Early retirement. Income Sequencing plan.

PJM_62

After reading many threads and getting some great advice in a pension sequencing question that I posted recently, I think I've come up with an initial plan for retirement income my wife and I to live off when we retire early in a couple of years.
Have worked out that 36k between us is do-able and plenty for our needs.
I would really appreciate any thoughts / comments about the plan. Is it good, or is there a better way.
Hopefully its written in a format that makes sense.
TIA.
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Husband & wife, age 55 retirement,
36k joint annual income plan. (18k each) – paying no tax if possible.

Using todays quotes/figures for the DB pots, DC pots, ISAs.
No growth or inflation taken into account.
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Husband.
At age 55
[Work DB £6500] + [Work DC] £8k UFPLS withdrawl (25% tax free) = £14,500.
Supplement this up to 18k by using withdrawal of £3500 from [ISA pot] (tax free).

Do that until age 60 = 5 years.
5 years of £8 from [Work DC] = £40k. (uses less than half of the DC pot)
5 years of £3500 from [Fid ISA pot] = £17,500. (uses less than qtr of the ISA pot)
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At age 60
[Work DB 6500] + [RAF DB 6500] = £13,000
Supplement this up to 18k by using £5k withdrawal from [ISA pot] (tax free).

Do that until age 67 = 7 years.
7 years of £5k from [ISA pot] = £35,500 (uses less than half of the ISA pot)
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At age 67
[Work DB £6500] + [RAF DB £6500] + [SP £8500] = £21,500
Gonna be taxed
Shouldn’t need to supplement!
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Wife.
At age 55
[NHS DB 10k] + [SIPP] withdrawl of £3k (25% tax free) = £13k.
Supplement this up to 18k by using £5k withdrawal from [ISA pot] (tax free).

Do that until age 67 = 12 years.
12 years of £3k from [SIPP] = £36k. (uses all of the SIPP pot)
12 years of £5k from [ISA pot] = £60k. (uses most of the ISA pot)

(that SIPP has not been started yet. Aim to get 36k in there over next 2 years)
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At age 67
[NHS DB £10k] + [SP £8500] = £18,500
Gonna be taxed
Shouldn’t need to supplement!
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NoMore

You haven't said the initial size of the DC pensions and ISA.

Also have you factored in early retirement factors for the DB pensions ( if they apply, they usually do for taking earlier than NRA)

PJM_62

Early retirement reduction is factored in to the DBs.
At 55 husband DC pot should be about 100k and ISA about 80k.
At 55 wifes ISA will be about 70k.

NoMore

For Husband - I wouldn't take the DB pensions early, I would use the DC pots as you can get 16666k out per year tax free using UFPLS (12.5k Personal allowance +25% tax free). Supplement with ISA.

You also seem keen to make sure its exactly 18k coming from each spouses respective pots. Why ? If its joint income, treat the pots as a whole and withdraw the required income from whichever pots give you the most tax efficient route.

PJM_62

For my (husband) DB pension (6.5k), if I waited until age 67 to take it, it was forecast to still only be 9k.
So I figured, just start taking that from 55, and put the 3x TFLS (19.5k) into my ISA that year.

Not that bothered about making sure both are 18k. That approach just seemed to make sense.
But as with all aspects of the plan, I'm happy to take advice and modify it.

PJM_62

If i start taking the DB pension at 55 then I guess I have the advantage of the spouses pension death benefits starting then too.

swindiff

The death benefits are the same whether drawing pension or deferred.

TadleyBaggie

Original thread: https://forums.moneysavingexpert.com/showthread.php?t=5985181

PJM_62

I wasnt sure of best way to maximise my wifes tax allowance. I.e, another 2500 on top of her 10k DB pension, so achieving the full 12,500 tax free income.
I figured the approach of building a SIPP pot while she is still working, with its tax relief bonus, was better than saving more into her ISA and supplementing the 10k DB with just ISA withdrawl ?

badmemory

You may also want to look at how the survivor will survive financially after the first one of you has died.

crv1963

Would the money from wife be better placed all in a SIPP as opposed to ISA? If she has enough earnings over time before retiring. My thinking is although it will be taxed as income the uplift of 25% would be greater than the increase in an ISA.