Flexible draw down

OldMusicGuy

Malchester wrote: »

Thanks for this post. I am in the same position as OP. I am retiring later this year. Have two DB pensions paying less than new personal allowance (which includes marriage allowance taking it to c£13,700 from April). My DC pension will be valued at around £8,500 when I retire. Was thinking of taking 25% tax free and than an amount each year, keeping me below personal allowance level, until state pension kicks in in 2025 (which is estimated to be greater than the basic (current statement says £169/week compared to standard pension of £164/week)

I wouldn't take all the 25% TFLS up front unless you specifically need it for something. IMO it is better to UFPLS each year so you take the personal allowance + 25%, leaving you with some of the 25% total tax free when you reach SP age and pay more tax.

Dazed_and_confused

paying less than new personal allowance (which includes marriage allowance taking it to c£13,700 from April).

You have misunderstood how Marriage Allowance works.

Being the recipient does not entitle you to any additional allowances. It entitles you to a fixed deduction of your tax liability (a maximum of £250 in 2019:20).

You cannot have a Personal Allowance greater than £12,500 (in the 2019:20 tax year).

This may make little difference to some people but it can have a massive impact on some. Or a minor impact for some such as those Scottish resident for tax purposes who still get the £250 credit but can have more taxable income before they use it all courtesy of the Scottish 19% tax rate.

xylophone

a state pension of about £145 when I am 66.

You have obtained a new state pension statement?

https://www.gov.uk/check-state-pension

What does it say about your ability to increase your SP?

You might consider a transfer to the HL SIPP - the administration is very efficient and there is no charge for withdrawals.

https://www.hl.co.uk/pensions/sipp

tiptoes27

xylophone wrote: »

You have obtained a new state pension statement?

https://www.gov.uk/check-state-pension

What does it say about your ability to increase your SP?

You might consider a transfer to the HL SIPP - the administration is very efficient and there is no charge for withdrawals.

https://www.hl.co.uk/pensions/sipp

Yes I have had a state pension forecast. If I pay NI for another 5 years I can increase to £165. I do also have some gaps which I could make voluntary contributions to.
I have tried to find a comparison tool online but there does not seem to be one. I have requested information from HL and also Aviva who hold the current pension. Thanks for your help

westv

Dazed_and_confused wrote: »

Being the recipient does not entitle you to any additional allowances. It entitles you to a fixed deduction of your tax liability (a maximum of £250 in 2019:20).

You cannot have a Personal Allowance greater than £12,500 (in the 2019:20 tax year).

But the Gov.uk website mentions that "you can transfer £ 1,190 of your personal allowance".

xylophone

I do also have some gaps which I could make voluntary contributions to.

Be careful about this. Check with the Future Pensions Centre.

https://www.thisismoney.co.uk/money/pensions/article-3627480/Can-pay-extra-NI-state-pension-155-65-week.html

camelopardis

Dazed_and_confused wrote: »

You have misunderstood how Marriage Allowance works.

Being the recipient does not entitle you to any additional allowances. It entitles you to a fixed deduction of your tax liability (a maximum of £250 in 2019:20).

You cannot have a Personal Allowance greater than £12,500 (in the 2019:20 tax year).

This may make little difference to some people but it can have a massive impact on some. Or a minor impact for some such as those Scottish resident for tax purposes who still get the £250 credit but can have more taxable income before they use it all courtesy of the Scottish 19% tax rate.

Is this just not semantics? I've done the sums and the result is as if I'd had my PA increased by £1,190 (this tax year)
BTW - how come its's £1,190 and not £1,185 when it's supposed to be 10% ?

Dazed_and_confused

But the Gov.uk website mentions that "you can transfer £ 1,190 of your personal allowance".

That's a little misleading.

The applicant gives up £1,190 of their Personal Allowance (and does actually get a smaller amount of Personal Allowance).

The recipient gets a tax credit worth £238 (£1,190 x 20%). A bit like Married Couple's Allowance. They don't receive any additional allowances.

Dazed_and_confused

Is this just not semantics? I've done the sums and the result is as if I'd had my PA increased by £1,190 (this tax year)

It will work out the same for most people but not everyone. Someone receiving State Pension Lump Sum could end up paying tax unexpectedly of they thought they had additional allowances. Their tax position is based on Personal Allowance of £11,850 so they would be liable to 20% tax on the State Pension Lump Sum if they had normal income above £11,850. Having Marriage Allowance might reduce their bill by £238 but scanty consolation if they have taken a £30,000 lump sum in the belief it wouldn't be taxed.

BTW - how come its's £1,190 and not £1,185 when it's supposed to be 10% ?

Tax legislation includes a rounding rule so that the Marriage Allowance amount must be rounded up to nearest £10.

Malchester

Dazed. Not sure what you are getting at. My personal tax allowance code this year is 1304 (11850+1190). My wife's personal tax code is 1066 (11850-1190)