Redundancy at 52, retire now?

michaels

Is it really sensible to sell the BTL - what is the yield? Could you borrow against it to increase the yield on the capital employed as you won't have to worry about the income tax implications of not being able to offset the interest when you are a non-earner. If you sell you pay the CGT whereas at the moment you are still earning a return from that money that will be lost when you crystalise the gain.

jamesd

So, following up on the pay vs earnings difference, the one that is used is "relevant UK earnings" and that is described here and also by HMRC.

I don't know whether income from the BTL counts.

jamesd

Ceme3000 wrote: »

5. If I am not earning for 3 years then my personal allowance won’t be used. If I take an income from the HL non ISA fund then can I receive £5000 plus my personal allowance without paying tax.

How do you get the 5000, maybe the old dividend allowance?

The personal savings allowance (1k), starting rate for savings (5k) and dividend allowance (2k) are available on top of the personal allowance. More on how they interact.

The interest allowances aren't just for bank and savings accounts. Bond, bond fund and peer to peer lending interest are included.

Ceme3000

Thanks. I had assumed it was because it is taxable. Reading the HMRC definition I can see mention of property income from a furnished holiday let is there but not property income generally. So I will investigate this further.

cfw1994

If you really want to sell the BTL, is there mileage in moving to the holiday let for a year....as in: would that remove the CGT?

Even if the original home was not generating income, that might be worthwhile (as well as seeing how you like the reality of retiring: see how you like a year on holiday)

I dont know how the tax man views that now, but in the past if you shifted all your correspondence to the BTL, told bank it was now your main address, I thought that you only had to move for 6+ months to make it your main residence. Maybe things have tightened up!?



Edited to add: yes, I can see things are tighter to avoid such flipping of homes, but still some CGT gains should be possible - reading https://www.optimiseaccountants.co.uk/minimise-your-cgt-liability-on-a-house-move-in/#.WyC64IrTWhB as an example source.

Ceme3000

jamesd wrote: »

I don't know whether income from the BTL counts.

Looks like BTL income doesn't count according to Royal London adviser guidance on their website. Sorry unable to post a link as I am a new user! Thanks again for pointing this out to me.

RADDERS

I can’t give any advice regarding the pensions, but the Motorhome then yes.
We retired early 2 years ago and bought a new Motorhome, since then we have done 3 3 month trips of Europe, out of season and numberous shorter trips in the Uk.
You can live and travel very cheaply in Europe, free Aires, cheap camperstops there are a lot of very informative groups on Facebook to help and advise.
I was 53when I finished and I always said if it didn’t work I could always go back to work but now having lived the dream no chance.

tacpot12

1. Does my plan seem to make sense? The numbers appear OK to me, but it feels like I am taking a leap into the unknown.
2. Would I be better using the SIPP as a !!!8220;bridging pension!!!8221; and delay taking the DB pension.
3. Is it better to take more tax free from the DB fund and accept a lower pension.
4. Is keeping all 50K in cash to cover me until age 55 excessive? Am I missing an investment opportunity? My logic for keeping it in cash is because if there is a stock market correction then I don!!!8217;t have to take money from the fund while the markets are depressed. But I could put it into a lower risk bond fund instead.
5. If I am not earning for 3 years then my personal allowance won!!!8217;t be used. If I take an income from the HL non ISA fund then can I receive £5000 plus my personal allowance without paying tax.

1. Yes, your numbers make sense. You can retire now!
2. Yes, deferring the DB pension to maximise it and drawing on the SIPP is the best option if you have the cash to survive market downturns, which you do.
3. No, taking the maximum pension/minimum lump sum is usually the best option financially (it does depend on the rate of 'exchange') but you can take more of the lump sump if you need to for your motorhome purchase.
4. No, ideally you want to have enough cash to be able to live off the cash for the duration of a 'typical' stockmarket crash/correction. Such downturns usually resolve themselves after 18months to 2 years, so keeping at least £36K in cash would be ideal. £50K might be a little too much, but you can use some of it to invest during a crash when assets are cheap.
5. The situation here is more complex.
Depending on the assets you buy in your SIPP/ISA/General Investment Account, any income with be designated either as Interest or Dividends. There are currently separate tax allowances (£1000) for Interest and for Dividends (£2000). There is also a special income tax rate for Interest that allows you to pay no tax on upto £5000 of interest if your income is less than the current personal allowance for income tax (£11850).

So in the 2018-2019 tax year you could take an income of £19,850 tax free. (£11,850 + £1000 Savings Allowance + £2000 Dividends allowance + £5000 Starter Rate (0%) for Interest Income)

You would have to purchase assets of the correct type to arrive at these ideals for tax efficiency. There is an arguement here to not let taxation dictate your investment strategy (Don't let the tax tail, wag the dog!)

Of course, if dividend or interest income you take out of your S&S ISA, or SIPP (after age 55) has its own tax rules according to the specific wrapper. (Tax free for S&S ISA!)

Your situation is quite similar to my own: Mix of DB & DC pension funds, cash available and I was made redundant at age 53 (at the end of September as it happens!). I used the redundancy money plus my other savings (earmarked for early retirement) to retire at the point of being made redundant. I didn't have any investment income between 53 and 55 - I even liquidated my S&S ISA to provide the cash to ensure that I could make it to 55 in the event of any market downturn.

kidmugsy

Ceme3000 wrote: »

Looks like BTL income doesn't count according to Royal London adviser guidance on their website. Sorry unable to post a link as I am a new user! Thanks again for pointing this out to me.

Yes, I've seen it discussed here before. Ordinary BTL rents are not earnings for pension purposes, holiday home rents are. (I suppose the reason is the amount of work that has to be put into a holiday home, especially the regular cleaning and laundry.)

BLB53

1. Does my plan seem to make sense? The numbers appear OK to me, but it feels like I am taking a leap into the unknown.

Yes, and you seem to be savvy with money so I guess it is just a matter of making the decision to go for it. Certainly try things out for a year and see how it goes.

Just be careful of the higher charges with HL which will may cause some drag if you are mainly funds. There are other platforms which would be lower cost and spread the risk.

Have a look through the DIY Investor article on drawdown
http://diyinvestoruk.blogspot.com/2016/08/a-look-at-sustainable-drawdown.html