Which pension route

SeniorSam

EdInvestor wrote: »

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.

EdInvestor,

thanks for that. It is one option I have considered but did not know if that or phased drawdown was best as it allows some of the income to be tax free? Are there any plusses or minuses to consider?

Sam

SeniorSam

dunstonh wrote: »

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.

dunstonh........

Thanks for your input. It was one of the considerations but I uncertain as to which Drawdown or Phased would be safer from a diminishing pot point of view?

I know all funds can go up and down, but it's something to ponder on unless there are any other points to consider on each?

Sam

EdInvestor

dunstonh wrote: »

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.

Watch out for extra costs if using phased drawdown, if you start needing to use advisors on a regular basis it will drain your fund, which is not all that large to start with.I would aim to keep the drawdwon side as simple and low cost as possible.

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.

May be worth considering if her unused allowances are not already being deployed.An Immediate Vesting Pension in her name using some of the tax free cash (as there seem to be reasonable other cash savings) may also be worth thinking about.

Your wife has space for an extra 2,200 odd of tax free income in her unused age allowance so it might be better to concentrate on getting that used rather than on reducing tax on your own income. IIRC this will further rise to around 3k's worth next year.

dunstonh

Watch out for extra costs if using phased drawdown, if you start needing to use advisors on a regular basis it will drain your fund, which is not all that large to start with.I would aim to keep the drawdwon side as simple and low cost as possible.

Phased drawdown costs no more than normal drawdown. Many advisers will not take a charge for each annual review. It also avoids you paying tax on income so even if the adviser takes a £250-£500 charge (which can be done with tax relief) the tax saved is likely to be far more significant.

Advised drawdown cases can actually be cheaper than funds within a SIPP or cost no more than DIY.

SeniorSam

EdInvestor wrote: »

Watch out for extra costs if using phased drawdown, if you start needing to use advisors on a regular basis it will drain your fund, which is not all that large to start with.I would aim to keep the drawdwon side as simple and low cost as possible.


May be worth considering if her unused allowances are not already being deployed.An Immediate Vesting Pension in her name using some of the tax free cash (as there seem to be reasonable other cash savings) may also be worth thinking about.

Your wife has space for an extra 2,200 odd of tax free income in her unused age allowance so it might be better to concentrate on getting that used rather than on reducing tax on your own income. IIRC this will further rise to around 3k's worth next year.

EdInvestor......

Thanks again, some useful comments, particularly for my wife. I had thought that there is no need for any spouse interest when she uses her small pension, as I will have sufficient.

The lions share of the surplus capital is in her name so that interest is attributable to her and not me, although maximum premium bonds are not proving such a good idea these days. As such, correct me if needed, but more payment into her pension at age 68 is still a good idea?

Thanks

Sam

SeniorSam

dunstonh wrote: »

Phased drawdown costs no more than normal drawdown. Many advisers will not take a charge for each annual review. It also avoids you paying tax on income so even if the adviser takes a £250-£500 charge (which can be done with tax relief) the tax saved is likely to be far more significant.

Advised drawdown cases can actually be cheaper than funds within a SIPP or cost no more than DIY.

dunstonh ......... thanks again for helping here. Looks like I need to get some actual figures and idea of costs to clarify which looks best before reaching a conclusion.

I do appreciate the comments for you and EdInvestor, which have made me think a littlemeore.

Sam

EdInvestor

Your aim should be to fully use your wife's annual tax free allowance of (IIRC) around 9400 p.a, most of which will be taken up by her state pension and possibly all of it by the interest already.If that's the way it's already set up, then no real point in further boosting the pension.

dunstonh

If that's the way it's already set up, then no real point in further boosting the pension.

Pensions are still the best way to provide the highest income per £1 put in them. If income need for spouse later in retirement is an issue then it makes sense for spouse to pay the £3600 a year into the pension to build up her own pot. The income rate will be around 12-15% p.a. guaranteed for life. What else out there right now gives that sort of income?

SeniorSam

dunstonh wrote: »

Pensions are still the best way to provide the highest income per £1 put in them. If income need for spouse later in retirement is an issue then it makes sense for spouse to pay the £3600 a year into the pension to build up her own pot. The income rate will be around 12-15% p.a. guaranteed for life. What else out there right now gives that sort of income?

dunstonh.......

In the 2008-9 year my wife had £1729 of net interest on her various accounts and she has a small earned income of £7,000pa but this will stop by the end of the year and then some of her capital may be invested to boost income if needed.. possibly an investment bond taking 5%.

Just to clarify, are you saying that her small pension fund of around £15,000, at age 68 she could get a 12-15% guaranteed annuity? This seems to good to be true at present, presumably on level single life ? (which is ok by me)?

If so, then would it be best to add a little more capital to this within her earned income this year?

Sam

SeniorSam

EdInvestor wrote: »

Your aim should be to fully use your wife's annual tax free allowance of (IIRC) around 9400 p.a, most of which will be taken up by her state pension and possibly all of it by the interest already.If that's the way it's already set up, then no real point in further boosting the pension.

EdInvestor......

Thanks for that. As you will see from my reply to dunstonh .. with my wife's investment interest and her earned income of £7,000 due to finish this year, I believe her allowance is used up.

However, dunstonh makes an interesting suggestion of additional pension contribution based on a higher guaranteed annuity being available. This would seemto make sense at around 12-15% annuity if available?

Sam