Final Salary Scheme transfer - justified?

kidmugsy

Smiffy7 wrote: »

net redundancy pyt of circa £90k.

Bloody hell, he likes paying income tax, your Dad. If £30k of that is tax-free, how much tax will he have paid on the other £60k net?

Is there no way to reduce it by spreading it across two tax years? You're an accountant, can you at least do something on that?

bigmatt1174

jamesd I am getting a little worried with your propensity to encourage borrowing - first of all don't overpay your mortgage, then looking to use a 5-7% credit card, and even mentioning Equity Release is frightening.

:eek:

jamesd

bigmatt1174, if you dislike the use of borrowing against certain future income as a tool, that's OK. I'm content to use and advocate it as a tool when it seems useful. And to advocate getting rid of it as a tool when that seems useful and at the time that seems most useful.

Not overpaying a mortgage isn't encouraging borrowing. It's discouraging reducing borrowing in one specific way and contrasting that approach and timing of it with others. And in the context you were referring to, doing it as part of a discussion that continued with lifetime financial planning, including retirement income provision, possible early retirement planning, tax planning and a range of protective insurance products. In that specific case, where there was already an interest only mortgage in place, what I suggested be considered was pension planning for a person who had no pension provision in place, combined with use of a portion of the pension lump sum to repay the mortgage, while educating those involved about the basics of how to get started on working out what sort of sums might be needed and what sort of safety margins - 50-100% - might be prudent for pension income planning. Contrast what I've discussed in that context with how you replied to them about their question and in the ongoing discussion.

What do you anticipate the lifetime cost of taking a DB pension five years before NRA will be? How does that cost compare to the cost of the alternatives that have been discussed here?

Remember the opening brief: "He could take a pension of approx. £27k pa at age 55, index linked for life with 50% widows pension - but this would not provide him with sufficient income to maintain his current standard of living". So we know that taking the pension five years before NRA produces failure to meet their income need and of course also has consequences for the rest of their life, unlike borrowing for the shorter terms generally being considered here.

Equity release shouldn't be frightening. It's a range of types of mortgage that is often available at the ages involved here and can be a useful way to translate inaccessible capital into income. Whether that borrowing should then be repaid once the higher sustainable income is available would depend on the financial objectives involved. Some would have maximising inheritance as an objective, others would have maximising income during their own lifetime as the dominant objective. The former may want to repay the borrowing, the latter may not. In this case I've assumed that there is a desire to increase inheritance and that the borrowing would be repaid once the higher income is available, or from life assurance.

You might find it useful to search for some of the posts where I've described aspects of my personal financial planning.

Meanwhile, what is your suggestion for possible solutions to the problem Smiffy7 has posed here?