pension dilemma

jamesd

Given the two years of notice she could also make large payments into a personal pension to get the tax relief, then use that to help support herself between age 60 and the normal retirement dates of the pensions. Or top up the smaller one to keep going to NRD of the large one.

atush is right about the chance that the pension from the current job might be takeable early on redundancy, without reduction. That would be an excellent option to use if available.

guymo

kidmugsy wrote: »

If she took the two pensions at 60 she'll sacrifice probably around 15% which would leave her neatly avoiding higher rate tax.

What would be good about avoiding higher rate tax? Given the choice between £1 taxed at 40% and £0 untaxed, I'd rather pay the tax.

(I do agree that it is highly likely that taking reduced pensions is going to work out better for this person than transferring to drawdown. I just don't see why the tax banding makes much of a difference in the above.)

Nual

Many thanks everyone. Yes it is the Pensions Trust. I will pass on the options you have suggested.

xylophone

I will pass on the options you have suggested.

Has your friend read her Scheme Booklet?

Does she know what her options are?

Will there be a redundancy payment?

You mention passing on her pension at death - if she wishes to assist her child could she not take her lump sums and make gifts while living, in the hope of a PET?

mgdavid

guymo wrote: »

What would be good about avoiding higher rate tax? Given the choice between £1 taxed at 40% and £0 untaxed, I'd rather pay the tax.

(I do agree that it is highly likely that taking reduced pensions is going to work out better for this person than transferring to drawdown. I just don't see why the tax banding makes much of a difference in the above.)

Given the choice between retiring at 60 and retiring at 65 or even 62 , I'd rather 60. The point is that early retirement costs, but in this case it will only cost the retiree 60p in every pound.

guymo

mgdavid wrote: »

Given the choice between retiring at 60 and retiring at 65 or even 62 , I'd rather 60. The point is that early retirement costs, but in this case it will only cost the retiree 60p in every pound.

Ahh, so what was really meant was that "all the pension reduction comes out of the 40% bracket" rather than "you get to avoid the 40% bracket altogether". The advantage of the former is clear, but the point is often expressed in a way that makes it look like the latter, which I find confusing. Thanks.