We’d like to remind Forumites to please avoid political debate on the Forum.
This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
Which pot to spend first?
Comments
-
So, I am 56 (OH 57) and on a similar path, with DB's kicking in at 60 and 62. I am currently working part time and winding down days further, planning to retire from corporate life in May 2018 having then practiced living off our planned retirement income level.
Already projecting overfunding, with FP2016, so I cannot put any more into pensions. Currently reviewing retiring one year early from one or two of my DB schemes to partly offset likely premium LTA charge.
We will drawdown DC funds up to my higher rate tax threshold to Meet our Number (with top-ups as needed from unwrapped cash savings, premium bonds, P2P, unwrapped S&S, ISAs in that order, all dependent on market conditions at the time) once I have stopped working. DC funds are currently cash heavy anticipating drawdown, with 40% left exposed to equities to benefit from any potential drop in crystallisation value. We will balance further drawdown levels with my DB income up to higher rate tax threshold.
OH will assign over the max she can of her personal allowance £1100, whilst her smaller DB pension and eventually SP keep her paying no tax. WHilst SP is a while off, we may also draw down from her stakeholder pension up to her personal allowance in the interim.
Whilst the following thoughts are not solely about the order of pots being taken, but about the longer game for a couple, especially where the accessibility of pots is uneven.
OH and my pensions are very skewed towards me, given my DB pensions, so concerned that should I die unexpectedly and that income stream halve, she could be left short, so
1. Not drawing from her stakeholder pension in the near term and just letting it build to her age 75
2. Topping up her (and my NICS) to get as close to max SP as possible. We have both got up to date forecasts and both short of full SP due to contracting out in earlier years.
2. Deferring drawing from her occupational pension (currently investigating what is possible)
3. Taking TFCLS from my DB schemes and putting away in ISAs for her as timing permits. Especially as any spouses pension she would receive would be TFCLS neutral.
4. Deferring her SP when accessible
Any further ideas on this front greatfully received.0 -
Many thanks for the advice.
I'm single with no dependents and currently paying into the DC scheme at a rate equivalent to £40k / year. DB plus state pensions will be just over £20k PA when I get to 66.
So the general plan is to get as much out of the DC scheme tax free as possible, irrespective of which money I actually spend. Only draw back I see is a reluctance on my part to get over committed to stocks and shares.0 -
you could draw down (11.5k next tax year) from dc pension pot from age 55 onwards and top up to 25k
from your cash pot & pay no tax ......do this for a few years . retain some emergency cash.
you are probably already invested in stocks and shares in your isa's and your dc pension funds??0 -
So, I am 56 (OH 57)
OH and my pensions are very skewed towards me, given my DB pensions, so concerned that should I die unexpectedly and that income stream halve, she could be left short, .....
Any further ideas on this front greatfully received.
Some DB pensions have an excellent anti-skew device, whereby you can volunteer to forgo part of your pension so that the eventual widow's pension is bigger. It can also help you avoid LTA problems since 20x your pension will be thereby reduced. Double whammy!Free the dunston one next time too.0 -
I'm toying with the idea of early retirement, and trying to work out which of my savings 'pots' I should spend first. I have a deferred final salary pension in addition to six figure sums invested in each of the following:
- Cash
- Stocks and shares ISA
- DC pension
If I take £25k from the DC pot next year (with no other earnings) I will get 25% tax free, and the benefit of my tax free allowance of about £11k. Overall I will lose about £1,500 in tax. If I spend the cash now then when draw from the DC pot later when I am also drawing from other pension sources, it appears that the tax burden will be greater.
Have I misunderstood something?
OP - you seem to have it covered. the two certainties in life are death and taxes!!
from the limited info you have provided you seem to have amassed tidy sum in the three pots you mention. you don't say what they are in actual terms or even relative to each other but the minimum total has to be 300 k as all pots are in 6 figures.
Hope the cash pot is not too heavy and you are languishing in cash...not a great idea!
you should def consult an IFA ref the management as they will look at a complete picture for you and charge you for the pleasure but IMO its usually def worth it !!
you might consider actually not drawing down your DC pot (maybe take the tax free cash though and add to isa's s&S) . it could double in size in the next 10 years!!!!
OK you would eventually have to pay some tax but you will anyway on your DB and SP when you get to 670 -
maximumgardener wrote: »the two certainties in life are death and taxes!!
The main differences between the two being that taxes are a lot easier to predict!0 -
yes ..certainly thats very true!
i am all for minimising tax and perhaps deferring it till later (we hope) in life0 -
I'm toying with the idea of early retirement, and trying to work out which of my savings 'pots' I should spend first. I have a deferred final salary pension in addition to six figure sums invested in each of the following:
- Cash
- Stocks and shares ISA
- DC pension
If I take £25k from the DC pot next year (with no other earnings) I will get 25% tax free, and the benefit of my tax free allowance of about £11k. Overall I will lose about £1,500 in tax. If I spend the cash now then when draw from the DC pot later when I am also drawing from other pension sources, it appears that the tax burden will be greater.
If you believe that your estate might have to pay a lot of Inheritance Tax then there is a case for preserving your DC pot as long as possible, since you can leave it outside your estate and it will therefor free of IHT.
But if you have no such problem that the sensible thing to do is what you suggest i.e. run down the DC pot quickly, drawing out the Personal Allowance's worth of taxable income each year. Or, to be precise, to draw just enough to ensure that you will be paying no income tax at all. An exception would be if you can foresee that you'd have to pay 40% tax once your FS pension begins. In that case you might as well pay some 20% tax while draining the DC pension, so letting you minimise your 40% payments later. Meantime you could move cash into ISAs (and even Premium Bonds?) to help you avoid paying tax on interest.
Here's a thought. Are you exploiting the £5k p.a. tax-free dividend allowance? If not you could rebalance your portfolio using some of your cash to buy shares and selling shares within your ISAs, to hold as Cash ISAs.Free the dunston one next time too.0
This discussion has been closed.
Confirm your email address to Create Threads and Reply

Categories
- All Categories
- 352.1K Banking & Borrowing
- 253.6K Reduce Debt & Boost Income
- 454.2K Spending & Discounts
- 245.1K Work, Benefits & Business
- 600.7K Mortgages, Homes & Bills
- 177.5K Life & Family
- 258.9K Travel & Transport
- 1.5M Hobbies & Leisure
- 16.1K Discuss & Feedback
- 37.6K Read-Only Boards