Pension rethink

Crystal_Pixie

kidmugsy wrote: »

Oof! That's about 6% they are hauling off for every year early you take it. That gives you a real incentive to delay taking it to as near your Scheme Retirement Age as possible (unless at some point past 55 they tell you that they're going to raise the SRA to (say) 67: you'd rethink at that point.)

Otherwise your current plan seems good, as long as you review it every couple of years to see how things are going, how pension law has changed, and so on: just ordinary, common sense things.

One other thing: if it's relevant it's almost always a good idea to pay enough in pension contributions to let you avoid 40% income tax. Unless complemented by some employer contribution, or achieved by salary sacrifice, contributing to avoid 20% income tax isn't terribly attractive until you pass 55 when the money suddenly becomes available to you and therefore you don't have to weigh up being denied access to it. There's one exception: you want your DC pot to become big enough to be able eventually to pay out enough to let you use your personal allowance fully once you've stopped earning and before you start your DB and State pensions.

Thank you for your response Kidmugsy that makes a lot of sense. I am using salary sacrifice as much as possible - car lease etc. As for trying to avoid 40% tax I am struggling with that one. I am not too sure how much I am allowed to contribute as I am putting in over £300 a month to my DB pension and my employer I believe puts in much more (I think it might be as much as 12%). I am trying to put as much as I can into my SIPP and S&S ISA at the moment.

Linton

Crystal_Pixie wrote: »

Thank you for your response Kidmugsy that makes a lot of sense. I am using salary sacrifice as much as possible - car lease etc. As for trying to avoid 40% tax I am struggling with that one. I am not too sure how much I am allowed to contribute as I am putting in over £300 a month to my DB pension and my employer I believe puts in much more (I think it might be as much as 12%). I am trying to put as much as I can into my SIPP and S&S ISA at the moment.

Your total annual pension contributions are limited to £40K including employers contributions, or your gross earnings through employment (which doesnt include Sal Sac), so you would seem to have plenty of leeway to put more money into your SIPP. For DB pensions you should ask your pensions people what the number is to be used for the £40K calculation - it only indirectly depends on your and your employer's actual contributions. Note that any unused part of the £40K allowance can be carried forward whereas the total earnings limit does not permit carry-forward.

jamesd

The key thing here seems to be early retirement potential. A rule of thumb that understates potential income uses four percent of the pension pot value. Instead of taking a six percent a year cut from DB you'd transfer to DC and do that unreduced.

Depending on your income target and non-pension assets you might be able to retire now and 55 looks likely to be quite easy.

A read of Drawdown: safe withdrawal rates and using cfiresim to consider options looks likely to be useful.