Have I done the right thing...

simonfitba

Reckon a couple of those TSB 5% accs would be good for £4k.

atush

She has crystallised her pension and is in the process of taking the 25% tax-free lump sum, spread over a few years. I reckon she has another couple of years of that to go.

Why is she not taking the 25% in one go?

simonfitba

atush wrote: »

Why is she not taking the 25% in one go?

She has cash savings after sale of her house. By spreading the 25% the money stays invested, doesn't it?

bigadaj

simonfitba wrote: »

She has cash savings after sale of her house. By spreading the 25% the money stays invested, doesn't it?

That's not normally the way it's done. To take the 25% tax free you'd crystallise the pension pot, though if you have several pots you can crystallise them at different times.

Once the pot is crystallised you'd lose the death benefits so there isn't any benefit in not taking the 25% out and investing or saving it. This can obviously be done outside an isa but there would potentially be tax to pay. This sum can then obviously be put into isas over progressive years to minimise tax.

AlwaysLearnin

I guess you mean invested in a tax free wrapper, as you could always invest it once taken.

By my reckoning, given the figures provided, she looks in good shape. £12k requirement, less £5.7k state pension, leaves £6.3 p/y to find. £70k savings, plus a total 25% pension lump sum of £42.5k gives £112.5k, leaving £127.5k in the pension pot. She's therefore got a lot of years worth in savings, or from looking at the GAD tables she should be able to get more than the £6.3k p/y from drawdown.

How she achieves it is up to her really, but it's not necessarily an either/or thing, i.e. she could look to draw down enough to make full use of her personal allowance (£10k 2014/15), and supplement by running down her unwrapped savings.