The Great Hunt: Getting ready for retirement

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  • Keep a detail record of your current actual spending for at least a few months - there are several free budgetting tools available.
    Look at priority costs - housing, food, utilities, payment of debts - to determine the absolute minimum income you would need.
    Compare this with your prospective retirement income.
    This will help you decide whether you need to keep on working, downsize or seek help in managing your existing debts.
    Any surplus can be allocated to leisure activities and other non-essential spend.
    If you retire early, see whether it makes sense to take any private pension now instead of waiting for to reach pension age.
  • slimmer1slimmer1 Forumite
    18 Posts
    Spend on all possible large items (eg house maintenance, car replacement etc) whilst still working. Also purchace any planned big items and replace any old ones before they break. It's much easier to find spare cash before your income drops.

    I echo others on plan, plan, plan!!

    Also write your 'Bucket list'. It's so great to cross items off.

    Talk to other fairly recently retired friends. Most get by quite nicely on a surprisingly smaller budget. Remember your lifestyle will change so much, no commuting, no national insurance to pay and you can take advantage of cheaper offers (out of season trips, mid week entertainment etc).

    KEEP FIT!!!!!! It's no good retiring then finding you can't enjoy it.
  • Hi Guys,
    This is my first post to this forum so sorry that it is a bit long. I can see that there have been a number of useful posts on this thread which offer advice on living into retirement. I was drawn here during my search for some retirement financial advice and I will be consulting an IFA. I have maybe left things a little late as I am due to retire in October this year but I have been doing the sums to work out how my wife and I would be able to live on our pensions. Naively, when starting out with a private pension some forty years ago, I assumed that you paid until you were 65 then started to receive a pension from the company that you had been paying. I suppose that in it's simplest form that would be the case if you wanted to go down that road but the options that are now available make the decision process far more complicated and potentially dangerous if you choose the wrong solution. Then the government throw the curveball when they announce in the budget that as of next April you can lift the lot and do with it as you wish. So here's the scenario that I would like to put to you for your thoughts.
    Assume that retirement is taken on the "normal" date of 65th birthday (Oct 2014) and that 25% tax free lump sum is drawn from all funds, the following is approximate income achievable taking into account things like spouses pension, RPI annual increments & minimum term payout etc.
    Final salary pot of £115,000 offering the lump sum and a pension of £370 pm.
    Various pots from other paid up funds of £105,000 offering the lump sum and a pension total of £360 pm.
    So an all up total pension of about £730 pm pre tax on offer.
    Current choices are limited and would appear to be: -
    1. Buy an annuity with the balance, either from the company or on the open market, and hope for the best.
    Pros - You have a regular income that can be easily quantified.
    Cons - You gamble almost a quarter million on outliving the fund.
    2. Wait until April 2015 and lift the lot to invest elsewhere, say in the buy to let market for example.
    Pros - Your capital is invested in bricks and mortar and hopefully will appreciate in value, future recessions notwithstanding.
    No annuity provider gets to keep your hard saved pot.
    There is an inheritance to pass on to your family.
    Cons - You have to manage the investment regardless of which way is chosen to invest.
    Investments can go down as well as up.
    I am sure that there are numerous options that I have not yet thought of and I would really like to hear some of your views.
  • livialivia Forumite
    5 Posts
    Thanks to those who read my rant . YES the 25% is taxed at source i.e pension provider who automatically deduct 20% plus if over £31865 you may pay more 30% etc. Then have to tell inland rev who will add to all or any other income for that tax year then deduct the allowance and then TRY to get the overchargeof tax by pension provider back for you-I.R says this can be difficult so it is NOT TAX FREE.you pay on the 25% as earned income!!
  • nohnoh Forumite
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    livia wrote: »
    Thanks to those who read my rant . YES the 25% is taxed at source i.e pension provider who automatically deduct 20% plus if over £31865 you may pay more 30% etc. Then have to tell inland rev who will add to all or any other income for that tax year then deduct the allowance and then TRY to get the overchargeof tax by pension provider back for you-I.R says this can be difficult so it is NOT TAX FREE.you pay on the 25% as earned income!!


    No.
    The PCLS (pension commencement lump sum) up to a maximum of 25% is paid tax free by the pension provider.

    Tax if due is only deducted from any income paid to you.
    http://www.hmrc.gov.uk/manuals/rpsmmanual/rpsm09104120.htm
  • jem16jem16 Forumite
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    livia wrote: »
    Thanks to those who read my rant . YES the 25% is taxed at source i.e pension provider who automatically deduct 20% plus if over £31865 you may pay more 30% etc. Then have to tell inland rev who will add to all or any other income for that tax year then deduct the allowance and then TRY to get the overchargeof tax by pension provider back for you-I.R says this can be difficult so it is NOT TAX FREE.you pay on the 25% as earned income!!

    This is not correct.

    25% of your pension pot is deducted and paid to you tax-free. The rest will be taxed as normal income which is what the pension provider will tax at 20%.

    Perhaps if you give some actual figures?
    How much was the pension pot?
    Was it the only pension pot?
    Did you buy an annuity or was it a lump sum under the small pots rule?
  • Interesting thread for someone who is hoping to retire in the next few years :)

    So... I will not get the state pension for another 10yrs plus..
    The only income I will have until then is a company monthly pension and a little bit of interest from investments.....this will not add up to more than £10000 a year which is the current personal allowance....so am assuming will not get taxed on my income...Yes ??

    Is it better to retire at the end of one tax year than the middle of another ?....assume would get taxed on my pension if my salary and pension above £10000 in one tax year was about £10000 ? Whereas if started receiving pension within one tax year and not above £10000 within tax year = no tax ?
  • So another ques......am assuming if your company pension + your state pension adds up to more than the personal allowance you get taxed on the surplus ??......have worked out personal allowance divided by 12Mths = £833 .....so that's the least would have to live on if reach state pension age...
  • You will find that you don’t actually need as much money after retirement as you think you will. For example with the extra time you can wash your own lettuce (or whatever) instead of dashing into the supermarket for ready-washed veg! (I know we don’t really admit to buying it – but we do!)

    I used to have to wear smart clothes – now I don’t and they last so much longer! Sold lots on eBay and just have a few posh dresses / suits left for a special occasion. I use the bus with my bus pass and save on petrol.

    Did a bit of part time work after I retired – but the tax man got most of it so I don’t do that anymore.

    I spend a lot of time at the gym and swimming pool – so a gym membership (off peak is cheaper) is necessary.

    Most of all, I enjoy not having to meet stressful deadlines – I don’t watch too much daytime TV – and I make sure I have a little sit down at lunchtime. It's just great!
  • jem16jem16 Forumite
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    So... I will not get the state pension for another 10yrs plus..
    The only income I will have until then is a company monthly pension and a little bit of interest from investments.....this will not add up to more than £10000 a year which is the current personal allowance....so am assuming will not get taxed on my income...Yes ??

    Yes.
    Is it better to retire at the end of one tax year than the middle of another ?....assume would get taxed on my pension if my salary and pension above £10000 in one tax year was about £10000 ? Whereas if started receiving pension within one tax year and not above £10000 within tax year = no tax ?

    Correct.
    So another ques......am assuming if your company pension + your state pension adds up to more than the personal allowance you get taxed on the surplus ??......

    Correct.
    have worked out personal allowance divided by 12Mths = £833 .....so that's the least would have to live on if reach state pension age...

    Why would you rather have less just to avoid paying some tax?
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