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Retirement

NYMackem said:
Yeah, the tax free quandary is an interesting one. Makes sense to use it over time for tax efficiency in one regard, but at the same time there is no guarantee that it will remain tax free forever, so there's another argument that says whip it all out at once to keep HMRC's hands off it.

The poster a few posts above makes an important point too, about having a couple of years' drawdowns in cash equivalents, so you're never in a position of having to sell equities in the immediate aftermath of a crash.
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I struggle to get my head around all of the different drawdown strategies despite playing around with various models (some online, some self-made and I've found Gemini AI to be useful too) as there are just so many variables but I've still got a few years to work it out. Certainly no interest in getting an annuity after seeing how my dad got screwed over by the Man from the Pru but back then he had no other choice

The future tax treatment of pensions is an excellent point. Who knows what a future Chancellor may decide to do.
 

NYMackem said:
Yeah, the tax free quandary is an interesting one. Makes sense to use it over time for tax efficiency in one regard, but at the same time there is no guarantee that it will remain tax free forever, so there's another argument that says whip it all out at once to keep HMRC's hands off it.
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I'm considering taking out £20k a year and moving it into a S&S ISA. Gambling that future tax changes will be less harsh to ISA's than to pensions. It should also be better if it comes to inheritance tax.
 
kladum said:
I'm considering taking out £20k a year and moving it into a S&S ISA. Gambling that future tax changes will be less harsh to ISA's than to pensions. It should also be better if it comes to inheritance tax.
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Pensions are out of your estate for iht till April 27 at the moment , no benefit at all in taking £20k from a pension and putting it in an isa , I don’t understand your logic , you need an IFA to guide you rather than ploughing ahead .
 
buster said:
Pensions are out of your estate for iht till April 27 at the moment , no benefit at all in taking £20k from a pension and putting it in an isa , I don’t understand your logic , you need an IFA to guide you rather than ploughing ahead .
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Guess the thinking behind it is if you die after 75 the pension could attract 40% IHT and at least 20% income tax as well, so there is that benefit
Darlo1973 said:
Good point. With drawdown you are going to stay invested for many years to come so a dip/crash just before retirement isn't that serious though it will reduce the amount you can take tax free (though taking full 25% may not be the best idea)
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If you hadn't de risked just before you retire have a look at sequence of return risks and see how it can knack your plans
 
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buster said:
Pensions are out of your estate for iht till April 27 at the moment , no benefit at all in taking £20k from a pension and putting it in an isa , I don’t understand your logic , you need an IFA to guide you rather than ploughing ahead .
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It depends how big the pot is. My understanding in the following scenarios, you're likely better getting the funds out asap and re-invested in an ISA:

- Pension above the c£1m limit, so any growth doesn't get the 25% tax free allowance
- Pension growing to the point where drawdowns can be withdrawn at basic rate now but would be taxed at a higher rate (e.g. pot growing while income tax thresholds remain the same, and/or more aggressive drawdown prior to state pension age)
 
I've three company pensions. The first one is final salary and the previous and current ones are defined contribution.

I am planning on moving the last one over to the current scheme with Aviva, just to keep them together to be easier to manage.

The original one i'll leave as is. But, is there any scenario or case where I should transfer this final salary scheme over to a defined contribution pot? My dislike of the final salary is that the inflation cap on it is low so in real terms it's lost a fair bit of value in the last 5 years or so. That would be built into any transfer value though I assume. Also, assuming they remain separate am I better taking all of the combined tax free value out of the defined contribution pot.

I know I should probably go and speak to an IFA, but the SMB can likely give me good advice for free 😁
 
kladum said:
I'm considering taking out £20k a year and moving it into a S&S ISA. Gambling that future tax changes will be less harsh to ISA's than to pensions. It should also be better if it comes to inheritance tax.
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S&S ISA can be quite enjoyable spreading the risk if you don't mind it being volitile, I'm 3 years away from retirement. If I i had more money it would be better, my account is currently 82.2% up. I am invested in 14 different companies across different sectors.

One of my shares is currently up 640% if it drops under $10 constantly, I will sell a few and put it somewhere safer.
 
3.142 said:
I've three company pensions. The first one is final salary and the previous and current ones are defined contribution.

I am planning on moving the last one over to the current scheme with Aviva, just to keep them together to be easier to manage.

The original one i'll leave as is. But, is there any scenario or case where I should transfer this final salary scheme over to a defined contribution pot? My dislike of the final salary is that the inflation cap on it is low so in real terms it's lost a fair bit of value in the last 5 years or so. That would be built into any transfer value though I assume. Also, assuming they remain separate am I better taking all of the combined tax free value out of the defined contribution pot.

