Do I need professional help?

RebTech

I reach state retirement age in three and a half years and a recent statement predicts about £120/wk. On top of that I have a small DB pension, I think around £10-£20/wk, and a SIPP currently valued around £55k (with HL). Also something like £12k invested without any tax wrapping. I have no property, partner or dependants, living in a small rented flat.

I earn a low income, in the region of £5-6k (variable), and have been slowly drawing on capital. It seems likely that will dry up a year or two before I reach 65, on the other hand I plan to on working as long as I can.

At the moment it seems to me my best option would be to start taking UFPLSs as needed from the SIPP when my current investments are all gone, and possibly continue to use the SIPP that way after reaching 65.

So my question is, does that seem like a reasonable way to go, and if not (or maybe even if so) should I seek professional advice?

Edit: to clarify, I'm not currently taking the DB pension (or any other pension or benefit apart from working tax credit), I'm just guessing at what it will be worth, I'm fairly sure the best option is to take it at state pension age.

EdGasket

If you can figure out what you want yourself or by asking on here it will be cheaper. IFA's start out around £1500 so that is quite high relative to your amounts involved. You can also try the free pension advice first.

xylophone

You mention a recent state pension statement - is this a "new state pension" statement?

https://www.gov.uk/state-pension-statement

When does the DB pension become payable? (Scheme Pension Age).

What effect will taking your pension have on your WTC?

http://www.adviceguide.org.uk/scotland/benefits_s/benefits_in_work_or_looking_for_work_s/benefits_and_tax_credits_for_people_in_work.htm

atush

Can you increase your income enough to not have to draw on the Sipp as you are still working?

RebTech

xylophone wrote: »

You mention a recent state pension statement - is this a "new state pension" statement?

Yes

When does the DB pension become payable? (Scheme Pension Age).

65, I'm almost certain.

What effect will taking your pension have on your WTC?

Good question. I just used the HMRC WTC calculator with ball park figures and it doesn't look too bad but there are too many uncertainties to put much reliance on it at this stage. The main thing is that this issue has been flagged up, thanks a lot.

RebTech

atush wrote: »

Can you increase your income enough to not have to draw on the Sipp as you are still working?

That's possible, what I'm looking at here is a relatively pessimistic scenario, I'm actually hopeful that my income might rise quite significantly. I run two very small businesses, one of which seems to have some potential for growth. But I very much value my leisure time too.

xylophone

65, I'm almost certain.

It might be best to check - if you have reached scheme pension age you might be expected to draw your pension and declare it for benefit purposes?

https://www.gov.uk/claim-tax-credits/what-counts-as-income

jamesd

WTC is a big issue, because taking pension income would harm that. To handle this properly you need to know that:

1. the 25% tax free lump sum is a lump sum and is not income.
2. any way of getting at the remaining 75% has the amount of the taxable 75% treated as income and handled through PAYE.

What this means is that if you need more money your best option is probably to combine WTC claim with using flexi-access drawdown. Flexi-access drawdown lets you take the 25% tax free lump sum but none of the 75% that is treated as income, so this will avoid interfering with your WTC claim.

If WTC was not an issue I'd suggest using flexi-access drawdown to take enough of the 75% to fully use your unused personal income tax allowance, taking whatever tax free lump sum is needed to do that. This could as easily be done with UFPLS.

RebTech

jamesd wrote: »

Flexi-access drawdown lets you take the 25% tax free lump sum but none of the 75% that is treated as income, so this will avoid interfering with your WTC claim.

Thanks very much for this info, but I'm not clear, do you mean taking 25% of the whole in one go (presumably investing whatever I don't need immediately), or something more complex?

atush

RebTech wrote: »

That's possible, what I'm looking at here is a relatively pessimistic scenario, I'm actually hopeful that my income might rise quite significantly. I run two very small businesses, one of which seems to have some potential for growth. But I very much value my leisure time too.

It would be preferable to leave your pension until you actually retire (or if you plan to work until SPA then use it in the last few years)

atush

RebTech wrote: »

Thanks very much for this info, but I'm not clear, do you mean taking 25% of the whole in one go (presumably investing whatever I don't need immediately), or something more complex?

That is how I read it. AS it isn't considered income it wont affect any WTC claim you make whereas taking more would