Pensions Planning: The NUMBER

LL_USS

QrizB said:

westv said:

What is "immersive reader" mode?

A setting in your browser.

In Firefox on Android it's an icon showing a rectangle with lines in (like a printed page) in the address bar.

Other browsers / OSs may vary.

I did not know about this. So useful tip to know thanks.

ClashCityRocker1

I don't know how interesting my pensions "planning" is but I have arrived at where I am almost accidently.

I was wandering along earning about £45K in my Civil Service job, so with a CS pension - this was in early 2023 so had about 26 years service in mixture of classic and alpha scheme (then just approaching 64 years of age).

Then I got promoted and apart from cranking up classic pension value it took me well into 40% tax territory. As didn't really need more than £3K or so a month i diverted everything over £50K into an AVC

Since then everything I've done has been based upon getting as much take home pay as poss without paying 40%.

This year I partially retired took most of the classic and all accrued alpha and putting that all into AVC - I calculate will be caught by the £60K annual allowance rules if I stay in work throughout 2026/27 but probably will fully retire that year especially if CS offer a redundancy package which might happen. Over retirement age that will be max 50% of FTE salary.

So what I'm aiming for, my "number" if you like, is when I retire to take as much income as i can without paying 40% tax. If I can retire on between £3k and £3.5K a month will be effectively living on same amount as while I was working! AVC will be a nice pot to draw on too. Obviously I'm over state retirement age (all that goes into the AVC port too)

Stemma

I don't know if this is the correct place for this question. I received a lump sum from a previous pension when I was 50. I am now about to retire, can I get the full 25% tax free lump sum again from another pension fund?

Secret2ndAccount

It's the right area of the forum, but the wrong thread. No worries.
The answer is yes. Each pension comes with its own tax free lump sum. For a defined contribution pension (a pot of money) you can take 25%.  For a defined benefit pension (an ongoing salary) there will be a pension commencement lump sum, which typically isn't 25%. Either way, each pension has a lump sum, and you can take them all. There is a lifetime limit of £268,275 for all tax free lump sums.

Markdavid1962

I just checked my figures from 3 years ago when I retired at 60, now 63 and my expenditure figures have now reached my initial calculation. However everyone's life style is different as we also live in Spain for 5 months of the year, I have included those figures also converted to pounds
We also sold the 4 bed  house in the south of England and moved to Northern Ireland another 4 bed house but the difference in price allowed us to help our 3 children get their first properties, plus we added additional funds to savings. Cost of living is much better in Northern Ireland compared to the south of England

So the expenditure is below £32000 pa and that includes additional holidays, a new car is not priced in as I bought a new car after I retired with cash when i turned 62, the plan is to get a new car every five years but will depend on savings.
I should point out that my wife receives DWP PIP so we reduce the £32000 by £7000 each year. At first we only withdrew £25,000pa but have increased that now this year due to IHT. 

The key for me is Pension growth vs what we draw each year, pension growth across the 3 pension pots since I retired at 60 is between £50,000 to £64,000pa.  I track my pensions twice per month and my current spreadsheet goes back 10 years. With the changes to IHT I am looking at drawing the maximum up to the 20% tax  threshold from the pension pot going forward and as I approach 67 and the state pension kicks in I will lower the amount, this is based on achieving the same growth, if not then £25,000pa. I will be updating my figures to include an inflation element for the next 3 years.

Below is my old calculations, in case its any use to anyone.

	Amount	Months	Total
council tax	150	12	1800
Spain Wise slush fund (Eating etc)	300	12	3600
TV & BB	100	12	1200
Elec	71	12	852
Oil central heating NI	500	1	500
Food	400	6	2400
Bank charges	36	12	432
Petrol	50	6	300
Ferry	1000	2	2000
Insurance Car house	800	1	800
Insurance house spain	200	1	200
Community fee spain	250	1	250
Spain elec pa	800	1	800
Spain water pa	400	1	400
Spain council tax pa	250	1	250
Spain TV BB	25	12	300
eating out Spain (5 months)	1000	4	4000
Petrol SPain	40	4	160
Petrol from Ferry to Spain house	120	4	480
Safety net	150	12	1800
Pool cleaning Spain	50	12	600
Clothing	60	12	720
Car service	400	1	400
Repairs and replacing	1000	1	1000
Mobile	60	12	720
Additional holidays	2	2500	5000
			30964

ukdw

Interesting - I tend be break my expenses down into Mandatory and discretionary too -  and don't worry too much about the discretionary ones - because I can always stop them if I start to run out of money!

Bank charges surprisingly high at 432- is that a Spain thing, or some sort of packaged account?

Interesting your mention of reducing your drawdowns when  the state pension kicks in.

My current plan too is to drop my DC pension when the state pension kicks in - but more recently I have been thinking that effectively means I will be no better off day to day when I get my state pension - so I am wondering whether it might just be worth leaving the drawdown as is, or maybe reducing it a little bit - but not by the whole state pension amount - and take the state pension on top - even if it means paying 40% on some of it.

40% tax by itself sounds a lot - but I am trying to convince myself that its not the 40% I should be worrying about - only the 20% of it above the normal basic rate 20%.

MarriedWithKids89

ukdw said:

Interesting - I tend be break my expenses down into Mandatory and discretionary too -  and don't worry too much about the discretionary ones - because I can always stop them if I start to run out of money!

