Higher rate tax in retirement

Triumph13

It's very unlikely that putting more into your DC if you will be a HRT payer in retirement will be your best option. If you will be over the LTA you will be paying more tax than the relief you got. If you are below LTA, then you face a net 30% tax so £60 net contribution becomes £70 of post tax withdrawal - a 16.7% profit. A much better option is to put all your wife's earnings into a pension until you have enough in there to fully use her personal allowance in retirement - £80 net contribution becomes £100 tax free withdrawal for a 25% profit.

shinytop

A much better option is to put all your wife's earnings into a pension until you have enough in there to fully use her personal allowance in retirement - £80 net contribution becomes £100 tax free withdrawal for a 25% profit.

I think I'm going to do something like that to start with.

cloud_dog

kevfm wrote: »

I've looked at using my DC TFLS and that helps. I'm not considering commuting my DB pension at this stage.

Hi

You mention taking the TFLS from your DC plan but are you not able to take any TFLS from the DB scheme? Obviously, this would lower the pension payments from the DB pension scheme.

Terron

I am likely to start paying HRT again after taking my pensions next years (not SP). Because I get most of my current income from propertymy effective HRT threshold would be about £33k dropping to £30k the year after. To avoid that I plan to sell one property - a former home so no CGT. I would use the proceeds and some of the TFLSs to pay off the mortgages in my own name.


That will probably leave me a little over the normal HRT threshold, but I don't mind paying a bit of extra tax at that level of income.

shinytop

ou mention taking the TFLS from your DC plan but are you not able to take any TFLS from the DB scheme? Obviously, this would lower the pension payments from the DB pension scheme.

Yes of course that's a possibility. I don't know what the conversion factor is so it will depend on that.

DairyQueen

I understand your reluctance to pay HRT in retirement. My OH is facing a similar dilemma. You at least have the opportunity to optimise your tax affairs as a couple. This is something that OH and I use to max advantage.

Concentrate on loading your wife's pension. You can then optimise net retirement income as a couple by using both tax allowances. It will also help your spouse should she be the survivor (likely given the stats on longevity and gender).

kidmugsy

Triumph13 wrote: »

It's very unlikely that putting more into your DC if you will be a HRT payer in retirement will be your best option. If you will be over the LTA you will be paying more tax than the relief you got. ...

I agree it's no answer if it takes him over LTA but otherwise it is potentially an answer to his wife's low income as a widow. The OP just needs to let his DC pension money be undrawn (except for the TFLS) until he dies, so that his wife can then use that DC pension. Its TFLS could be used to top up the ISAs if they've taken a hammering while being used to fund DC pension contributions for his wife.

I wouldn't be at all relaxed about paying HRT as a pensioner. I'd happily avoid it and have the money available in case we needed it. If I were keen to fund stupid railway lines, wars of aggression, and all that jazz, I'd suggest to my future widow that she might leave some money to the Treasury in her will.