NHS Pension

Silvertabby

thebullsback wrote: »

I have double checked my figures and its

£6696 p.a. + £20089 Lumpsum

£5381 p.a. + £35874 Lumpsum

Ah, what a difference a 0 makes ! I agree the max lump sum calculation now.

Based on the NHS commutation rate of 1:12 the break even point is 12 to 14 years.

thebullsback

my uneducated thinking is .
Take small NHS pension and large Lumpsum Take all the other pots banking the 25% from each .
Apparently I cannot cash in Bond 32 .
Then I would take as much as I can out of pots while I was only on a taxable income of about £7500 or is there another way.

hugheskevi

Then I would take as much as I can out of pots while I was only on a taxable income of about £7500 or is there another way.

You appear to be irrationally prioritising tax free status above value. Think of it as a question along the lines of would you prefer £1000 and pay £200 tax, or £500 tax-free.

At the age of 60 you can expect to live for more than 25 years. That is 25+ years of (taxed) pension income or a (tax-free) lump sum of 12 times the pension value.

The first 6 years of pension will be completely or mostly tax free, but even if not, 25 years of payments * 0.8 to account for basic rate tax=20. Crudely, that suggests a 'fair' exchange rate is closer to 20:1, not 12:1.

By comparison, if you purchased an index-linked annuity at age 60 you would probably have to pay about £40 per £1 of pension purchased. So you can see just how poor a 12 to 1 exchange rate is.

The lump sum is free of income tax, but taking into account the very poor exchange rate it is actually very inefficient compared to taking the pension income and paying tax unless there are particular individual circumstances.

Then I would take as much as I can out of pots while I was only on a taxable income of about £7500 or is there another way.

So you would be planning to take c£5,000 taxable income plus tax free lump sum from the DC pots each year to avoid basic rate tax? That won't be sufficient to fully withdraw them before reaching State Pension age, so you are likely to end up paying a small amount of tax despite ravaging the value of your pension.

Mr_EDATD

Do you have health issues that means you have a low life expectancy?

If not then you need to be thinking along the lines of how much you need to live on in retirement rather than how little tax can you pay.

thebullsback

I am classed as morbidly obese and my lifestyle is sedatery and I also like a drink also no one in my family has lived beyond 74.
When I look at pensions and see a pot of £30000 and am told I can expect £1400 a year I think ....wow these pension people have it made mind.
Sorry but thats how I see it.

Mr_EDATD

Fair enough. This is important information in retirement palnning.

Maybe money isn't the thing that you should be concentrating on in retirement - getting fit and active has its own rewards and 60 isnt too late to start. After all Every Day's A Training Day (EDATD)!

Maybe go with your plan, but try and get fitter...then if you run out of money at least you can rejoice in still being alive and provide hope / inspiration for the younger generations in your family!