Take or Leave it

Sterlingtimes

I appreciate that we all have different considerations.

For my part, I would be inclined to take the cash free lump sum as I needed it but to use cash free lump sum prior to taking taxable income. If I were to die early in my pension years and had taken taxable income instead, I would then paid tax unnecessarily. I would prefer a slower erosion of my funds by using the tax-free element first.

westv

I'll probably use part of my lump sum to pay off the mortgage shortly after I retire or when the fix ends - whichever comes first.

westv

Sterlingtimes wrote: »

I appreciate that we all have different considerations.

For my part, I would be inclined to take the cash free lump sum as I needed it but to use cash free lump sum prior to taking taxable income. If I were to die early in my pension years and had taken taxable income instead, I would then paid tax unnecessarily. I would prefer a slower erosion of my funds by using the tax-free element first.

You can take something like £15,800 tax free every year if you take the 25% with every withdrawal rather than in one go. Even then, you can still take a lump sum of whatever is left in the pension after any previous withdrawals.

Sterlingtimes

westv wrote: »

You can take something like £15,800 tax free every year if you take the 25% with every withdrawal rather than in one go. Even then, you can still take a lump sum of whatever is left in the pension after any previous withdrawals.

Yes, I presume that you have divided £11,850 by 0.75. This works where the pensioner has no other income. Othewrwise, withdraws in excess of the tax free allowance may be taxable. It is a question when of whether it is worth paying 20% tax today to avoid 40% tax tomorrow.

Therese1

vulcanrtb wrote: »

If you only ever plan to withdraw from your pot below annual allowance (think it's somewhere around £11500 PA but someone will have a more accurate figure), then it's better to leave it in. But if you plan to withdraw much more than that per year, the tax you will pay will probably cancel out any percentage build.
FWIW, I plan to take out 25% of my pot on retirement at 55 and use the money to fund living comfortably for 5 years (until various DB pensions kick in at 60) and not have to worry about tax.

Sorry to hijack but just wanted to ask cos I was thinking of this idea.
Do you mean draw 25% of the whole pension value at 55? I have a DB pension at 60 but the last few years it's just a cash pot and has about £45k there. I was wondering if I could draw that at 55 and not impact my DB values? If I did 25% of everything I presume the DB is significantly reduced?

NorthernGeezer_2

Any thoughts on taking your 25% and investing it elsewhere?
Could "elsewhere" be more beneficial than leaving in your pension and at the mercy of market forces?

lisyloo

NorthernGeezer wrote: »

Any thoughts on taking your 25% and investing it elsewhere?
Could "elsewhere" be more beneficial than leaving in your pension and at the mercy of market forces?

Don't understand the last part.
The same investment will perform the same whether inside or outside a pension.


The tax treatment may be different and there may be thing you can't put into a pension (wine, classic car, residential property, art, rolex).


However the same shares/funds will perform the same whether in or out. They might have marginally different charges.

dunstonh

Any thoughts on taking your 25% and investing it elsewhere?

Why would you do that? The same investments are available for all the main tax wrappers.

Could "elsewhere" be more beneficial than leaving in your pension and at the mercy of market forces?

Why couldnt the "elsewhere" be within the pension? Why do you need to draw the 25% to put it elsewhere?
Wouldnt the "elsewhere" be subject to market forces of a different type? Everything is subject to external presssures.

NorthernGeezer_2

By "elsewhere" I meant anything other than the usual investments associated with a pension.

kidmugsy

lisyloo wrote: »

However the same shares/funds will perform the same whether in or out. They might have marginally different charges.

Yes, but if you want to hold cash it's almost certain to earn more interest outside a pension than inside. It's pretty reasonable if somebody of retirement age wanted to hold 25% in cash and 75% principally in equities.