0.2% charges on deferred pension.

Albermarle

The OP is, I think, looking at using the £40k that came out of his pension where it was already invested, so he'd just be reinvesting it

Fair point , assuming that the new investment is not markedly different/riskier from the old one .

Dazed_and_confused

I'm just thinking that the fact I will have zero taxable earnings from April 20 - April 21 presents me with a window of opportunity and what I have outlined is a way to take advantage of it.

That is true for 2020:21. And a lot of people posting on here have similar ideas for DC pots. It sometimes feels like the country is full of people in their late 50's/early 60's trying to empty their DC pots ahead of their State Pension starting!

The problem (a nice one to have) comes in 2021:22, you need to decide if you still want to take taxable funds from the DC pension equal to your Personal Allowance or cut back a little to take into account the DB pension income.

Nothing wrong with paying some tax but plenty on here seem to avoid it if possible.

AnotherJoe

waveydavey48 wrote: »

No, apologies if I didn't make it clear. Plan is to stop working by the end of this year (when I will still be 57). Then next April, when the new tax year starts, withdraw the TFLS and £12,500 personal allowance and open S&S ISA and invest in VLS60 (self and wife).

On reflection I suppose the problem would come in the following tax year because if I withdrew another £12,500 I would be using up my personal allowance so when my DB pension commences in February 2022 it would all be taxed.

I'm just thinking that the fact I will have zero taxable earnings from April 20 - April 21 presents me with a window of opportunity and what I have outlined is a way to take advantage of it.

Thank you.

Definitely that's what I'm doing for the 4 years between retiring and getting SP.
It might be worthwhile while checking if you can defer you DB, because if you can and get an uplift on it then each year you can take another £12.5k without paying 20% tax.

waveydavey48

AnotherJoe wrote: »

It might be worthwhile while checking if you can defer you DB, because if you can and get an uplift on it then each year you can take another £12.5k without paying 20% tax.

That's a good point thanks. The "normal retirement age" in my DB scheme is actually 62 but for some reason (which I'm not arguing about!) members can opt to take it from age 60. I don't think we can defer it in return for an increase but I am going to check.

Thanks all.

Oh by the way, I do appreciate that the tax we pay funds hospitals, schools etc but having worked for 40 years and paid my dues I don't feel guilty about legally minimising my tax bill. I recall a story on the bbc website about a wealthy businessman who paid £30 or so tax in a year. https://www.bbc.co.uk/news/business-48481320

Looks like you need a clever lawyer/accountant to really minimise your tax bill.

jamesd

waveydavey48 wrote: »

Any ideas?

What pension contributions are you planning?

You can pay in gross up to your earnings and get 25% added even on the portion in the income tax personal allowance range. Then you can take out a quarter free of tax. That effectively saves you income tax on a quarter of your pay plus the benefit for the personal allowance range.

There are three constraints:

1. you can pay in gross the lower of your earnings or the 40k annual allowance. If earnings are over the 40k you can carry forward unused annual allowance from the previous three tax years.

2. taking out tax free money has no effect but once you take out taxable money your annual allowance is reduced from 40k to 4k and carry-forward is banned. You deal with this by making the contributions before taking taxable money.

3. there are some limits designed to prevent organised schemes recycling lots of tax free cash into new contributions. The easiest limit to stay within is not taking more than £7,500 of tax free cash per rolling 12 month period (not by tax year, by months like 16 June to 15 June). Since you're already 55 you could start this now.

waveydavey48

jamesd wrote: »

What pension contributions are you planning?

I hadn't thought about it properly to be honest.

I'm coming to appreciate that this is more complex than I had thought.

I have now ordered John Edwards's book which forum members seem to rate highly and will not do anything until I have read and digested it.

Is this the kind of thing a "Pension wise" appointment would cover?

Thanks again folks.

waveydavey48

Hi folks, sorry to come back on this but I've read something on the pension wise website which has thrown the cat among the pigeons, assuming I have read it correctly.

My understanding was that I could take my 25% TFLS and leave the remaining 75% invested in my DC pension. The pension wise website says

"You can take 25% as a lump sum without paying tax. If you do this, you can’t leave the remaining 75% untouched. You must either:

buy a guaranteed income (annuity)
get an adjustable income (flexi-access drawdown)
take the whole pot as cash"

I'm confused. Can anyone clarify this please?

greatkingrat

Essentially you would be choosing the "get an adjustable income" option. It's just you would be taking an income of £0 to start with.

waveydavey48

greatkingrat wrote: »

Essentially you would be choosing the "get an adjustable income" option. It's just you would be taking an income of £0 to start with.

Ah, I see, so just opt for flexi-access drawdown.

I don't think my scheme with Fidelity offers that option so I would have to transfer it to another provider I suppose. Am I right in thinking Vanguard will be offering that soon?

Thank you.

LHW99

waveydavey48 wrote: »

Ah, I see, so just opt for flexi-access drawdown.

I don't think my scheme with Fidelity offers that option so I would have to transfer it to another provider I suppose. Am I right in thinking Vanguard will be offering that soon?

Thank you.

I think "soon" comes into the 'rumours of rumours' category!