What should I do

DesG

atush wrote: »

If you'd done the projections to 80, 85 and 90 it would have shown a different story?

Hence why it says that 75 is where things change and would make the 1st option the best. I'm sure your calculator works if you want to add them in.

atush wrote: »

And I am positive the LS would not been invested, or at least not all of it. Human nature.

And again, that's why I did the figures assuming there would be no investment.

Thrugelmir

DesG wrote: »

Hence why it says that 75 is where things change and would make the 1st option the best. I'm sure your calculator works if you want to add them in.

What will you annual pension be at 75 though.

Annual indexing will progressively widen the gulf between the options.

mania112

If you think your priority is to leave something for your family, you should go for the early retirement option and reinvest this into a personal pension.

kidmugsy

mania112 wrote: »

If you think your priority is to leave something for your family, you should go for the early retirement option and reinvest this into a personal pension.

If you are going to do this you'll want to keep up to date on the laws about "pension recycling", the gist of which is that you can recycle pension income ad lib, but there are constraints (at the moment) on recycling tax-free lump sums.

Chezcat

kidmugsy wrote: »

There's no point your buying an annuity. What Ivader is suggesting is a legitimate way for you to boost your income. Suppose you opt for "Retire at 55 and receive £6,400.00 per year...".

Now you take £2,880 from your savings and invest that in some sort of personal pension (my own experience of a SIPP at Hargreaves Lansdown is good: other people speak highly of pensions at Cavendish Online). The provider then claims £720 from the government, and your fund therefore grows to £3600. After waiting a few weeks for all this to take effect, you then withdraw the £3,600, closing the pension. Your income for that tax year is therefore £6,400 + £3,600 = £10,000. The tax-free personal allowance for 2015-16 is £10,500, so you'd get your income free of income tax. You can do this year after year if you like. Your profit is £720 per year, less the provider's charges. You can return the £2880 to your savings and wait to repeat the operation in the next year. So effectively your annual income becomes £720 + £6,400 = £7,120 (less charges).

I suppose it's possible that a future government would put a stop to this, but until then it's absolutely above board.

I have been following this post as the situation is similar to mine although I do have investments to keep me going( I am 54 at present). Thanks for this information, I need to do some research now!

atush

DesG wrote: »

Hence why it says that 75 is where things change and would make the 1st option the best. I'm sure your calculator works if you want to add them in

And I am sure you left them out to make it look like taking the LS and lower pension was a good idea.

digannio

kidmugsy... thanks very much for the information in 11 above. I hadn't realised this was the case and I will be having a close look at this.

I'm 58 and retired early with a company pension and I have been looking at using this annual pension contribution of £2,880 to boost a Scott Widows pot I have that stands at around £29,000. I am intending to perhaps buy an annuity with this pot along with another pension pot (which is currently around £14,000) when I'm 65.

But your suggestion has given me another possible way forward. This could boost my current annual income until I take an annuity at 65 followed by the full annual State Pension that I'm due at 66.

Are there any hitches in claiming this annual cash and repeating the opening and closing of a pension each year (with the Govt cash boost) as it does seem a bit of a loophole? Also why for tax purposes would it count as extra income annual income of £3,600 when you have put in £2,880 yourself?

Thanks again for the info....

kidmugsy

digannio wrote: »

I'm 58 and ... I have been looking at using this annual pension contribution of £2,880 to boost a Scott Widows pot I have that stands at around £29,000.
But your suggestion has given me another possible way forward. This could boost my current annual income until I take an annuity at 65 followed by the full annual State Pension that I'm due at 66.

If your Scottish Widows pot is a private pension, or a "Defined Contribution" scheme from previous employment, you may not even need to make the £2880 contribution every year. You could transfer that SW pot to a provider who will allow drawdown under the new laws expected to take effect from 06/04/2015, and just draw enough money each year to use up your Personal Allowance. That's called "phased drawdown". (I'm assuming that SW won't have altered their "systems" to allow it, but that may prove wrong.)

Suppose your current income is £8,100 p.a. (for the sake of illustration). Next tax year that will leave you with unused personal allowance of £10,500 - £8,100 = £2,400. So you withdraw that from the pension; it will be accompanied by a tax-free sum of £800. The remainder of that pension pot remains "uncrystallised" ready for use again in the next tax year.

The only possible catch would be if transferring out of SW were to cost you any advantages there: the ones to check would be whether that pension brings you free life insurance, or offers an attractive "guaranteed annuity rate" (GAR).

digannio wrote: »

Are there any hitches in claiming this annual cash and repeating the opening and closing of a pension each year (with the Govt cash boost) ... Also why for tax purposes would it count as extra income annual income of £3,600 when you have put in £2,880 yourself?

No hitches; the provider will have had his charges, since he has to cover his costs and make a living on top of that. For tax purposes the taxable income is 75% x £3,600 = £2700. They tax you because they tax you, but you can hardly complain when £720 of taxpayers' money was gifted to you in the first place.

digannio

Thanks again for some valuable info. The phased drawdown is certainly something I will now look at for next year. It could be the ideal product for me. The SW pension is an old private one that's with profits. There are no annuity guarantees or life insurance and no MVR or exit charges. I've been looking at what to do with it but just left it for now as it has been performing OK, rising by more than £11,000 in the last five years with no contributions into it.

The other pension pot I have is an old DC one through Fidelity which stands at around £13,000, invested in some world and GB funds. I suppose I could switch this one into a new provider alongside the SW one for drawdown.

One question with this phased drawdown business. If the choice you make doesn't perform particularly well and you continue to draw, say £3,000 to £4,000 up to your personal allowance, isn't there a danger it could very very rapidly be all used up?

kidmugsy

digannio wrote: »

The SW pension is an old private one that's with profits. There are no annuity guarantees or life insurance and no MVR or exit charges.

Would you be at risk of losing a terminal bonus? Could you avoid such a loss by changing your retirement date in good time, then doing the transfer (if necessary) on that date?

digannio wrote: »

The other pension pot I have is an old DC one through Fidelity which stands at around £13,000, invested in some world and GB funds. I suppose I could switch this one into a new provider alongside the SW one for drawdown.

(a) If SW carries a terminal bonus and you want to preserve that, start with Fidelity. It may be that you won't even need to transfer, and that Fidelity will offer phased drawdown.

(b) The whole point is to use it up while the withdrawals are tax-free. Once you start your State Retirement Pension you presumably (i) will become a taxpayer, and (ii) will have less need of the private pension money, by virtue of the state money.