Bank charges surprisingly high at 432- is that a Spain thing, or some sort of packaged account?

Interesting your mention of reducing your drawdowns when  the state pension kicks in.

My current plan too is to drop my DC pension when the state pension kicks in - but more recently I have been thinking that effectively means I will be no better off day to day when I get my state pension - so I am wondering whether it might just be worth leaving the drawdown as is, or maybe reducing it a little bit - but not by the whole state pension amount - and take the state pension on top - even if it means paying 40% on some of it.

40% tax by itself sounds a lot - but I am trying to convince myself that its not the 40% I should be worrying about - only the 20% of it above the normal basic rate 20%.

FWIW I also break down my expenses into mandatory and discretionary. However, I also found it useful to break down my mandatory expenses into "Subsistance" (everyday living expenses like food, utilities, insurances, fuel, etc) and "Exceptional" (occasional expenses e.g. house maintenance and repairs, new white goods/furniture/electronic goods, etc). 

DT2001

ukdw said:

Interesting - I tend be break my expenses down into Mandatory and discretionary too -  and don't worry too much about the discretionary ones - because I can always stop them if I start to run out of money!

Bank charges surprisingly high at 432- is that a Spain thing, or some sort of packaged account?

Interesting your mention of reducing your drawdowns when  the state pension kicks in.

My current plan too is to drop my DC pension when the state pension kicks in - but more recently I have been thinking that effectively means I will be no better off day to day when I get my state pension - so I am wondering whether it might just be worth leaving the drawdown as is, or maybe reducing it a little bit - but not by the whole state pension amount - and take the state pension on top - even if it means paying 40% on some of it.

40% tax by itself sounds a lot - but I am trying to convince myself that its not the 40% I should be worrying about - only the 20% of it above the normal basic rate 20%.

So your Number is quite flexible. Whilst not worrying too much about your discretionary amount have you taken into account the performance of your funds at all?

My aim is to move as much as possible from SIPP to ISA (unless things change drastically in the budget) utilising our BR tax band. Still waiting for OH to retire so can only partially implement. Once we are both retired we will put in place a transfer of excess income system. We have gifted to one child for property purchase and aim to help other 3 when overseas property is sold.

At SPA I do not foresee any change in total ‘income’ as I have separated out a near cash fund equivalent to SP.

ukdw

DT2001 said:

ukdw said:

Interesting - I tend be break my expenses down into Mandatory and discretionary too -  and don't worry too much about the discretionary ones - because I can always stop them if I start to run out of money!

Bank charges surprisingly high at 432- is that a Spain thing, or some sort of packaged account?

Interesting your mention of reducing your drawdowns when  the state pension kicks in.

My current plan too is to drop my DC pension when the state pension kicks in - but more recently I have been thinking that effectively means I will be no better off day to day when I get my state pension - so I am wondering whether it might just be worth leaving the drawdown as is, or maybe reducing it a little bit - but not by the whole state pension amount - and take the state pension on top - even if it means paying 40% on some of it.

40% tax by itself sounds a lot - but I am trying to convince myself that its not the 40% I should be worrying about - only the 20% of it above the normal basic rate 20%.

So your Number is quite flexible. Whilst not worrying too much about your discretionary amount have you taken into account the performance of your funds at all?

My aim is to move as much as possible from SIPP to ISA (unless things change drastically in the budget) utilising our BR tax band. Still waiting for OH to retire so can only partially implement. Once we are both retired we will put in place a transfer of excess income system. We have gifted to one child for property purchase and aim to help other 3 when overseas property is sold.

At SPA I do not foresee any change in total ‘income’ as I have separated out a near cash fund equivalent to SP.

I do keep a detailed track of where my spending goes, and pay particular attention to regular mandatory spending which for us is about £16k.

Discretionary spending varies quite a lot depending a lot on travel plans or hobby related purchases.

My level of drawdown is like a lot of people on this board I suspect mostly governed by the 20% tax band, rather than either investment performance or the amount of spending.

My strategy in times of big market falls will be to ramp down the discretionary spending a bit and instead buy more units in my ISA.

I'm also in a similar position child help wise - having funded the deposit for one, and trying to persuade other child to open up an investment account so that I can transfer some of my ISA funds over.

My current plan is also to keep total income the same when I hit SP age - by reducing drawdown initially and the every year to match the SP rises.  

However the coming IHT pension changes in particular are making me think it might be worth reconsidering my drawdown approach at that stage - Perhaps making it less governed by tax rates - and maybe more closely linked to either investment performance, IHT planning or actual spending.

Markdavid1962

To answer some of the questions, The Bank Account fees is a packaged bank account, as it has a 90 day trip travel insurance and airport lounge access plus the normal car breakdown etc.

To answer Pension performance and drawdown, the growth across the three pots to date this year (from May) is around 60K, my drawdown month is the end of May so still a few months left of the year,  my wife and I also have Cash ISAs which we maxed out during the working years which are untouched. The first pension pot I have just received the annual statement from October 2024 to October 2025 (Growth after fees 17.47%)

Also looking at IHT and thinking of  the best way to pass funds to the kids, it may be moving money to another country like Spain but need to look in to this still

The other useful tool was a budget planning spreadsheet which I downloaded from the Australian Government, which is useful for planning purposes, especially as I added a Spain workbook