I know I should probably go and speak to an IFA, but the SMB can likely give me good advice for free 😁
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Quick answer is unless you work for a particular employer in the north east the chances of anyone recommending you to transfer out of a DB is slim. You may even pay a canny bit for them to do all the work then they still say no.
Have a read through the thread to get people's opinions on whether to take all the tax free. I would say no, this isn't advice though
 
Matt Hopkins said:
Quick answer is unless you work for a particular employer in the north east the chances of anyone recommending you to transfer out of a DB is slim. You may even pay a canny bit for them to do all the work then they still say no.
Have a read through the thread to get people's opinions on whether to take all the tax free. I would say no, this isn't advice though
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Thanks. I definitely want to take the max tax free upfront, just not sure on where to take it from. Intuition says it's better to take from the DC rather than DB pot.
 
3.142 said:
Thanks. I definitely want to take the max tax free upfront, just not sure on where to take it from. Intuition says it's better to take from the DC rather than DB pot.
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Ah thought you were just talking about tax free from DC.
Taking the tax free from a DB generally comes down to if the commutation rate is acceptable
 
Darlo1973 said:
I struggle to get my head around all of the different drawdown strategies despite playing around with various models (some online, some self-made and I've found Gemini AI to be useful too) as there are just so many variables but I've still got a few years to work it out. Certainly no interest in getting an annuity after seeing how my dad got screwed over by the Man from the Pru but back then he had no other choice

The future tax treatment of pensions is an excellent point. Who knows what a future Chancellor may decide to do.
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The 25% tax free will get eroded away eventually … IMO
About de-risking as approach retirement , amongst other things

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3.142 said:
I've three company pensions. The first one is final salary and the previous and current ones are defined contribution.

I am planning on moving the last one over to the current scheme with Aviva, just to keep them together to be easier to manage.

The original one i'll leave as is. But, is there any scenario or case where I should transfer this final salary scheme over to a defined contribution pot? My dislike of the final salary is that the inflation cap on it is low so in real terms it's lost a fair bit of value in the last 5 years or so. That would be built into any transfer value though I assume. Also, assuming they remain separate am I better taking all of the combined tax free value out of the defined contribution pot.

I know I should probably go and speak to an IFA, but the SMB can likely give me good advice for free 😁
Click to expand...
The highlighted bit above is key.

If any of the pension pots you want to move are above £30k you won't be able to move them without showing you have had independent advice. When I was exploring that, the cheapest "advice" I could find was about £3k for a pot that was just over the threshold. I didn't need the advice, I just wanted to move it.

Instead of moving it I'm rinsing it, it will have a balance of zero the month before my state pension kicks in.
 
buster said:
Pensions are out of your estate for iht till April 27 at the moment , no benefit at all in taking £20k from a pension and putting it in an isa , I don’t understand your logic , you need an IFA to guide you rather than ploughing ahead .
Click to expand...
One direct benefit as mentioned by EBC above is that theres a cap on the 25% tax free, I'm planning to retire early and take my pension over many years using UFPLS, so theres a strong chance I'll hit this cap eventually if I leave the 25% to grow inside the pension. That assumes this benefit even still exists, like I said, I expect future tax changes to be more harsh to a pension pot than to an ISA.

I've done a lot of reading around this, and worked through details with several AI's, it increases admin but I cant find any financial downside in gradually moving the tax free cash into an ISA, but I'm open to learning of any.
 
Slatz63 said:
The highlighted bit above is key.

If any of the pension pots you want to move are above £30k you won't be able to move them without showing you have had independent advice. When I was exploring that, the cheapest "advice" I could find was about £3k for a pot that was just over the threshold. I didn't need the advice, I just wanted to move it.

Instead of moving it I'm rinsing it, it will have a balance of zero the month before my state pension kicks in.
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Unless the law has changed, which I don't think it has, you don't need to take advice moving a DC pension unless it has guarantees on it.
I transferred my works one to Vanguard no problems
Slatz63 said:
I've found OPEN AI/Chat GPT to be really helpful with my own financial planning.

Started with basic questions like My Occupational Pension is £xxxxx per year, I'll get a full state pension at 67, I have £xxxxx in an ISA and £xxxxx in cash savings. What is best/tax efficient drawdown strategy assuming I'll live to 90.

It explains things really well and provides sample questions to ask your IFA to make sure you are getting the best advice.

It's also helped me outline an estate plan to minimise the Inheritance Tax my son will need to pay on my death.
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Big Pete not a fan
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Matt Hopkins said:
Unless the law has changed, which I don't think it has, you don't need to take advice moving a DC pension unless it has guarantees on it.
I transferred my works one to Vanguard no problems

Big Pete not a fan
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Gemini is brilliant for that kind of stuff. You do need to validate it, ask for sources etc. but no doubt it gives great direction for what to look at or which questions to ask.
 
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