Which pension route

SeniorSam

Although a new boy to this site this week , I have seen that there are many well-qualified members out there and am seeking some guidance.

So, I'm about to stop working in this tax year ( possibly in 2009 or early 2010 depending on health) and already 68 last Feb.

Even though I am a higher rate taxpayer I have this month opted to take my State pension and because of deferment it is enhanced to around £13,650 and my wife has her State pension of £7,200 which she has been drawing since 65 and now she is 68 also.

Over the years I have earned fairly well and want to generate as much pension income as I can from the Sipp I have (£260k - was more but took a dive last year before moving into cash fund ) and my wife's PPP £15,000 ish.

Not bothered about her pension being available for me, but need to ensure that my pension is at least 50% for her in any annuity I may purchase.

My thoughts are do I simply take an annuity for the whole Sipp (doubtful)

Take the Tax free cash and buy annuity with the balance?

Take the TFC and Drawdown, or Phase retirement with part tax free and part annuity?

A confusing consideration but with market conditions as they are, possibly even low-medium risk may suggest the latter.

I have not looked at impared annuity as I not sure if my health problem (Asthma) is a consideration?

We have other capital that could generate some income, but wish to do the best we can to maintain our lifestyle as much as possible.

Any guidance, suggestions, ideas etc would be appreciated.

Sam

EdInvestor

This may be rather more complicated than you think

What other savings/investments do you have?

Do you own your own home?

What kind of basic income do you want for living costs in retirement? What kind of capital expenditure might you need to incur over the next say 5-10 years?

Tax wise, have you heard of "age allowance clawback"?

SeniorSam

EdInvestor wrote: »

This may be rather more complicated than you think

What other savings/investments do you have?

Do you own your own home?

What kind of basic income do you want for living costs in retirement? What kind of capital expenditure might you need to incur over the next say 5-10 years?

Tax wise, have you heard of "age allowance clawback"?

..........Thanks for the reply.

There is sufficient capital to invest to generate additional income of £5000 p.a.without paying income tax on that and still leave a reserve. Our house is paid for and eventually downsizing may realease more capital but that is not a consideration at this time and neither is equity release.

I expect I may still be a higher rate taxpayer, so higher age allowance would not be expected

As to capital expenditure in the next 5-10 years, this would only be in respect of car change in about 2-3 years time - say £10,000 unless anything unexpected cropped up.

As to annual living costs, these would be higher in the first few years to support holidays and a figure of around £35,000 ish would possibly be needed.

The main consideration was the best way to decide on using pension funds to achieve best results for us both at our age.

This consideration needs facing by all Sipp owners and it's not at all clear cut, so any helpful suggestions to consider would be appreciated.

Sam

whiteflag_3

SeniorSam wrote: »

..........Thanks for the reply.

There is sufficient capital to invest to generate additional income of £5000 p.a.without paying income tax on that and still leave a reserve. Our house is paid for and eventually downsizing may realease more capital but that is not a consideration at this time and neither is equity release.

I expect I may still be a higher rate taxpayer, so higher age allowance would not be expected

As to capital expenditure in the next 5-10 years, this would only be in respect of car change in about 2-3 years time - say £10,000 unless anything unexpected cropped up.

As to annual living costs, these would be higher in the first few years to support holidays and a figure of around £35,000 ish would possibly be needed.

The main consideration was the best way to decide on using pension funds to achieve best results for us both at our age.

This consideration needs facing by all Sipp owners and it's not at all clear cut, so any helpful suggestions to consider would be appreciated.

Sam

Hi Sam

Given the complicated nature of your situation, is there any reason why you havent looked at getting professional advice?

EdInvestor

If you expect to be a higher rate taxpayer in retirement then you should not be putting additional money into pensions.

SeniorSam

EdInvestor ........ What makes you think I am putting more money into pensions ??? I have not said or indicated this.

Sam

SeniorSam

whiteflag.......... I may do this, but with all the help available another opinion is always welcome.
Sam

EdInvestor

SeniorSam wrote: »

EdInvestor ........ What makes you think I am putting more money into pensions ??? I have not said or indicated this.

Sam

Because your sources of capital and income would not appear to add up to enough to make you an HRT unless you ploughed a lot more into pensions.

SeniorSam

EdInvestor wrote: »

Because your sources of capital and income would not appear to add up to enough to make you an HRT unless you ploughed a lot more into pensions.

EdInvestor

Thanks for that, keeping below higher rate will be good. So on that basis, what can you suggest?

Sam

EdInvestor

Take the full tax free cash from the SIPP. Redeploy into a tax free environment - eg ISAs or N&SI index linked. You wife has an unused part of her age allowance, so you may wish to put some of this cash in her name so the income is tax free.

To maximise income from the SIPP.put it into drawdown (where you can take 120% of the annual annuity rate up to the age of 75). You wife can take the entire fund in cash (minus 35% tax) outside your estate should you die before then.

dunstonh

why not phased income drawdown rather than taking the full tax free cash? No point taking money out of a tax free environment and reducing death benefits all at once. Also, how about feeding a pension for the wife. May only have 6 or 7 years left but that will build up more income in her name for when she is 75 and utilise the age 75 allowance. You dont just use ISA & NS&I.