Cetv

Linton

Davo58 wrote: »

My initial thought train was the figure of £171,000 is roughly 29x my pension, if i drew my pension at 64, i would need to live to 93 to get that amount. With the best will in the world i will not be around that long. So i was going to use age 85 and divide the cash accordingly to increase the yearly pension. Bearing in mind i have a small annuity of £125.34 pcm and another final salary scheme.

Unless you are of life-shortening ill health, according to ONS predictions a male aged 64 has a more than 50% chance of reaching 85,about 25% chance of reaching 93 and more then 10% chance of reaching 100. So basing your plans on dying at 84 seems a little pessimistic. Plus you seem to be forgetting inflation.

Better in any case to withdraw the figure you decide on annually rather than keeping it all in cash for 20 years after paying extra rate tax. This means that much of your £171K can remain invested.

dunstonh

My initial thought train was the figure of £171,000 is roughly 29x my pension, if i drew my pension at 64, i would need to live to 93 to get that amount. With the best will in the world i will not be around that long. So i was going to use age 85 and divide the cash accordingly to increase the yearly pension. Bearing in mind i have a small annuity of £125.34 pcm and another final salary scheme.

If you transfer the pension from defined benefit to money purchase, you have a fund of money within the pension. If you die before 75, that fund is paid out tax free to your beneficiaries. If you die after 75, the fund is still paid out to the beneficiaries who will pay no tax if they take nothing from it (i.e. it becomes their pension and they will be taxed when they start drawing on it). If they take it all as a lump sum then they will be taxed.

Whilst you are alive, you can draw an income and lump sum (in a number of different ways). You leave it invested in the meantime. You dont divide it the way you have.

So, transferring it is still a possibility but your thoughts about how to draw it need a bit of work. Maybe having a chat with a pension transfer specialist IFA would be a good idea. First consultation is free.

GunJack

^^^ how does that work, ref. the inherited pension pot and tax on taking it as a lump sum?

jamesd

They get a pension pot and it's tagged as being either taxable or not when taken, also that it has no age restriction for taking money out. When the pension provider pays money from it they run it through their usual PAYE system with relevant tax code from HMRC applied to the taxable pot. Nothing special about a lump sum. Either it's tax free lump or taxable as income and taxed by PAYE.

Arranging for babies or other children to get a beneficiary pension that is taxable be very efficient because they have their own income tax personal allowance. Their parent can then draw on this tax free using the child's personal allowance and use it to meet the child's needs, including housing, clothes and food. Beats leaving it to the parent who may pay more tax when taking money out for the same purpose.

For a normal pension a taxable lump sum is also income and run through PAYE, just like regular monthly income. Knowing that taxable lumps are really just a lump of taxable pension income matters when international tax treaties are involved because it tells you which treaty clause applies. This is how you can get 100% of a pension pot out tax free using the Portugese scheme that sets their tax rate on foreign pension income to nil, while the tax treaty says that income is taxed by your country of residence, Portugal, so no UK tax is due on it either.

enthusiasticsaver

Davo58 wrote: »

Thank you all again. i do have a taxable income of £24000 also, my initial thought was to take it all in one go, but with the higher rate tax figure, i am wavering. If i go at 64 then i have another 6 yrs to go.

Can you not draw it over several tax years to minimise the tax charge. It would be even less if you waited until you retired and no longer had £24k income.

enthusiasticsaver

Linton wrote: »

Unless you are of life-shortening ill health, according to ONS predictions a male aged 64 has a more than 50% chance of reaching 85,about 25% chance of reaching 93 and more then 10% chance of reaching 100. So basing your plans on dying at 84 seems a little pessimistic. Plus you seem to be forgetting inflation.

Better in any case to withdraw the figure you decide on annually rather than keeping it all in cash for 20 years after paying extra rate tax. This means that much of your £171K can remain invested.

Good advice on drawing it annually rather than in one go. We plan to do that too except we have 2 drawdown pots. One with cash in current accounts/national savings income bonds and one with sipps, stocks and shares isas. Which pot we take it from annually will be determined by stock market performance, annual shortfall as this may be different each year and position in both pots.

enthusiasticsaver

Davo58 wrote: »

My initial thought train was the figure of £171,000 is roughly 29x my pension, if i drew my pension at 64, i would need to live to 93 to get that amount. With the best will in the world i will not be around that long. So i was going to use age 85 and divide the cash accordingly to increase the yearly pension. Bearing in mind i have a small annuity of £125.34 pcm and another final salary scheme.

Have you worked out what your final salary scheme will produce and how much you will need each year to maintain your current lifestyle?

Davo58

It's hard to work out , it keeps going up yearly, the only certain thing i know is that if i retire at 64, the monthly pension will be reduced by 10.8%. I will certainly need help from an advisor, my head is going to explode. Their are so many options i think i understand about 15% of them.

AlanP_2

Davo58 wrote: »

It's hard to work out , it keeps going up yearly, the only certain thing i know is that if i retire at 64, the monthly pension will be reduced by 10.8%. I will certainly need help from an advisor, my head is going to explode. Their are so many options i think i understand about 15% of them.

As a ballpark indicator compare the £171k with the annual pension at Scheme Retirement Age and don't worry about the impact of taking it early, or delaying taking it for that matter.

To do a more accurate assessment you could set up a s/sheet to work out the Discounted Cash Flow using what you see as a sensible inflation rate & a sensible investment return rate.

Davo58

Can i ask something completely separate to this thread. My wife has two separate pensions with the prudential, could we put these into one? would it be better value and would we need an advisor to do it if it is?.