So, when you're retired, whats your income?

AnotherJoe

Reason behind the cryptic comment is, I was just wondering about how different institutions determine your income. Various forms, applications (bank accounts, saver accounts etc) and such like require you to state your income.

But whats your income if you are on drawdown when your income is pretty much whatever you want it to be?

If there's a government benefit that depends on you having an income less than £x, and you only have say SP as a constant source of income, and you pay for your fois gras at harrods and RTW cruises by drawing down from your £2M ISA, is your income just £155 a week? (OK sure they may also enquire about other savings but does that apply if its all in a SIPP and nothing in ISAs or banks accounts?)

Or if there's a bank account that requires at least, say £5k a month income, can that be satisfied by a standing order from your Santander 1-2-3 that puts in £5k a month and then moves it back the next day?

Linton

Yes this is a real problem area. It's not just large drawdown pots, you could be deferring your State Pension. Having excess drawdown could also give rise to interesting situations. For example can taking a regular high but non-sustainable income from drawdown and putting the excess in an S&S ISA enable one to get better credit terms? For example a cheap interest only mortgage to add a bit of leverage to one's investing.

fabsaver

This is something I've struggled with too. Gone are the days when people worked right up to retirement and then had an defined annuity or final salary pension as 'income'. More and more people will be living off their ISA's and SIPP's before their state (and/or any occupational pension) is due to start.

The financial institutions need to move with the times and allow more flexibility in their application criteria. Yes in practice you can meet any bank funding requirement simply by moving money around. The money can just visit for a few minutes and doesn't even need to stay overnight. However if you don't put the necessary 'income' on the application form the computer is more likely to say no.

What is income? Is it the actual interest and dividends received? What if all your stock market funds are in accumulation units? Do you count growth? Maybe it should be based upon a 'safe withdrawal rate' of say 2-4% of total investments. Without any defined criteria it can be, as you say, whatever you want it to be.

More worryingly could it be considered fraud if the 'income' stated on a bank application form cannot be proved if requested?

molerat

I "earn" £84K net pa, that is what is paid into my current accounts

AnotherJoe

Is that by chance the same £4K circulating around 21 or so accounts ?

p00hsticks

AnotherJoe wrote: »

If there's a government benefit that depends on you having an income less than £x, and you only have say SP as a constant source of income, and you pay for your fois gras at harrods and RTW cruises by drawing down from your £2M ISA, is your income just £155 a week?

One of the drivers for having the new State Pension amount pitched at £155 is that it's above the level that would let someone qualify for the means tested Pension Credit

Councils will need to have something in place to cater for Housing Benefit though.....

molerat

AnotherJoe wrote: »

Is that by chance the same £4K circulating around 21 or so accounts ?

Close, just the same £1K circulating round 7 accounts each month

AnotherJoe

molerat wrote: »

Close, just the same £1K circulating round 7 accounts each month

So, with an hour or so's work on your standing orders, you could double your income?
Fantastic !

LHW99

OK sure they may also enquire about other savings but does that apply if its all in a SIPP and nothing in ISAs or banks accounts?

I don't think you have to say how much you have in / withdrawn from ISA's on your tax return (and I don't think you had to put ISA's on the form some years back when Child Tax Credit came in).

AnotherJoe

So, as it happens i did a survey questionnaire this morning (surveys for points = airmiles).

A couple of questions,

Whats your income into your bank accounts - so if i was molerat it would be £84k.

And another question
Are you employed (various types).
or
Are you unemployed
or
Are you retired and taking SP.

There was no option - "are you retired and not taking SP"
Or Are you retired and have other sources of income additional / instead of SP.

No doubt all these surveys are written by 20-something whippersnappers who think just as simple as, you are in a job OR you are unemployed OR you are retired and get SP.

fabsaver

AnotherJoe wrote: »

If there's a government benefit that depends on you having an income less than £x, and you only have say SP as a constant source of income, and you pay for your fois gras at harrods and RTW cruises by drawing down from your £2M ISA, is your income just £155 a week? (OK sure they may also enquire about other savings but does that apply if its all in a SIPP and nothing in ISAs or banks accounts?)

Looks like they have this covered https://www.pensionwise.gov.uk/benefits
Basically anything withdrawn counts as income. Even if the pension pot is left untouched it still counts in the assessment. They’ll look at how much you’d get if you bought an annuity, and how much income you’re taking. The higher amount will be used when you’re assessed for benefits.