2008 Retirement nightmare

f1fan_2

I reached the age of 65 in September this year and have accrued approx £190k in private pensions over my working life which is currently held in cash in a SIPP. In addition to this I have a small pension of £3k plus the state pension (£9k) which I have deferred. I intend to continue working for at least 12 months and I am a higher rate tax payer. I don't have a spouse and would like to be comfortable in retirement but would like to leave as much as possible to my children when I die.
I would appreciate any advice from forum experts in these financially volatile times.

EdInvestor

Start maxing out stocks and shares ISAs to avoid tax when you retire as you are now right up against the clawback level where you will start losing your old age tax allowance.
Put any other cash savings in N&SI index linked certs (payable tax free).
As markets improve, gradually reinvest some of the SIPP cash in inflation beating assets

Presumably you own your own home? How much is it worth? Is it under the IHT band? Your SIPP, after going into drawdown, can be left to heirs minus 35% tax charge up till the age of 75, after which things change.It is outside your estate.

How much will you need to live on annually when you retire?

f1fan_2

Thanks for your advice edinvestor, can you please explain what this means "you are now right up against the clawback level where you will start losing your old age tax allowance."
My house is worth approx. £375k and I think I could live on £25k/annum.
Should I be taking some of my tax free allowance out of my SIPP in view of the 1.5% interest rate cut today? or should I leave it for the moment.

EdInvestor

f1fan wrote: »

Thanks for your advice edinvestor, can you please explain what this means "you are now right up against the clawback level where you will start losing your old age tax allowance."

After age 65 the personal tax allowance goes up to 9,300 and will rise soon to 10,000.But it is clawed back at a punitive rate starting at 21,800. It will thus be helpful if you can obtain some of your income in a non-taxable format.

If you take benefits from your SIPP, you would be able to take a tax free lump sum of 47,500.This should be invested in ways which will generate tax free income.

The remaining amount in the SIPP would generate a max income of 12,483 at current rates (which may fall a bit) which would meet your spending requirements .

Howewver it would be better if you obtained the income over the clawback level outside your pensions. In addition if you try to generate that level of income from your SIPP while keeping it in cash, you will find that the capital depletes pretty rapidly.

You should study ways of investing your SIPP that generate adequate income but also suit your level of risk - sometimes the circle is difficult to square.

My house is worth approx. £375k

Presumably you could trade down to generate more cash or do equity release if necessary?

Should I be taking some of my tax free allowance out of my SIPP in view of the 1.5% interest rate cut today? or should I leave it for the moment.

Depends - are you planning to save from your salary?It's very unfortunate you don't seem to have any stocks and shares ISAs set up to generate tax free income.