed to untaxed.
If you put £80 into a pension, youre actually putting £100 of your own money in, with the government just giving you back the tax you originally paid on it.

Still better than earning the £100, paying £20 in tax and then putting £80 into a savings account.

 

[whitey]

I’m 43 and just started looking into my pension, I’d love to wind down once my mortgage is paid off at approx 57. I’ve worked for the same company for 21 years and I believe the amount in there is way higher than average for my age (well, according to Grok anyway). So this thread is fascinating, I’ve been a long time lurker

very similar scenario bar the mortgage. We fancy moving next year so may throw a spanner in the works. I see what the articles say about the average size pots and feel it cant be right (If they are, then nice to be ahead of the curve in something). Glad I started paying in 20 years ago.

 

[42]

Still better than earning the £100, paying £20 in tax and then putting £80 into a savings account.

But ultimately, when you draw the £100 after state pension age, youll pay £15 in tax on it. I agree its still better, but many get a bit carried away thinking its better than it actually is. Of course, if youre a higher rate payer then its genuinely a lot better.

very similar scenario bar the mortgage. We fancy moving next year so may throw a spanner in the works. I see what the articles say about the average size pots and feel it cant be right (If they are, then nice to be ahead of the curve in something). Glad I started paying in 20 years ago.

Given its an average, theres loads whove got nowt. Self employed tradies can be quite bad for it

 

[Paddy O'Dors]

A few false starts this last week with the beginning of the pub garden season. Early sunshine giving way to a cloudy afternoon. Shame like but cannit be long before a few afternoons are a blurry haze.

 

[JAZZMANB]

Its not free money, its your own money going from taxed to untaxed.
If you put £80 into a pension, youre actually putting £100 of your own money in, with the government just giving you back the tax you originally paid on it.

Only investment option that gives it back though

 

[Darlo1973]

But ultimately, when you draw the £100 after state pension age, youll pay £15 in tax on it. I agree its still better, but many get a bit carried away thinking its better than it actually is. Of course, if youre a higher rate payer then its genuinely a lot better.

But thanks to investment growth there will be many more of those £100s for you to spend in retirement.

 

[JAZZMANB]

But ultimately, when you draw the £100 after state pension age, youll pay £15 in tax on it. I agree its still better, but many get a bit carried away thinking its better than it actually is. Of course, if youre a higher rate payer then its genuinely a lot better.


Given its an average, theres loads whove got nowt. Self employed tradies can be quite bad for it

Like I said ,leaving it long enough to work for you means you've more pot growing pre stare pension age . On 20k its 5k more starting point than an isa over say 6 plus years .
I put 20k in a stocks and shares isa around 3 years ago the same time I started at sipp with 20 . The isa is on £22800 the sipp just over 30k

 

[Jesse The Body Ventura]

But ultimately, when you draw the £100 after state pension age, youll pay £15 in tax on it. I agree its still better, but many get a bit carried away thinking its better than it actually is. Of course, if youre a higher rate payer then its genuinely a lot better.

And that's my position as a higher rate tax payer.
As my workplace pension is tied to the state pension if I want to retire earlier I need to bridge that gap. So either switch my cash isas to sipp or just start putting into a sipp and let the isa drift.

 

[WHD]

Its not really a 25% boost. Pensions are basically deferred pay, so the money you have in normal savings / ISAs etc is out of taxed income. So when you put into pension, youre just getting your tax back (25% going in, is same as 20% going out). Then when you draw it, it becomes taxable. And remember, state pension now takes up all of the personal allowance. It doesn't grow more, as proportionally youll just pay more tax on it.

But if you want to retire before state pension age, then you can draw it out tax free upto the personal allowance and also get 25% tax free, so in that respect, it is a 25% boost.

 

[42]

But if you want to retire before state pension age, then you can draw it out tax free upto the personal allowance and also get 25% tax free, so in that respect, it is a 25% boost.

Yeah, but were talking SIPPs & AVCs which are over & above normal work place pension. So your normal workplace pension will be taking the personal allowance anyway. So for most of the additional money, its just a 5% tax saving from the 25% tax free bit for standard rate payers

And that's my position as a higher rate tax payer.
As my workplace pension is tied to the state pension if I want to retire earlier I need to bridge that gap. So either switch my cash isas to sipp or just start putting into a sipp and let the isa drift.

when you say tied to state pension, is it a DB pension that has reductions for taking early? If so, then the reductions are just because the pot is being spread over a longer period. And leaving it until SPA means youll pay more tax on that, and increase the chances of getting nowt as youre closer to death (or ill health & not being able to enjoy it)

 

[WHD]

Yeah, but were talking SIPPs & AVCs which are over & above normal work place pension. So your normal workplace pension will be taking the personal allowance anyway. So for most of the additional money, its just a 5% tax saving from the 25% tax free bit for standard rate payers

My missus has a DB pension with work. We also put into a SIPP in her name instead of saving elsewhere. The plan is to take the SIPP at 57, as tax free as possible, then the DB pension at 65.
So in that respect, its an additional 25% with the SIPP, unless I'm missing something?