Retirement Preparations

pile-o-stone

kidmugsy wrote: »

Then let her contribute when she can afford to. After all she can continue contributing tax-efficiently until she is 75. No rush.

I guess the best route would be to withdraw the 25% at 55 (as the chap above just pointed out, mathematically it makes no difference to the investment return whether the capital is withdrawn now or when I retire) and put it into an ISA.

As my wife approaches retirement, say 3 years away, we then look at her pension pot and top it up from the ISA if required. If she has enough in her pension pot & state pension to use up her tax free allowance, then the 25% stays put in the ISA.

Ideally, if her business takes off, she may have surplus in her pension and would also be able to contribute to the ISA from her own 25% TFLS.

The main thing, unless Thrugelmir gets back to me, is that there seems to be no compelling reason to leave the 25% within the SIPP beyond age 55, which is what I wanted to check. The compelling reason to withdraw at age 55 is to make sure a meddling government doesn't withdraw the 25% TFLS facility completely.

pile-o-stone

Triumph13 wrote: »

It's good to know that you are indeed planning to draw down the 75% as this wasn't clear.

Sorry, my bad. I was concentrating on the 25% TFLS and keeping under the 0% tax threshold to worry about the remainder of the pension pot.

Terron

tony4147 wrote: »

I think the OP is asking a very sensible question, we all want to reduce our tax burden in retirement, just not sure of the best way to do it.

I looking forward to t increasing when I some of my pensions next yea, though I will be trying to reduce it in some ways.
Last year my income was ~£26k, mostly from property. I use letting agents to fully manage the properties so I don't do much actual work and am pretty much retired.
Next year I turn 60 and will start accessing my older pension schemes. I also plan to pay down some mortgages .My income should rise to about £45k Obviously I will pay more tax, but I will be left with more than I ever had whikst working.full time.

Albermarle

eg you have £40K in a fund which will give 100% return in 10 years.

..

Can you point me in the direction of this fund please:rotfl:

kidmugsy

pile-o-stone wrote: »

there seems to be no compelling reason to leave the 25% within the SIPP beyond age 55, which is what I wanted to check. The compelling reason to withdraw at age 55 is to make sure a meddling government doesn't withdraw the 25% TFLS facility completely.

The reasons for leaving a 25% in place after 55 might include (i) the 25% is such a large sum that it can't all be moved into ISAs quickly, (ii) in a pension it is protected from creditors in the event of bankruptcy and so on, (iii) you have inheritance tax worries.

If none of those three apply I have every sympathy with pulling it out at 55. Just remember to be prepared to pull it out of the ISA again if better opportunities present themselves, including better pension opportunities.

pile-o-stone

Just as a foot note to the tax free ISA retirement option. As well as using the 25% TFLS from my two pensions to drip feed into the ISA for a tax free retirement income, I will also be looking to downsize from our family home and put the tax free money released from my home equity into the ISA too. This could be over £100k, so it'd take a few years to get it all into the ISA. I assume that I could put the money initially into a normal investment account and just keep an eye on the capital gains, then move it £20k at a time into the ISA?

Linton

pile-o-stone wrote: »

....
The main thing, unless Thrugelmir gets back to me, is that there seems to be no compelling reason to leave the 25% within the SIPP beyond age 55, which is what I wanted to check. The compelling reason to withdraw at age 55 is to make sure a meddling government doesn't withdraw the 25% TFLS facility completely....

Why would they? It is a great benefit to many ordinary people who want, for example, to pay off their mortgage when they retire. I think a future government would be far more likely to cut the ISA contribution limits. It is difficult to see a justification for helping people who can afford to squirrel away £20K/year avoid tax on any gains.

OldMusicGuy

pile-o-stone wrote: »

The compelling reason to withdraw at age 55 is to make sure a meddling government doesn't withdraw the 25% TFLS facility completely.

I have the same fear. However, there's no need to get the money out as soon as possible. There will be some notice of a major change like this, for example it will have to be announced in a budget and that usually means you have a number of months notice before it comes into force. So it will be quite easy to get the 25% out of a SIPP before any such change comes into force.

Thrugelmir

pile-o-stone wrote: »

The compelling reason to withdraw at age 55 is to make sure a meddling government doesn't withdraw the 25% TFLS facility completely.

To raise tax revenues. Then ISA's (and their predecessors) seem a far better target. Given the accumulated sums invested in them and the income they generate. The average size of a pension pot isn't significant in value.

pile-o-stone

Linton wrote: »

Why would they? It is a great benefit to many ordinary people who want, for example, to pay off their mortgage when they retire. I think a future government would be far more likely to cut the ISA contribution limits. It is difficult to see a justification for helping people who can afford to squirrel away £20K/year avoid tax on any gains.

My worry is that either they will get rid of the 25% TFLS or they will reduce or cap it. Governments seem to have a mania for meddling with the pension system. They have already moved the goal posts on the FTLS from 50 to 55 and my state retirement age from 65 to 67, so forgive me if I don't trust that they won't make other changes .

The ISA limit does seem high, so the potential that it could be reduced also adds to the urgency to squirrel away the money as soon as allowed.

I had a pause when Thrugelmir gave the warning I was responding to in the text you quoted, but he's not come back to clarify his position and other people have been positive on the strategy. So unless things change, I'm going to continue with the plan at age 55.