What to do with Cash Lump Sums for best returns.

NarkT_Ov

As I'm taking early retirement in 2015 I'm looking for the best interest rates for my money.

Last figures I have from April 2014 are £132k, tax free from pension and £54k after tax from severance. These will be higher for next year as a pay rise is due from Jan to June and I'll have paid into pension for another 16 months from April 2014.

I'll have a pension that will be just shy of £20k for the year before tax. So can play around with the lump sums as I have no debts other than paying council tax, utilities etc.

Also have savings circa £80k tucked away so free to take a little risk

mgdavid

are you sure there's no option to reduce the lump sum and have a larger regular pension payment?

colsten

For savings, see your other thread: https://forums.moneysavingexpert.com/discussion/5141932

If you are thinking about investments, you should start by reading about investments if you are new to them. Perhaps also engage an IFA if you feel you need advice.

Do you need all of the £132K in cash in one go? Wouldn't much of that be safer in your pension fund? Is your pension a final salary pension?

NarkT_Ov

mgdavid wrote: »

are you sure there's no option to reduce the lump sum and have a larger regular pension payment?

Could take what ever % I like but 99% of employees go for the 25%. I could take a full pension and no lump sum but pay more tax on pension. So why give it to the tax man?

NarkT_Ov

colsten wrote: »

Is your pension a final salary pension?

Yes I'm on a final salary DB scheme.
Old skool I.C.I. pension scheme that I've been in for 37 years. ;)Thank you I.C.I

PeacefulWaters

NarkT_Ov wrote: »

As I'm taking early retirement in 2015 I'm looking for the best interest rates for my money.

Last figures I have from April 2014 are £132k, tax free from pension and £54k after tax from severance. These will be higher for next year as a pay rise is due from Jan to June and I'll have paid into pension for another 16 months from April 2014.

I'll have a pension that will be just shy of £20k for the year before tax. So can play around with the lump sums as I have no debts other than paying council tax, utilities etc.

Also have savings circa £80k tucked away so free to take a little risk

Are you a 40% taxpayer?

There's an opportunity this tax year and next tax year to reduce your 40% tax liability and withdraw it when retired paying 20% tax.

colsten

NarkT_Ov wrote: »

Yes I'm on a final salary DB scheme.

In which case, unless you really need all of the £132K in cash, you would almost certainly do better leaving it invested in your pension as it gives you a guaranteed return for life without you having to learn about investments and making your own decisions on where best to invest the money.

NarkT_Ov

PeacefulWaters wrote: »

Are you a 40% taxpayer?

Yes I pay 40% tax :mad:

PeacefulWaters wrote: »

There's an opportunity this tax year and next tax year to reduce your 40% tax liability and withdraw it when retired paying 20% tax.

Tell me more

Mistermeaner

NarkT_Ov wrote: »

Yes I'm on a final salary DB scheme.
Old skool I.C.I. pension scheme that I've been in for 37 years. ;)Thank you I.C.I

Don't worry I'm still working there to keep your pension nicely topped up.

Last forecast for me I only have another 32 years until retirement :j

PeacefulWaters

NarkT_Ov wrote: »

Yes I pay 40% tax :mad:

Tell me more

Subject to annual limits, you fund an additional pension scheme to get the maximum 40% tax relief that you're entitled too.

AVC
Personal pension
SIPP

You then retire. Become a 20% taxpayer. Take 25% of this additional investment back as a lump sum. Drawdown the balance from the additional pension scheme over time and pay 20% tax on it. Perhaps bridging the income gap until state pension kicks in.

tigerspill

PeacefulWaters wrote: »

Are you a 40% taxpayer?

There's an opportunity this tax year and next tax year to reduce your 40% tax liability and withdraw it when retired paying 20% tax.

Can you not take 25% of the pension pot as a lump sum tax free when you retire?