What to do with my PCLS that is tax efficient

zagfles

desrese wrote: »

I didn’t realise we could invest unwrapped and not exceed the £12k allowance and it may well be the easiest route.

@Triumph13 yes you are exactly right in understanding what I was trying to say and zagfles only beat you by a minute!

If I did use phased flexi-access drawdown, will it work like this?

Open a SIPP with the £341k.

£148k (the whole PCLS) placed uncrystallised in my new SIPP. £80k taken out for the first 2 years ISA allowance and the remaining £68k stays in, but invested until the next ISA year is available.
Thanks for everyone’s help so far.

If you can avoid paying tax on unwrapped by staying within the dividend and CGT allowances, using phased drawdown is unlikely to be beneficial, except possibly in terms of some peripheral stuff like inheritance tax and means tested benefits eligibility.

With just £35k each over a few years till you can get them into ISAs, you're unlikely to exceed the dividend or CGT allowances (and if you do, it's good news, and you can delay selling part so you use 2 years' CGT allowance)

pip895

Why would anyone take PCLS (tax free lump sum) out of a pension if they didn't need the money? Isn't it usually much better if you leave it in? If your particular pension doesn't give you a good deal/flexibility then wouldn't it be better to transfer the lot to a SIPP where you can take the tax advantage over time.

Albermarle

Why would anyone take PCLS (tax free lump sum) out of a pension if they didn't need the money?

From reading this forum and elsewhere it seems to be very common thing to do . Reasons ( mainly poor ones ) seems to be :
1) Because it is there
2) Because they think they have to take it all
3) Some suspicion that it is best to get money out of pension asap so you know it is safe in a bank account

Isn't it usually much better if you leave it in?

For most people yes and many like the OP take it out and are not quite sure what to do with it .

zagfles

pip895 wrote: »

Why would anyone take PCLS (tax free lump sum) out of a pension if they didn't need the money?

For those with bigger pots, LTA issues, for those with smaller pots, simplicity.

Isn't it usually much better if you leave it in? If your particular pension doesn't give you a good deal/flexibility then wouldn't it be better to transfer the lot to a SIPP where you can take the tax advantage over time.

It's sometimes better, sometimes worse, sometimes makes no difference.
Main negatives with taking it out are possible tax on investment growth and in scope for stuff like inheritance tax, means tested benefits etc. If these aren't likely to be an issue, then it's probably neutral.

desrese

Albermarle wrote: »

From reading this forum and elsewhere it seems to be very common thing to do . Reasons ( mainly poor ones ) seems to be :
1) Because it is there
2) Because they think they have to take it all
3) Some suspicion that it is best to get money out of pension asap so you know it is safe in a bank account
For most people yes and many like the OP take it out and are not quite sure what to do with it .

I haven't actually taken it out yet. Sorry if I did not make that clear, but I intend to retire in May next year and will only take it out unwrapped or via phased flexi access drawdown as has been recommended here.
I'm still digesting the options, but in the meantime thanks for everyone's continued advice.

bluenose1

Is your wife's pension more than £12,500 per annum? If not have you considered if you are entitled to the Marriage Tax Allowance.
If her pension is low enough then it may also be worth opening a SIPP in her name as potentially she could invest £2,880 and withdraw £3,600. Lots of information regarding it on this forum.
Are you both entitled to full State Retirement Pension, if not sure you need to check.
Do you have to work another 7 months, could you not consider going sooner?

desrese

bluenose1 wrote: »

Is your wife's pension more than £12,500 per annum? If not have you considered if you are entitled to the Marriage Tax Allowance.
If her pension is low enough then it may also be worth opening a SIPP in her name as potentially she could invest £2,880 and withdraw £3,600. Lots of information regarding it on this forum.
Are you both entitled to full State Retirement Pension, if not sure you need to check.
Do you have to work another 7 months, could you not consider going sooner?

That is one of the things I have learned whilst reading this forum and we have done both thanks:beer:

I could leave earlier, I agree. Only 3 months notice required, but the way I am going, I will need until May to decide what I am doing.

I will write back in a couple of days when I have considered the options.

desrese

For completeness here is what I decided to do!

Thanks to all for your responses and I have actually decided to leave earlier than planned, in fact I have just finished my letter of resignation so will be gone by the 31st. January.

The early departure will allow, hopefully enough time to receive my PCLS and meet the ISA cut off dates for this year and next.

First £80k wrapped for me and the wife and the remainder unwrapped me and the wife until the 2021 when the next ISA is available.
Thanks to all!

cloud_dog

desrese wrote: »

For completeness here is what I decided to do!

Thanks to all for your responses and I have actually decided to leave earlier than planned, in fact I have just finished my letter of resignation so will be gone by the 31st. January.

The early departure will allow, hopefully enough time to receive my PCLS and meet the ISA cut off dates for this year and next.

First £80k wrapped for me and the wife and the remainder unwrapped me and the wife until the 2021 when the next ISA is available.
Thanks to all!

No one understands why you need / want to take the full PCLS??

The remaining £68k (or whatever it is) may well add to your income tax liabilities.

Why do you feel you need / must take the PCLS?

ffacoffipawb

cloud_dog wrote: »

Why do you feel you need / must take the PCLS?

Low hanging fruit for a skint chancellor.

Especially such a large amount.