£120,000 easy access investement

markbsac

hi

i will soon be getting a lump sum from my pension up to £120,000 i need easy instant access for holidays cars ect the normal stuff on reaching 60 and retiring, any idea where the best accounts for this could be, or is it just best to leave it in my current accounts ?

thanks mark

Prism

Do you really need instant access to all of it at once? I would do some planning and split it into chunks across instant access and 1 or 2 year fixed accounts.

markbsac

good point i guess i need to plan how much i need to spend initially, i have isas that i could top up, ill have to do some number crunching i guess

techwatcher

I wouldn't leave it in your current accounts - it could, and should, be earning some interest.

Marcus seems to be the 'go to' account for funds to which you require instant access. It pays 1.5%. As Prism says, I would do some planning, put some into instant access and some into 1 and/or 2 year fixed accounts, where you will earn a little more interest.

markbsac

thanks ive checked out marcus ..this will be ok for 85k i think thanks for your advice

SonOf

i will soon be getting a lump sum from my pension up to £120,000 i need easy instant access for holidays cars ect the normal stuff on reaching 60 and retiring, any idea where the best accounts for this could be, or is it just best to leave it in my current accounts ?

Is it better to not take some or all of the lump sum from the pension?

Many DB pensions have an early breakeven point on taking a reduced/no lump sum that means income is better. On most DC schemes, you should not take the 25% up front unless you have a spending need. And in those cases, you should take no more than you need.

markbsac

im taking 25% this still leaves me £280,00 to invest into a drawdown and this is as it stands now its still being invested ito the astra zeneca pension scheme as i am not sure when i will be taking it but before im 60 which is in a couple of years time....or even now as im 57 and could take it from 55

SonOf

markbsac wrote: »

im taking 25% this still leaves me £280,00 to invest into a drawdown and this is as it stands now its still being invested ito the astra zeneca pension scheme as i am not sure when i will be taking it but before im 60 which is in a couple of years time....or even now as im 57 and could take it from 55

Why are you doing that?
It seems to be bad advice (if you are taking advice) or a bad decision if you doing DIY.

You should not take the 25% up front unless you need it. You do not appear to need it. You should only crystallise what you need now. You dont lose the rest by leaving it. You get out by delaying it until you need it.

markbsac

hi no i have been told to only take what i need its my decision to take the whole 25% so i can just take it from an account when ever i need it, sre you saying then i can take 25% tax free when ever i need it i was under the impression i needed to take 25% all in one go to keep it tax free

SonOf

markbsac wrote: »

hi no i have been told to only take what i need its my decision to take the whole 25% so i can just take it from an account when ever i need it, sre you saying then i can take 25% tax free when ever i need it i was under the impression i needed to take 25% all in one go to keep it tax free

No, you dont need to take it all up front. You can take it in chunks as and when you need it. The longer you leave it, the more you get out tax free.

You currently have £480k uncrystallised funds. You can draw on that multiple ways.

If you needed to spend £20k now and have no personal allowance left, then crystallising only £80k of the pension will raise your £20k and move £60k into the crystallised section of your pension whilst leaving £400k uncrystallised. Both segments continue to be invested and grow over time. Allowing you to take a greater amount tax-free over your retirement.

Also, if you cease working before state pension age, you can use the 25% as part of the drawdown. You get your personal allowance which allows you to draw from the 75% chunk (the crystallised segment) without paying tax as it's below your personal allowance. But you can also use some of your 25% (from uncrystallised segment) to take the income above the personal allowance but still be tax-free.

Phased flexi-access drawdown (a phasing of UFPLS) is a very popular method but you would lose that if you took the 25% in full up front.

There are variations and methods that can take advantage of tax allowances and get you more than the way you are doing it.

If you are struggling with the methods, then speak to a local IFA. You will likely find what you are proposing doing is going to cost you far more than the IFA fee. Alternatively, do some research and understand the methods and couple it with some forward planning on tax allowances and the different methods to see which works out best. On your sized pension, using the wrong method could cost you many tens of thousands of pounds. Potentially in the hundreds of thousands over your lifetime.

markbsac

My idea was take 25% tax free and only draw £1000 a month so i dont pay any tax i also have a small force's pension and i will have £10,000 in another small pension but I don't want to pay anymore tax so if I needed to top my monthly income up I was going to take it from my 25% my idea for taking the whole 25% is due to the fact invested pensions in drawdown may go down as well as up