My retirement plan

srcandas

I’m about to put my HL SIPP (£116000) into drawdown and put final retirement plans in place (tx for all the help here getting me this far ). If anyone has the time and has a comment it would be much appreciated and if not it has helped me put it down in writing

I’m 61 in August, have a pension being paid of £5142 flat-rate. Have a state pension forecast of £193 per week.

I work for my limited company so for the next two years will take a salary of £16000 to earn biggest part of P2S and then in the third year (when P2S acumulation stops) draw my interest free loan from the company of £25000. Then just one year till state pension kicks in I’ll quit. Unfortunately no value in the company to sell on.

I’m going to put my SIPP into drawdown giving me a tax free lump of £28500 which will pay off the mortgage and leave £11520 in this year’s ISA.

I won’t draw from the HL drawdown SIPP until year 4. I][COLOR="Blue"]Although I had thought about taking the maximum, and using it to defer my state pension by a year or two??[/COLOR][/I.

My wife is 56 and works for the company. She will draw a salary of £9000 for 3 years to build up her state pension entitlement. She has 29 years accumulated in her native Spain and 4 in the UK at the moment. Trying to get it to 35+ if poss although quite what she will get in 2023 is difficult to tell. I’m assuming P2S will have no benefit for her with the new increased base salary.

However she has a SIPP of £12000 and we will stuff this with the max we can over the next three years to give her at least some income (every little helps) to use her personal allowance as much as poss.

We have few other savings but we do have a flat in Spain (value £55000). We will probably end up living in Spain once my 28 year old step daughter settles.

Seems like a plan but still need to decide on the drawdown being used to defer state pension. Any thoughts? :beer:

atush

first, what is the flat rate pension from? Do you need this income or will it be saved in your OH's sipp?

What date is your SP due?

Deferring your SP could be wise, but it will be at half the rate of today if you are over into the new SP? So if you are retiring after, it may not make as much sense (but that 5.?% will be index linked for life).

Have you worked out the approx income from all your non pension assets?

srcandas

atush wrote: »

first, what is the flat rate pension from?

It's two PPs: one Pru the other Scottish Widows. Both paid 20% deducted but I can reclaim if I don't use personal allowance

atush wrote: »

Do you need this income or will it be saved in your OH's sipp?

I don't allocate it. My OHs SIPP gets paid from her salary.

atush wrote: »

What date is your SP due?

2017 after the change so I have two years I think to accrue more SP

atush wrote: »

Deferring your SP could be wise, but it will be at half the rate of today if you are over into the new SP? So if you are retiring after, it may not make as much sense (but that 5.?% will be index linked for life).

Yes it is a complex calculation. Not sure what you mean by new SP??? I understood until 2016 the system was as now. And that I will receive the SP added pension as it is more than the new base.

atush wrote: »

Have you worked out the approx income from all your non pension assets?

It can be anything I like within reason. The advantage of my limited company. I can make it zero in some years and big in others if I wish but of course I want to accrue as much state pension as possible so being salaried until 2016 seems sensible I think.

:beer:

atush

new sp means after the change.

As your SP date is 2017, you can't defer at the fab rate of 10.2%, but instead will only get around 5% for any deferment.

srcandas

atush wrote: »

new sp means after the change.

As your SP date is 2017, you can't defer at the fab rate of 10.2%, but instead will only get around 5% for any deferment.

Thanks for that atush. I hadn't seen that. As always post here and you learn

So give up a year and take 25 years to recoup allowing for the fact it would be taxed. It is inflation protected but doesn't seem very attractive so I guess I can disgard that one.

That just leaves the issue of driving up my partners SIPP. I guess I could give her a pay rise but it does go against the grain :rotfl:

jamesd

I'm not keen on not taking maximum permitted income from the SIPP. You can take the income and put it into a S&S ISA where it will grow and pay income tax free. Or you can take the income and put it into more pension contributions to get another tax free lump sum. Either beats just not taking it and leaving it subject to the use it or lose it annual GAD limit. You don't have to actually spend it just because you take it.

I'm not keen on clearing the mortgage. I'd go with investing the money and using income from investments to help to pay the mortgage payments. I'm assuming, without knowing the mortgage interest rate, that this is possible; it usually is.

It's worth investigating pension contributions as a potentially tax efficient way to get money out of your company.

So far it looks like £15,178 of guaranteed income for the £20,000 flexible drawdown allowed minimum requirement. Worth pondering whether you're interested in qualifying for flexible drawdown buy buying a single life level annuity or not. I don't think so but it's worth wondering. Only income actually being paid counts, drawdown income doesn't count and the minimum will be higher after a planned review before your state pensions start.

Don't give her a pay rise. Just give her more pension contributions...

srcandas

Tx James for your time and offerings.

jamesd wrote: »

I'm not keen on not taking maximum permitted income from the SIPP. You can take the income and put it into a S&S ISA where it will grow and pay income tax free. Or you can take the income and put it into more pension contributions to get another tax free lump sum. Either beats just not taking it and leaving it subject to the use it or lose it annual GAD limit. You don't have to actually spend it just because you take it.

I'm not keen on clearing the mortgage. I'd go with investing the money and using income from investments to help to pay the mortgage payments. I'm assuming, without knowing the mortgage interest rate, that this is possible; it usually is.

So assuming they give me 4% of £87k and £29k tax free lump I get:

2013 : £28500. [I can do 2xISA allowance so most in ] +
2013 : £2088 [ after 20% tax ]
2014 : £2784 [ after 20% tax ]
2015 : £2784 [ after 20% tax ]
2016 : £3480 [within personal allowance. Won't take salary as cannot get P2S]

So as I enter the 2017 tax year 4 months from getting state pension I have: £39636 plus growth in ISAs. But have paid 2.5% on £16k mortgage which I must then repay. And my drawdown pot will have less value.

Let me ponder that.

Sadly £15000 salary for me to get P2S and £9000 for wife to use her personal allowance, plus the company repaying me £25000 tax free is as much as the company can support

But I'm assuming I can put that £9k into my wife's SIPP.

Off to get my spreadsheet going :beer:

jamesd

Why does your drawdown pot have less value? All that's happened is that some of it has moved from the less flexible pension wrapper to the more flexible ISA wrapper. There's no effective tax cost because the same tax would be due whenever the income is taken.

At only 2.5% mortgage interest it's easy to get 2.5% income from investments so it's better to invest the money and use income to pay the cost.