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Pensions Planning: The NUMBER

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  • crv1963
    crv1963 Posts: 1,495 Forumite
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    It sounds like we're in similar positions regarding our and our partners incomes, current and forecast tax brackets etc. I've been thinking recently about how Mrs. Anon and I can make our investing and forecast drawdown more tax efficient. Have you made any specific plans to try and do this yourself?

    To try to keep Mrs CRV just under the income tax bracket we are planning on using her DC pot (last checked as being just under 100k) and combine her Nest (current workplace pension still contributing) with her SIPP (Our most recent savings vehicle contributing a base 200 per month and ad hoc sums, plan to plough the maximum we can within her earnings limit annually for the next three years, using savings for this).

    So plan is draw 3.5k pa from the 100k DC pot. (Never combining this with anything else).

    Draw 8k pa from SIPP+ Nest combined pot- which will reach zero by her age 64 when my SP kicks in (pot should be around 50-60k at the start).

    Then assuming (hoping) we both reach SPA she will have 3.5k DC money and SP so around 12k pa, I will have DB pension and SP, so an increase of combined income of 8.5k (todays figures).

    If there is a crash then we can draw against the Premium Bonds, ISAs or cut spending or plan less expensive/ frequent holidays- or a combination.

    We didn't start seriously looking at future provision until I was age 53 and Mrs CRV 50, but better late than never!

    With regards to leaving money to heirs we have told them if there is any money left in the DC pot, the equity in the house and any unspent savings then they get an equal share, but they should be aware that we 1) intend enjoying retirement and 2) are likely to have to self fund any future care needs. So don't count on getting anything!
    CRV1963- Light bulb moment Sept 15- Planning the great escape- aka retirement!
  • Anonymous101
    Anonymous101 Posts: 1,869 Forumite
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    edited 24 July 2019 at 10:58AM
    crv1963 wrote: »
    To try to keep Mrs CRV just under the income tax bracket we are planning on using her DC pot (last checked as being just under 100k) and combine her Nest (current workplace pension still contributing) with her SIPP (Our most recent savings vehicle contributing a base 200 per month and ad hoc sums, plan to plough the maximum we can within her earnings limit annually for the next three years, using savings for this).

    So plan is draw 3.5k pa from the 100k DC pot. (Never combining this with anything else).

    Draw 8k pa from SIPP+ Nest combined pot- which will reach zero by her age 64 when my SP kicks in (pot should be around 50-60k at the start).

    Then assuming (hoping) we both reach SPA she will have 3.5k DC money and SP so around 12k pa, I will have DB pension and SP, so an increase of combined income of 8.5k (todays figures).

    If there is a crash then we can draw against the Premium Bonds, ISAs or cut spending or plan less expensive/ frequent holidays- or a combination.

    We didn't start seriously looking at future provision until I was age 53 and Mrs CRV 50, but better late than never!

    With regards to leaving money to heirs we have told them if there is any money left in the DC pot, the equity in the house and any unspent savings then they get an equal share, but they should be aware that we 1) intend enjoying retirement and 2) are likely to have to self fund any future care needs. So don't count on getting anything!



    It sounds like you've gone into a good amount of detail regarding "Cashflowing" your retirement. Which I think is essential but, as you have done, you need to maintain sufficient flexibility in the plans to accommodate any changes either in legislation or your personal circumstance. There's definitely a balance to be made there. You sound like you're well protected from likely downturns with the DB aspects and premium bonds buffer plus flexibility in your lifestyle.


    Regarding heirs, I think your approach is the way it should be for 99% of the population. Pretty much everyone except those that have huge estates passed on from generation to generation.
    Both my parents are still alive, I've had several discussions with them about inheritance. My view is that its their's and they should enjoy it. I think they'd like to leave me and my siblings something but I've always insisted that I'm an adult, I can take care of myself, if there's some left it would be nice but I don't need their money and would prefer they spend it on themselves.
  • NoMore
    NoMore Posts: 1,598 Forumite
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    @crv1963, are you going for 11.5k p.a. for Mrs crv1963 because that's what you need or just because you don't want to pay tax ?


    Because you could get ~16k out per year and not pay tax by using your 25% tax free and the Personal Allowance.
  • BoxerfanUK
    BoxerfanUK Posts: 727 Forumite
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    NoMore wrote: »
    @crv1963, are you going for 11.5k p.a. for Mrs crv1963 because that's what you need or just because you don't want to pay tax ?

    Because you could get ~16k out per year and not pay tax by using your 25% tax free and the Personal Allowance.
    That's a good question NoMore :T

    Tbh I have a similar dilemma with my OH DC pot. We are planning to DD her DC pot to the tax threshold, but we don't actually need it all so should we DD less I just don't know!!! It seems that not making full use of the personal allowance would not make a lot of sense.

    Also unsure whether to take the 25% PCLS and draw 12.5K (at todays rates)or go with UFPLS and draw 16.6K thus leaving more still invested in the pot.

    Worse problems to have I guess. :)
  • Anonymous101
    Anonymous101 Posts: 1,869 Forumite
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    BoxerfanUK wrote: »
    That's a good question NoMore :T

    Tbh I have a similar dilemma with my OH DC pot. We are planning to DD her DC pot to the tax threshold, but we don't actually need it all so should we DD less I just don't know!!! It seems that not making full use of the personal allowance would not make a lot of sense.

