Pensions Planning: The NUMBER

kimwp

https://forums.moneysavingexpert.com/discussion/comment/82145976#Comment_82145976

Presumably also you have discussed it, but in case not, your current plans involve your wife retiring at 63 (Presumably so you retire together), which means she is losing more of her health before retiring. If she isn't already, then considering her retiring earlier, or going part time would seem reasonable.

If you will have 5k net in pension income, mostly from your pension, presumably you will be paying 40% tax on that? So not much point saving 40% tax to pay 40% tax, when your wife could be saving 20% tax by paying into a pension and taking less than the first tax threshold so paying 0 tax on withdrawal?

hugheskevi

If you will have 5k net in pension income, mostly from your pension, presumably you will be paying 40% tax on that? So not much point saving 40% tax to pay 40% tax, when your wife could be saving 20% tax by paying into a pension and taking less than the first tax threshold so paying 0 tax on withdrawal?

The contributions are benefiting from salary sacrifice, so getting at least 42% relief. The pot is not particularly close to the Lump Sum Allowance (but something to keep an eye on in future), so even if all the withdrawal is subject to higher rate tax, that is a tax rate of 30% factoring in pension commencement lump sum.

That gives an uplift of (£70 / £58) = 20.7%, and more if some of the employer NI saving is passed on, so well worth doing in addition to partner pension.

MarzipanCrumble

OK - been there in that I deferred SP at !0% pa increase and worked for about 5 years beyond SP age (female, old SP).

Just keep an eye on IHT liability.

CrickJon

https://forums.moneysavingexpert.com/discussion/comment/82146706#Comment_82146706

I won't be taking any lump sum, so if my pension withdrawals are reduced by 25% as they are tax free, and because we will have approx £120k in ISA savings, the plan would be to utilise that and the 25% tax free, to ensure we never fall into the 40% tax bracket.

Example - non-SP:

Withdraw £66,000

Tax free £16,500

Taxable pension income £49,500

Personal Allowance £12,570

Taxable at 20% £36,930

Approx income tax £7,386

Net pension cash £58,614

ISA withdrawal £5,000

Spendable cash £63,614 (£5,301 per month)

This is kind of how I saw it working, I get that we will miss out on some of the wife's £12,570 personal allowance (she will only take in around £2.5k pa in pension), so we would only be missing out on 20% of approx £10k). When we get to our SPs, there will be much less stress on my pension and our ISA.

Organgrinder

Can you transfer some of your wife's tax allowance too?

I think it's £1260 saving £252 tax per annum.