Early Retirement Plan

Triumph13

Can I respectfully suggest that you are very much in danger of letting the tail wag the dog in terms of your obsession with avoiding tax. There are many good reasons for spending less than one could in retirement, but trying not to pay any tax isn't one of them.

You have £550k between you in SIPP of which 1/4 comes out tax free. 7 years of PAs for both of you is another 32% of it and you could, if you wanted, get all the rest out at basic rate giving you a total tax bill of £50k which is immaterial compared to your £1.1M of assets. Simply not worth worrying about too much.

My starting point from your numbers would be more on the lines of £600k of tax free investments drawn at 3% gives you £18k pa tax free which means >£51k pa post tax after 67. Bridging the gap to there, at a spending level of £50k rather than £40k, costs £250k. Add on the £50k total tax bill to get everything out (which you wouldn't want to do anyway) and that still leaves you with £200k spare.

TLDR stop worrying about tax and go have some fun!

MarkAdams

Thanks Triumph 13
I underand that I am exploring the boundary of tax efficiency -v- tax obsession.
It's reassuring to know that we can just do it. Without worrying.

GunJack

Just a thought.... in terms of IHT might you be better off exhausting the ISAs (part of estate for IHT?) before touching the pensions (which can be inherited tax-free i.e. no IHT)?

frugal90

Well planned. Earlier if you want I think!

xylophone

Both have several occupational pension schemes from previous employment which are all Defined Benefit schemes. Both have 35 years of paid up NI contributions so can expect full state pensions at age 67.

Have you both checked your state pension forecast here?
https://www.gov.uk/check-state-pension

Presumably you each have a COPE shown?

kangoora

As long as you have the capacity within your budget it seems strange to limit your retirement on the grounds of having kids in Uni. Just because you can't go on long holidays with an <18 at home doesn't, IMO, equate to 'cannot retire'.

I suspect you've worked out these figures based upon 'I want to retire starting in 2 years time' rather than 'Can I retire tomorrow given our current situation' - sort of a "Just 1 (2) more years syndrome".

You seem to have ample funds to retire now, especially with future DB pensions yet to kick in and potentially inheritances. The fact that your DB pensions and SPs cover 90% of your income requirements then you have a very much belt and braces (with a bit of string in your pocket) plan. If you re-did your numbers with a (small) optimistic bias I'm pretty sure you could justify retiring next week also...

Up to you, obviously you need to be happy with your decision.

MarkAdams

Thanks GunJack. You're right about the IHT issue. We do need to factor it in

MarkAdams

Thanks frugal90. I like a plan. Spontaneity has a place. But not in this context. And if the forum feedback is that the plan is sound then that's reassuring to hear. It makes the change easier to make. Just writing about this stuff makes it easier.

MarkAdams

Thanks xylophone. Yes and yes. But we will have both paid up the full 35 years by SP dates.

MarkAdams

Thanks kangoora. I'm getting that feedback from other posters too.
You may be right. This is my first step to airing a plan. If it gets riddled with holes then I know I need to go back to the drawing board. If it stands up to scrutiny then I know I've done my homework and I understand this stuff correctly and I can play with permutations.
It seems to me that half of this is about the psychology of making the change. You might have climbed that mountain already. But I am still very much in the foothills. There's probably a thread or two about procrastination and the psychology of retiring that I've not read