    Also unsure whether to take the 25% PCLS and draw 12.5K (at todays rates)or go with UFPLS and draw 16.6K thus leaving more still invested in the pot.

    Worse problems to have I guess. :)



    Personally I'd take the approach of taking the most of the pension as possible whilst its tax free. You can re-invest any you don't need into S&S ISA, or any other vehicle, giving you the same position post-tax as you would have had pre-tax if you didn't take it. Once its out the money is in your hands and not at the mercy of HMRC!
  • cloud_dog
    cloud_dog Posts: 6,326 Forumite
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    BoxerfanUK wrote: »
    That's a good question NoMore :T

    Tbh I have a similar dilemma with my OH DC pot. We are planning to DD her DC pot to the tax threshold, but we don't actually need it all so should we DD less I just don't know!!! It seems that not making full use of the personal allowance would not make a lot of sense.

    Also unsure whether to take the 25% PCLS and draw 12.5K (at todays rates)or go with UFPLS and draw 16.6K thus leaving more still invested in the pot.

    Worse problems to have I guess. :)
    Our plan (at present) is to withdraw as much money as possible tax free using the PA from DC pension pots. Haven't quite decided whether to take the 25% PCLS or use UPCLS but, whichever way we go the aim will be to withdraw the maximum from the pots before commencement of DB schemes / SP. It just so happens that 2 x this amount is around 'Our Number' (will be more than actually) and so any excess will simply be put in to work in the same investment it came from but in an ISA account.

    The main reason I am ok doing it this way, and I believe the main reason for not doing it this way i.e. do not withdraw the maximum from your DC pots / retain it in your DC pots, is probably related to IHT planning / considerations. As with everything I will continue to monitor 'things' but I would prefer to maximise our income/opportunities in retirement over IHT (which is likely to be minimal for us / dependants).
    Personal Responsibility - Sad but True :D

    Sometimes.... I am like a dog with a bone
  • NoMore
    NoMore Posts: 1,598 Forumite
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    One downside to taking out as much as possible, whether you need it or not, is IHT considerations if your estate is large.


    EDIT: Cloud_dog posted at same time mentioning the same thing
  • DT2001
    DT2001 Posts: 842 Forumite
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    NoMore wrote: »
    One downside to taking out as much as possible, whether you need it or not, is IHT considerations if your estate is large.


    EDIT: Cloud_dog posted at same time mentioning the same thing

    If you do not need it and your estate is likely to be subject to IHT you maybe able to pay regular amounts (Section 21 of the Inheritance Tax Act 1984 deals with the normal expenditure out of income exemption.) to your beneficiaries. It seems you need to keep good records and is not black and white.
  • DT2001
    DT2001 Posts: 842 Forumite
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    MallyGirl wrote: »
    I will keep on focusing on the pension for now as OH is not ready to retire, whatever the numbers might say. I might reduce my hours later or move to an employer without sal sac (and the flexibility to change the payments every month if I want to). The rules and limits on pensions may change. I do put some in the ISAs too so that we can smooth the tax bill in retirement.
    In some ways I wish I had 'got it' earlier but actually I am happy with the approach I am taking now. I couldn't do it without the offset mortgage though.

    I understand your position as my OH enjoys her work (and the social interaction that brings) and our total is enough to stop now.
    As others have suggested on different threads couldn’t you borrow on your mortgage to cover until drawdown is available and repay with 25% tax free funds to effectively rebalance your pots? I know you say you’re happy with your approach but I wondered if you could reduce your hours/move earlier if you wanted?

    When you state that your total is enough do you calculate on the basis of a particular SWR and personal tax allowance? With Boris in power it reminded me that my forecasts should provide not only for variable investment returns but also changing tax scenarios. I’m optimistic that we can vary our expenditure to cope with fluctuations.
  • crv1963
    crv1963 Posts: 1,495 Forumite
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    NoMore wrote: »
    @crv1963, are you going for 11.5k p.a. for Mrs crv1963 because that's what you need or just because you don't want to pay tax ?


    Because you could get ~16k out per year and not pay tax by using your 25% tax free and the Personal Allowance.

    Undecided at the moment, the 11.5 we think will be the need, but we could take the 16k, we'd place excess of need into ISA or premium bonds, it will be a case of deciding when we get to drawdown, taken faster will deplete the pot earlier, we will have to wait and see I think.

    Premium bonds are a choice because no tax on winnings so no juggling about with fears of any tax on savings, tied up loosely as in accessible but have to clearly go through a process to get the cash back in a few days-so can't take out with the hole in the wall so can't spend on a whim, and an opportunity however unlikely to win something big!

    Juggling lots of different balls at the moment, pension savings, future proofing our home- spending some savings for this and an unexpected sum from Mum as well as working extra hours to fund future needs, I will be glad when the plans come together and we are actually retired.

    Son aged 22 at interview asked the panel about pension contribution from employer, was told he was the first young person ever to ask that of a panel at the company and why he'd asked it. His response to the panel was "When I reach your age I intend to have the option of retiring". Oldest interviewer was 44!
    CRV1963- Light bulb moment Sept 15- Planning the great escape- aka retirement!
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